Macau Business Daily, Oct 27, 2014

MOP 6.00

spent

Number 653 Monday October 27, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

Less than half of budget

A

Year III

t last the figures are in. Macau’s 2013 fiscal surplus hit MOP125 billion.

The territory is one of only few recording positive surpluses year after year.

But the execution rate for last year’s budget was a paltry 40 percent. Quite unsatisfactory, according to the government. Delayed infrastructure projects took the brunt of the blame Page

On hold

3

Local fashion designers sell to Europe

Investors are skittish. So it’s wait and see. The next 6-12 months will be telling. Stocks are not at ‘scorched earth’ levels yet, say analysts.

China’s economic slowdown and anti-corruption drive remain the biggest factors influencing investors

Page 5

Kering sales affected by lower Gucci sales in Macau, HK

Page 5

Page 4

Café de Coral quits North American market Page 4

Smoke concerns

HSI - Movers October 24

There’s always a hitch. Health authorities are concerned about reports concerning casino premium mass areas.

Feedback suggests the smoke-free rules of October 6 are being circumvented. The Gaming Inspection and Coordination Bureau is to investigate

Page

2

East, West, home’s best China has launched the Asian Infrastructure Investment Bank. A rival to the World Bank. AIIB wants to supply Asian countries with the financial resources withheld from the Western controlled bank

www.macaubusinessdaily.com

Page 10

In veritas vino

Name

%Day

China Mobile Ltd

2.16

China Unicom Hong Ko

1.28

Sino Land Co Ltd

0.47

Bank of East Asia Lt.

0.00

New World Developm

0.00

China Mengniu Dairy

-1.08

Henderson Land Devel

-1.23

Galaxy Entertainment

-1.62

China Resources Land

-1.67

Hengan International

-1.68

Source: Bloomberg

I SSN 2226-8294

Brought to you by

Wine is now a popular tipple in Macau. Not just amongst locals and expats but foreign and mainland Chinese tourists. Wine expert and founder of the Macau Sommelier Association, Adolphus Foo, speaks to Business Daily about consumption trends. And catching up with Hong Kong

Pages 6 & 7

2014-10-27

2014-10-28

2014-10-29

23˚ 28˚

23˚ 27˚

23˚ 28˚

2

October 27, 2014

Macau The ‘hanging gardens’ of Kun Iam

Health Bureau concerns about premium mass smoking zones

T

he Health Bureau is “very concerned”, it said in a statement, about feedback claiming some casinos were converting their premium mass table gaming areas into smoking zones.

Health authorities also noted that they would refer the situation for handling by the casino regulator, the Gaming Inspection and Coordination Bureau (DICJ).

In a joint press release published on September 30 by the casino regulator the Health Bureau announced that the mass floor of casinos would be non-smoking areas starting from October 6 except for smoking lounges approved by the government and the VIP rooms – a statement that suggested that smoking would not be allowed in any premium mass area.

Investment bank Credit Suisse AG said in a note on Friday, as quoted

by Hong Kong financial news outlets, that they have observed smokers being allowed to get around the new

smoking ban rule as some premium mass table gaming areas were being converted by “certain” casinos into members-only areas.

The note also pointed out that several other casino operators are applying to the regulator for the conversion. The bank wrote that if smoking is allowed in more premium mass areas this would be positive for the casinos and in turn improve mass gaming business.

As at Friday, a total of 19 gaming venues in the city – slot parlours included – were approved for setting up smoking lounges on mass gaming floors. The remaining 28 casinos that told the government of their plan to set up smoking lounges are still awaiting final approval.

S.L.

Zhuhai International Convention & Exhibition Centre opening Thursday Joanne Kuai

joannekuai@macaubusinessdaily.com

I

t will be a landmark for Zhuhai’s MICE (Meetings, Incentives Conferencing, Exhibitions) industry. The Zhuhai International Convention & Exhibition Centre (Zhuhai CEC) with an initial investment of 7 billion yuan (MOP9.1 billion) will debut with the first Zhuhai International Automobile Exhibition on Thursday.

Following the ‘Turandot’ and Prague Philharmonic performances this week, the Zhuhai CEC Grand Theatre is preparing for 63 operas and concerts from 16 countries in its premiere season.

Located inside Zhuhai CEC, the Zhuhai Huafa Sheraton Hotel with 550 rooms and suites and Zhuhai Huafa Apartments is expected to be operational soon, while a 63-storey St. Regis Zhuhai

Hotel is due to open in 2016.

The Convention Wing of Zhuhai CEC has a 2,000-square metre Plenary Hall, Opera Theatre, Concert Hall and 35 meeting rooms. The Exhibition Wing has six exhibition halls at ground level, each of which has about 5,000 square metres of column-free, high–ceiling space. The entire exhibition floor space of 30,000 square metres can accommodate 1,600 standard 3m x 3m booths.

In addition, Zhuhai CEC has a 4,500-square metre column-free, divisible Grand Ballroom equipped with a 4,000m² kitchen capable of catering for round-table banquets of up to 6,000 people.

In July 2014, the Zhuhai CEC was approved by and became a member of

the Union des Foires Internationales (UFI) – the Global Association of the Exhibition Industry which gathers trade show organisers, fairground owners, other groups from the exhibition industry and its partners.

The property was developed

by Zhuhai’s leading state-owned enterprise, the Huafa Group. The Group said that from 2013 to 2018 their objective is to increase gross assets from 60 billion yuan to 150 billion yuan, increasing revenue from 10 billion yuan to 50 billion yuan.

The Zhuhai International Automobile Exhibition will run until Sunday. The organizer said that exhibitors from Hong Kong and Macau would also join the event, where duallicence plates will also be sold.

103 mainland domestics working in Macau

T

he Human Resources Office says that according to statistics provided by the Public Security Police, by the end of September some 103 domestic helpers from mainland China were working in Macau. Of these, 86 hail from Guangdong and 17 from Fujian.

The Office said in a statement giving the latest update regarding

domestic helpers from mainland China that they sent out questionnaires to 266 qualified employers and collected 126 valid answers. Over 75 percent of employers are happy with their workers, while 73 percent hired helpers from the mainland to take care of the elderly or do cleaning.

The other reasons include taking care of children, the sick, or the disabled.

Some of them wish the helpers could enhance homemaking and cooking abilities.

Some 27 applicants cancelled their applications to apply for a quota to hire domestic helpers from the mainland, saying that they couldn’t find the ideal person, while some had already hired someone from overseas.

Macau citizen wins big in India

the story of a boy who encounters a pretty cleaning girl by chance, who then encourages him to pursue his dreams. The film was subsidised by the Taiwan Public Television Service and the Subsidies for Short Films in Taiwan, and premiered there last month.

Born in Macau, Chao Koi Wang is currently taking a Master’s degree programme from the Department of Filmmaking at the Taipei National University of the Arts.

C

hao Koi Wang, a Macau citizen studying in Taiwan, won the first prize at the international competition of the 4th Bangalore International Short Film Festival, which was held in India, with his film ‘A Boy’s Prayer’.

The film ‘A Boy’s Prayer’, directed and written by Chao Koi Wang, overcame 500 entries from 50 countries to be ranked at the top in the international competition category of the festival. The film was inspired by a yellow garbage truck, and tells

T

he Light Railway Transit (LRT) is going to adopt a hanging gardens plan for the route that will run in front of the Kun Iam Statue in Nape area.

The Transportation Infrastructure Office said it has invited Portuguese architect Cristina Rocha Leiria, the designer of the Kun Iam Statue, to help with the design of the LRT route in the area. The architect submitted two proposals; following several months’ consultation and more than 500 opinions collected from the public the government has decided to adopt the hanging gardens plan.

According to the plan, a park will be built from Rua de Madrid crossing over Avenida Dr. Sun Yatsen and reaching the coastal area of the statute. The avenue in front of the statue and LRT tracks will be underneath the park so that the view of the statue remains unimpaired.

Bank of China: economic growth rate to drop in H2

B

ank of China Macau Youth Association, a think tank for the local branch of Bank of China has predicted that the economic growth rate of Macau during the third quarter will post minus growth, declining 3.9 percent year-on-year.

In addition, it pointed out that the decline may worsen in the last quarter, with a significant drop of 11.5 percent compared to the same period of last year. However, the year’s overall economy growth rate will remain positive, with an increase of 4.8 percent, according to Association forecasts.

Macau-Bali charter flights soon

T

he Macau International Airport Co Ltd (CAM) has announced that nonscheduled charter flights between Macau and Bali in Indonesia are expected to commence by the end of this year with aviation and travel agencies well prepared. In addition, before the end of the year Jeju Air of Korea will apply to the Civil Aviation Authority of Macao (AACM) to launch flights between Macau and Korea next summer. CAM met with both airlines, as well as several others expressing the intention to commence Macau services, during the China Low Cost Carriers Summit 2014, which took place in Shenzhen last week. Meanwhile, Taiwan Tiger Airways said during the summit that its Taiwan to Macau flights have been planned and only await an operation licence.

3

October 27, 2014

Macau 2013 budget performance: Fiscal surplus reaches MOP125 bln

having only spent some 7 billion patacas in 2013 on the investment of infrastructure rather than the budged 11.2 billlion patacas.

Almost at the end of 2014, Secretary Francis Tam has finally reported to the Legislative Assembly the budget performance of 2013. The fiscal surplus was satisfying but the execution rate of the public investment plan did not even reach 40 percent, as the progress of infrastructure projects lags behind

Among the fiscal surplus of 124.6 billion patacas that the government gained in 2013, some 96.3 billion patacas had been allocated in the no excess reserves of the public treasury while the other surplus of 28.3 billion patacas is managed by the seven autonomous bodies.

Currently, the fiscal reserves of the government have reached more than 340 billion patacas, after allocating the surplus of 2013 to it, according to Mr. Tam. There are seven autonomous bodies in the Special Administrative Region – Macau Post, Macau Postal Savings, Pension Fund, Monetary Authority of Macao, Automobile and Maritime Security Fund, Macau Foundation and the Commission of Audit.

Meanwhile, the director of the Commission of Audit, Commissioner Ho Veng On, also attended the legislative meeting to present the Commission’s audit on the budget performance report of 2013.

Mr. Ho claimed that the result of the report shows that the financial statements had been made based on the law. He said that the government had shown the executive and operational results of the government in 2013 as well as the financial conditions in ‘all important terms’.

In addition, he stated that he gave ‘an unqualified opinion’ on the performance report by the government, meaning he had no significant reservations in respect to matters contained in the report.

Kam Leong

kamleong@macaubusinessdaily.com

L

ast Friday, the Secretary for Economy and Finance, Francis Tam Pak Yuen, presented to the Legislative Assembly the budget performance of 2013, which shows the fiscal surplus of the government in 2013 reached some 124.6 billion patacas (US$15.6 billion) while the execution rate for the public investment plan (PIDDA) reached only 39.6 percent, due to delays in major infrastructure projects.

According to Mr. Tam, the general integrated budget of public revenue totalled more than 175.9 billion patacas in 2013, a year-on-year increase of 21.3 percent, some 30.9 billion patacas more than in 2012.

The general revenue that the government gained was some 47.3 billion patacas more than the budgeted revenue. The increase was primarily due to direct taxes on Business Daily 25(w)x247(H)mm.pdf the gaming industry reaching 124.4 1

more than 7 billion patacas was spent on the PIDDA, although the execution rate was only 39.6 percent.

The low execution rate on PIDDA raised doubts from legislators Chan Chak Mo and António Ng Kuok Cheong, questioning if the low rate was caused by the delays in infrastructure.

Mr. Tam admitted that the delays in five major infrastructure projects, of which the budgeted cost totals some 2.2 billion patacas, were the reasons causing the low rate of PIDDA. Major infrastructure included the rolling stones and system for the Light Rail Transit (LRT), the filling of Zone A for the new urban reclamation for the Fai Chi Kei public housing, the Taipa route of LRT as well as MongHa social housing.

In fact, due to the delays, some 4.2 billion patacas that the government was supposed to pay, it did not pay, resulting in the government

billion patacas, the Secretary said.

On the other hand, the general integrated budget of public expenditure was some 51.4 billion patacas, a slight decrease of 4.9 percent year-on-year. The budget performance report also showed that the government had spent some 26.6 billion patacas less than the budgeted expenditure in 2013.

Meanwhile, the aggregated revenue of specific organisations in 2013 reached some 12.7 billion patacas, an increase of 34.7 year-on-year, while the expenditure of such organisations totalled 3.6 billion patacas, up 29.5 percent year-on-year.

Low execution rate on PIDDA According to the report, the government had spent some 44.4 billion patacas on the operation, with the 22/10/2014 3:28 PM execution rate at 65.7 percent while

Fiscal reserves

GLOBAL TOURISM ECONOMY FORUM • MACAU 2014 Join us at the 3rd edition of Global Tourism Economy Forum (GTEF), to explore strategic intercontinental cooperation in tourism and business opportunities across nations, provinces and cities along the Maritime Silk Road in the 21st century.

This highly anticipated event brings key government dignitaries and tourism ministers across the Maritime Silk Road countries and the world’s most influential speakers including:

C

M

Y

H.E. Dr. Thong Khon

Qiang Wei

Rapil Zhoshybayev

Minister of Tourism, Cambodia

Party Secretary, CPC Jiangxi Provincial Committee, PRC

Commissioner of the EXPO 2017 First Deputy Minister of Foreign Affairs, Kazakhstan

Rodolfo López Negrete Coppel

H.E. Dr. Yaddehige Don Nihal Jayathilaka

CEO, Mexico Tourism Board

Secretary of the Ministry, Economic Development of Sri Lanka

Zhu Hong

Ji Xianggi

Vice Governor Jiangxi Provincial People’s Government, PRC

Vice Governor, Shandong Provincial People’s Government, PRC

CM

MY

CY

Vice Governor, Guangxi Zhuang Autonomous Region, PRC

K

Yousuf Ahmad Lootah

Tan Sri Dato’ Sri Dr. Ng Yen Yen

Lan Tianli

CMY

Executive Director, Tourism Development & Investments, Department of Tourism & Commerce Marketing, Dubai, UAE

Chairman, Malaysia Tourism Promotion Board

Forum program highlights include: “Dialogue with Travel and Tourism Leaders” session by China Daily Pavilion Exhibition and Presentation for Maritime Silk Road Countries, Provinces and Cities GTEF 2014 Farewell Dinner in support of PATA Foundation Fujian Province Dance Drama: Dream of Maritime Silk Road

“Face to Face, Ministers and Private Sector CEOs” session in collaboration with UNWTO “Passage from the Past to the Present” session featuring Chinese provincial governors and academic experts “Shaping the Present for the Future” session presented by PATA

www.GTE-Forum.com

Email: info@GTERC.org

REGISTER NOW!

Tel: +853 8296 3600

澳 門特別 行政區 政 府社會 文化司 HOST

SUPPORTING UNITS

OFFICIAL HOTEL & VENUE

O SECRETÁRIO PARA OS ASSUNTOS SOCIAIS E CULTURA DO GOVERNO DA REGIÃO ADMINISTRATIVA ESPECIAL DE MACAU

ALL-CHINA FEDERATION OF INDUSTRY & COMMERCE

MAJOR SPONSOR & WELCOME DINNER PARTNER

FORUM CARRIERS

WORLD TOURISM ORGANIZ ATION

IN COLLABORATION WITH

LIAISON OFFICE OF THE CENTRAL PEOPLE’S GOVERNMENT IN THE MACAO SPECIAL ADMINISTRATIVE REGION

CO-ORGANISER

OFFICE OF THE COMMISSIONER OF THE MINISTRY OF FOREIGN AFFAIRS OF THE PEOPLE’S REPUBLIC OF CHINA IN THE MACAO SPECIAL ADMINISTRATIVE REGION

MAJOR SPONSOR & FAREWELL DINNER PARTNER

MEDIA PARTNERS

MAJOR SPONSORS

中國 ·全聯旅遊業商會

NATIONAL TOURISM ADMINISTRATION OF THE PEOPLE’S REPUBLIC OF CHINA

WORLD TRAVEL & TOURISM COUNCIL

COORDINATOR

PACIFIC ASIA TRAVEL ASSOCIATION

SUPPORTING UNIT OF BUSINESS NETWORKING ACTIVITIES

o

INSIGHT

4

October 27, 2014

Macau

Café de Coral quits North American market

Brought to you by

Hong Kong’s biggest listed restaurant chain has sold its 133 restaurants in the U.S. and Canada to MTY Foods, a Canadian competitor. The company wants to focus on its two strategic markets: Hong Kong and mainland China

HOSPITALITY

Luís Gonçalves

Steady rise

luis.goncalves@macaubusinessdaily.com

At the end of 2013, Macau had 98 hotels and guesthouses providing some 27,800 rooms.

Compared to 2009, that means a total of 8,500 additional rooms and a growth of 44 percent in the period. The average size of establishments, as measured by the average number of rooms, has steadily risen. At the end of 2013, the average hotel had 284 rooms vis-a-vis 214 rooms at the end of 2009. The expected opening, within the next couple of years, of several new and large units in Cotai is likely to prop up that average noticeably. This growth in the supply of rooms and the average size of hotels has been prompted by the growth of casinos – and, some would say, been a foundation of that growth. Total revenue in the period has more than doubled, rising more than twice as fast as the number of guests. As a result, both revenue per guest and revenue per room rose steadily in the years shown in the chart. The first posted a total growth of 47 percent, while the second went up by 62 percent.

C

afé de Coral, Hong Kong’s biggest listed restaurant chain, announced Friday the sale of its North American operations in order to concentrate on its core markets, Hong Kong and mainland China.

In a filing submitted to the Hong Kong Stock Exchange, the company said it had sold its business operations in the US and Canada for HK$54.4 million. The buyer was MTY Food Group.

Café de Coral’s North American operations included 133 outlets in the United States and Canada. The business there was a joint venture with Manchu WOK Entities. The company now wants to focus on Hong Kong

and mainland China markets. The operation ‘will enable the group to focus on its core businesses in Hong Kong and mainland China and to better utilise its resources to achieve long-term growth for the Group under its current growth strategy and plan’, the company wrote.

In the filing, Café de Coral underlined that its’ US and Canadian chains only accounted for 2.3 percent of its total revenues and that ‘the disposal will not have a material impact on the results of operations and financial condition of the company’.

However, the company informed the market that it is expecting a loss

of HK$30 million from the sale due to the difference between the sale price and net value recorded in the company’s assets (HK$77 million).

The buyers of Café de Coral’s North American restaurants are two parent companies of MTY Food Group, a Canadian company listed on the Toronto Stock Exchange, says the filing. MTY operates a network of more than 2,500 restaurants.

For the year ended March 2014, Café de Coral reported a profit of HK$582 million, an increase of around 7 percent from the previous year (HK$580 million). Revenues climbed to HK$6.9 billion from HK$6.4 billion in 2013.

Kering sales affected by lower Gucci sales in Macau, HK “We’ve experienced deterioration in Hong Kong and Macau, while Singapore remained a difficult market”, says the company

K The figures for last year suggest a somewhat more complex picture. While the number of rooms per hotel kept rising at a sustained pace, the figure for guests per room has just recovered to a level similar to the years 2010 and 2011. It had dropped slightly in 2012.

Growth in revenue per guest stood at just 3.1 percent, rising at a comparatively much lower rate than in the early phase of the period shown, when two-digit growth rates were recorded. On the other hand, revenue per room picked up again, by 8.3 percent, after stalling in 2012.

J.I.D.

15.3pct

hotel sector revenue growth in 2013 y-o-y

ering reported third-quarter revenue that met analysts’ estimates as growth for Puma sports gear offset the effects of weaker Chinese spending on sales of Gucci handbags.

Revenue climbed 3.3 percent to 2.6 billion euros (US$3.29 billion), Paris-based Kering said Friday in a statement after European markets closed. Analysts predicted 2.59 billion euros, according to the median of 17 estimates compiled by Bloomberg.

Sales climbed 4.4 percent on a comparable basis.

“Luxury activities held firm in a complex economic environment, thanks to a strong sales uptrend in our network of directly operated stores,” Chief Executive Officer Francois- Henri Pinault said in the statement, adding that sport and lifestyle products were boosted by marketing at Puma.

Kering, which this week named new CEOs at the Bottega Veneta, Brioni and Christopher Kane brands, said in July operating performance would improve in the second half of 2014 and

forecast a return to positive revenue trends, including at Gucci. Luxurygoods makers including LVMH Moet Hennessy Louis Vuitton SA however have recently reported softer demand.

China, Gucci Fewer Chinese tourists are shopping in Hong Kong because of pro-democracy protests, while fighting in Ukraine and the resulting sanctions have depressed Russian spending in Europe. Worldwide sales

of personal luxury goods will rise 2 percent this year, the slowest pace since 2009, Bain & Co. estimated this month.

Gucci sales fell 1.9 percent on a comparable basis, compared with the 0.5 percent drop anticipated by analysts.

“Given recent market headwinds, it’s in line with the overall industry performance,” Chief Financial Officer Jean- Marc Duplaix said on a conference call. “In the U.S., Gucci’s momentum is vibrant. On the flip side, we’ve experienced deterioration in Hong Kong and Macau, while Singapore remained a difficult market.”

Gucci sales in China saw a stabilization, though “still slightly negative in the low-single digits,” Group Managing Director JeanFrancois Palus said, adding Kering doesn’t predict further deterioration.

Revenue at Puma, which is trying to reposition itself as a sportsperformance brand, rose 6.2 percent, compared with a 3 percent gain predicted by analysts.

Bloomberg

5

October 27, 2014

Macau

Investors putting Macau on hold for 12 months Luís Gonçalves

Luis.goncalves@macaubusinessdaily.com

I

nvestors are likely to remain cautious about Macau’s gaming operators for the next 6 to 12 months, as signs of recovery could take longer than expected to appear on the horizon. With October revenues testing new lows this month, casino stocks still have a margin to drop even further.

‘Investors were generally cautious on the next 6-12 months and expressed a view that stocks are not at ‘scorched earth’ levels at which they’d be prepared to buy, nor do they think they are compelling absolute shorts here’, wrote Wells Fargo in a note to clients on Friday, following a meeting with investors ranging from equity to debt to gaming areas.

The current feedback from investors is that the market is still very cautious about Macau in the near term, with conviction running ‘low’. The main driver for the pessimism is China’s economic indicators and

Beijing’s policy on corruption and lavish spending.

These two negative factors are likely to last longer than anticipated.

China’s economy is growing at less than estimated speed this year and next, something that will affect credit growth in the country and as a consequence Macau gamblers from the mainland.

The crackdown on corruption by the Xi Jinping government is also likely to continue for all of 2015, at least.

‘There was plenty of discussion over whether Macau could be ‘weaker for longer’ than consensus views contend, and whether stocks could remain range-bound if weak fundamentals persist into next year’, Wells Fargo said on Friday.

Last week, Francis Tam, Secretary for Economy and Finance, conceded that the recovery of gaming revenues will not happen before the middle of 2015, when new

casinos start to open here.

In the near term, like this month, Mr. Tam confirmed that the drop in gaming revenues will be higher than in September. That month, revenues went down 11.7 percent. In October, they will probably decline around 20 percent.

But if the difficult year for operators and gaming stocks in 2014 is putting investors in a negative mood, the long term story for Macau remains intact. ‘There’s broad agreement on the longer-term secular story, and investors appreciate our view that Macau could be a US$100 billion market if it reaches 1 percent of Chinese and Hong Kong GDP by 2020’, the US bank said. ‘There were no ‘hardened shorts’ (although they exist) arguing Macau’s recent growth has been driven by excess Chinese liquidity or housing and fixed asset investment,’ Wells Fargo added.

Current market conviction about a speedy turnaround time for Macau remains ‘low’, several investors told Wells Fargo

SJM chief confident despite plummeting gaming revenue When asked to comment on the decline in gaming revenue for the past four months, Ambrose So Shu Fai, chief executive of casino operator SJM Holdings Ltd, said that he was still bullish on the long-term development of the gaming industry in the territory, saying that the completion of infrastructure projects such as the Hong Kong-Macau-Zhuhai Bridge in future will support the growth of the gaming business here.

Mr. So was speaking to Chinese-language media on the sidelines of the 19th Macao International Trade & Investment Fair (MIF) on Friday.

An average daily gaming revenue of about MOP800 million patacas (US$100 million) seen now is sufficient for the operation of the gaming companies here, the SJM boss remarked.

Against the backdrop of a recent continuous decline in gaming revenue, Mr. So said that the construction of SJM’s Cotai project Lisboa Palace had not been affected, noting all was progressing as planned.

Local fashion designers sell to Europe Local fashion designers are receiving orders from European manufacturers following support from the Macau Government’s Subsidy Programme for Fashion Design on Sample Making, according to Cultural Affairs Bureau director Ung Vai Meng Joanne Kuai

joannekuai@macaubusinessdaily.com

T

welve projects involving fashion design and filmmaking authorised under the Subsidy Programmes Series for Macau’s Cultural and Creative Industries saw the grantees receive awards last week at the Macau Creative Pavilion at The Venetian Macao during the 19th Macau International Trade and Investment Fair (MIF).

Cultural Affairs Bureau director Ung Vai Meng said that some local designers are becoming popular with European manufacturers and have been receiving orders in the wake of the launch of the subsidy programme.

Mr. Ung also said in promoting Macau’s film industry that six local directors had been subsidised with an initial fund of MOP600,000 to produce fiction films. The Bureau also invited investors to Macau to watch local productions. At least three movies were granted an investment of some MOP15 million from foreign investors and will be screening in places outside Macau.

Ung Vai Meng said that these awards seek to recognise the efforts and contributions of the subsidised participants. He also expressed his wish that these programmes meet the

current development phase of Macao’s cultural and creative industries in different areas, offering targeted support measures to these industries, with assistance and resources for participants for an even greater number of high quality local creative works.

The Macau Fashion Festival 2014 was also one of the highlights of this year’s MIF.

Go culture Under the subsidy programme, local designer Wai Chin Seong, with own-brand POURQUOI, joined the event for the first time, showcasing collections alongside six other designers at the ‘Style • Encounter Moment’ in the opening fashion parade.

Ms. Wai told Business Daily that she thought that being presented at the Macau Fashion Festival and MIF would be an opportunity for her to reach out to overseas markets. She said with local designers’ works being more diversified, she is hopeful that Macau’s products can reach a broader audience and that her own designs can already be seen selling online or

in buyer shops.

The Macau Productivity and Technology Transfer Centre (CPTTM) is one of the organisers of the Fashion Festival. Director General of CPTTM Shuen Ka Hung told Business Daily that the fashion industry in Macau,

rather than focusing on manufacturing as before, has gradually intergrated itself with the cultural and creative industry.

Fellow organizer Macau Trade and Investment Promotion Institute (IPIM) said that they are striving to further enhance the reputation of Macau’s fashion design industry in mainland and overseas areas.

Meanwhile, executive director of IPIM Irene Va Kuan Lau said MIF provides the industry with an international platform. “The Macau Fashion Festival features a series of events including fashion shows, a fashion area, fashion designers showcase, business matching and two fashion seminars in which industry experts from the Mainland and Hong Kong will be sharing their experiences and insights with the audience, ” said Irene Va. “We hope that through these activities, we can provide an international platform to showcase fashion clothing designed and made in Macau, and create more networking opportunities for local fashion design industry operators to develop mutual trade and investment cooperation with their counterparts around the region.”

6

October 27, 2014

Macau

Macau’s market will compete with Ho Macau has a small population, and limited transportation system, to be able to compete, in terms of the wine market, with other destinations such as our neighbouring SAR. In an interview with Business Daily, the founder and president of the Macau Sommelier Association, Adolphus Foo, says that even though the wine market has grown over time, especially with the hotels in town, it still has some difficulties reaching a wider audience. Yet, with the new Cotai properties on the way bringing more expatriates to the city as well as boosting tourism Mr. Foo, who is also the manager of F & B at City of Dreams, believes Macau’s wine market may be able, at last, to compete with Hong Kong.

do your menu. I always believe in meeting the need — say I have a guest from Mainland China in the restaurant, I can do a good selection of Bordeaux wines or Pinot Noir. For our local clients, we have to think about the price point, too.

Is Macau still a good entry point for the Mainland China wine market?

Working as a sommelier, I remember a guest coming up to me and saying “I’ve tried a lot of good wines, what else can we try?” So, I said maybe you can explore certain regions. We have some guests that we are able to talk to about them but I’d say they make up a very small percentage. But when we talk to the guests it’s very powerful

because they actually can buy a lot of wine, they have a lot of money, so normally they buy a lot.

For now, Macau [as an entry point] is not as good as Hong Kong. In Hong Kong they have exhibitions, whilst in Macau we don’t.

So, Hong Kong is still a better entry point for the Mainland China wine market?

For now, yes, unless Macau can do big exhibitions here.

What is lacking in Macau to become an entry point for Mainland China?

A lot of things. Guests flying from all over the place will go to Hong Kong because they have an international airport. It has a lot to do also with the logistics, so if you

Luciana Leitão

leitao.luciana@macaubusiness.com

Photos by Manuel Cardoso

Has the wine market grown as much as expected a few years ago?

It’s growing for sure, in Macau.

Overall, we can see the growth of the hotels and that helps to contribute to the growth of the wine [sector]. Based on the seven years I’ve been in Macau, before, more than three years ago, only fine wines were sold; right now, I see more volume — but still fine wines.

Are wines that are not fine wines growing as well?

Yes. Our guests are a little bit adventurous. When they come to our restaurants they will want to try something different; they’ve tried all the good wines already but they also want to explore, so some of the newer wines are doing very well, different varieties are doing very well.

What are the specific characteristics of Macau’s wine market?

In Hong Kong, for example, they have a lot of variety but they’re also trying to develop.

I was in Hong Kong as a judge [for a competition] and I was a bit surprised because they were trying to promote other wines from countries like Georgia. They have local consumption. For us, it’s more our guests that we serve, so maybe the focus is still based on a certain style they like — Bordeaux, Burgundy, Pinot Noir.

Given most customers are Mainland Chinese, for instance here in the resort restaurants, can you not be as adventurous in the type of wine you offer?

We should be a little bit more adventurous. Of course, we can serve whatever is on the wine list but we want to educate our consumer. The guest will like it because we always ask “Have you tried this? Have you tried that?”

They trust you, especially when they try something new, it’s an eye-opener for them.

So, you believe tourists are getting more curious about wine?

Correct. We should not limit but we should expand. Say, for example, at dinner, maybe you want to try other wines. Say, for example, if you’ve tried Bordeaux,

maybe you want to compare it with wine from the US. Still, French wines are the top seller in Macau. Do you believe this is changing?

Well, wines from Chile and Argentina are growing. Other countries, like the US, wine from Washington and Oregon, is also moving well. The guests explore and also the locals like to try something new. We have a lot of events, so we have a chance to try different wines.

How about the Portuguese wines, have they been losing interest in Macau?

Portuguese wines are interesting.

We also have guests that come to Macau and want to try some of the Portuguese wines. Of course, our guests may not be familiar with certain wines. But the selection that we have, we have a great selection, like for example the Douro Boys? wine. It’s good quality. When the guests try it, they believe it’s amazing and it comes at a very good price.

Customers are tourists As the president of the Macau Sommelier Association, do you also see, overall in Macau, locals more interested in wines or just tourists?

I would say guests buying wine are 80 percent, and locals are 20 percent.

Are locals interested in different types of wine compared to Mainland Chinese?

Locals prefer the good Portuguese wines, at an affordable price.

Of course, they can go to the Bordeaux wines but these are expensive.

Considering we have this strange balance between tourists and locals, do you believe the wine market in Macau is a difficult one?

No. I don’t think it’s difficult.

Many restaurants now offer good wine selections; many restaurants actually believe in the wine programmes, so they offer a choice.

Is it easy to satisfy all types of customer?

It’s easy, depending on how you

Overall, we can see the growth of the hotels, and that helps to contribute to the growth of the wine [sector] We should be a little bit more adventurous I’d say guests buying wine are 80 percent, and locals are 20 percent

7

October 27, 2014

Macau

ng Kong’s, says wine expert want to do an exhibition and you have to come from Hong Kong to be here it’s a bit challenging.

A competitor

One good thing about Macau is that we actually check all the suppliers, so the process will take a bit of time

Given its characteristics, is it possible for Macau to compete with the Hong Kong wine market?

In the future, slowly, yes. When we have more people — not just population but the expatriates working here, the guests coming here. If you have a tourism [base] that’s growing, I’m sure the wine market will grow as well.

Thinking of the future of the wine market in Macau, what can be the difficulties Macau encounters growing?

The wineries need to know more about Macau.

I spoke to some winemakers who would actually like to come to Macau; they want the wine from their region to be listed on our wine lists. The difficulty is actually understanding our market. Overseas wineries usually go to Hong Kong to sell and the suppliers from Hong Kong are trying to come to Macau, but they find difficulties — if you’re a smaller company, considering you have to spend your time over here, sometimes you find it difficult to sell because here you’re dealing with big properties. One good thing about Macau is that we actually check all the suppliers, so the process will take a bit of time.

Competition wise, how can COD defeat other operators in what concerns wine consumption?

The wine list must have personality — wine lists are the most important thing for guests to choose from.

A good wine list is when you open the list and it’s easy to understand.

Some wine lists are too big and sometimes guests find it difficult to choose. The price point is also important. For example, if I go to a restaurant, suddenly I see MOP10,000 per bottle, you shock me, so we have to consider the guests. When you open the wine list, at least if you have a price point of MOP2,000, MOP1,000

or MOP500, then it will be easier.

The price point is very important, as well as [having] the breakdown by section properly organized. For me, a good wine list is not about size; it’s about something that when you open it up there’s a story behind it.

If I look at your wine list, what will I find?

The wine list at COD covers many regions. If you want to have wine from Africa, we have it. We even have wine from England, so it very well covers all the regions.

What is the biggest offering that you have?

The French wines and also the Portuguese. Right now, we’re reviewing the Portuguese wines, so we’ll have more selection as well.

For our local clients, we have to think about the price point, too If you have a tourism [base] that’s growing, I’m sure the wine market will grow as well

8

October 27, 2014

Greater China Think tank expects economic “new normal” A leading think tank expects lower GDP growth but better structure in China in coming years. Yu Bin, head of macroeconomics with the development research centre of the State Council, has said that China would shift steadily toward a “new normal economic state”. China’s Q4 GDP is expected to rise 7.4 percent after a five-year low of 7.3 percent in Q3, said Yu. He said the slump of old pillar industries after reaching peaks has dragged on the country’s economy, but maintaining China’s macro policies will be beneficial to economic restructuring.

China scores cheap oil 14,000 miles away The country’s crude imports rose 7.8 percent to 27.6 million tons, or 6.74 million barrels a day, in September from last year

China, Russia urge science cooperation Chinese President Xi Jinping and Russian President Vladimir Putin on Saturday extended congratulations on the opening of the 2014 Pujiang Innovation Forum, voicing hope for enhancing bilateral cooperation in the fields of science and technology. The forum, themed “Coordinated Innovation and Sharing Opportunities”, is being held in the coastal city of Shanghai in east China on October 25-26. Xi said in his congratulatory message that China is implementing a strategy of innovation-driven development and promoting comprehensive innovation with science and technology as the core.

Beijing to cut pollutants during APEC The pollutants discharge in Beijing and neighbouring regions of Tianjin and Hebei is expected to be cut by a third during next month’s APEC meeting, thanks to a series of air pollution control measures. “China will take the highest-level measures to guarantee the air quality during the APEC meeting,” said Chai Fahe, vice president of the Chinese Research Academy of Environmental Sciences, on Saturday. “It is expected that the pollutants discharge in the Beijing-Tianjin-Hebei regions will be reduced by 30-40 percent, and the air quality will hopefully be further improved,” he said.

Vice president attends young leaders forum Chinese Vice President Li Yuanchao on Saturday met with representatives attending the second Sino-France young leaders’ forum in the eastern Chinese city of Hangzhou. Highlighting that this year marks the 50th anniversary of the establishment of diplomatic ties between China and France, Li said China is willing to work with France to implement the outcomes of Chinese President Xi Jinping’s visit to France in March, enhance mutual trust and understanding, strengthen cooperation so as to usher in a new era of China-France comprehensive strategic partnership.

China to hasten establishing circuit courts China’s Supreme People’s Court announced Saturday it will hasten steps to set up circuit courts, responding to the latest requirement of the ruling party to advance rule of law. The supreme court will also speed up efforts to establish special courts in Beijing, Shanghai and Guangzhou to handle intellectual property rights cases. Other measures include enhancing accountability of judges, unifying the management of personnel and finance of local courts below provincial level, and setting up a mechanism to record officials’ interference in judicial cases.

C

hina is finding oil supplies 14,000 miles away, aided by the global rout in prices that’s left producers vying for new markets.

PetroChina Co. said it bought Colombian crude for a northern refinery for the first time because it was good value. The transaction underscores how the world’s secondbiggest oil consumer is benefiting as producers from the Middle East to Latin America vie for customers in Asia.

Brent oil futures tumbled to the lowest level since 2010 as the highest U.S. output in almost 30 years cuts its consumption of foreign crude. OPEC’s biggest producers are reducing prices to defend their market share. China consumed the second-biggest amount of crude on record in September and imported the largest volume ever for that time of year, customs data show.

“China will just look to get the cheapest crude possible from whatever source it can,” Virendra Chauhan, a London-based analyst at Energy Aspects Ltd., said by phone October 21.

The country’s crude imports rose 7.8 percent to 27.6 million tons, or 6.74 million barrels a day, in September from last year, the data show. The number of super tankers sailing toward China’s ports surged to a nine-month high last week, according to IHS Fairplay vessel-tracking signals compiled by Bloomberg as of October 17.

Colombian shipments China’s purchases of Colombian crude totalled 7.8 million metric tons from January to September, more than twice the amount a year earlier, customs data showed October 22. Shipments from Saudi Arabia, its biggest supplier, shrank about 11 percent to 36.6 million tons, according to the data.

Colombian oil output increased about 10 percent since 2011 and the nation is seeking sales in Asia to compensate for the weakening in short-haul exports as U.S. production increases, said Bernard Leung, a Bloomberg oil strategist in Singapore.

China’s supplies from Colombia cost an average of US$94.56 a barrel last month while Saudi shipments were purchased for US$102.30, according to data compiled by Bloomberg.

Saudi Arabia, the largest oil

exporter, earlier this month reduced the price of its Arab Light crude for Asia to the lowest level since December 2008, sparking speculation that a price war was set to start among members of the Organization of Petroleum Exporting Countries.

OPEC members Kuwait, Iran and Iraq also cut official selling prices this month.

Refining capacity Refiners including PetroChina processed 42.02 million tons of crude in September, or about 10.3 million barrels a day, according to data from the National Bureau of Statistics in Beijing. That’s up 9.1 percent from a year earlier and the most since a record 10.5 million in February.

China’s refining capacity will rise 20 percent to 800 million tons a year by 2020, from about 668 million at the end of this year, China National Petroleum Corp.’s Economic and Technology Research Institute said in a report in January.

“Chinese buyers are jumping on the opportunity to buy crude on the cheap at the moment,” David Wech, the managing director of JBC Energy GmbH in Vienna, said in an Oct. 17 e- mail. “Refining margins have

China will just look to get the cheapest crude possible from whatever source it can. I expect a lot more volumes flowing to China in particular Virendra Chauhan analyst Energy Aspects

surely benefited from weak outright crude prices.”

Refineries shut The U.S. imported 7.62 million barrels of crude a day in July, 29 percent less than the peak in June 2005, data from the Energy Information Administration show.

Shale oil has boosted the country’s crude output to the highest since 1985. European consumption is also shrinking as refineries shut or convert to storage depots at the fastest pace since the 1980s.

Crude that may have previously found a buyer in the U.S. or Europe is now available for Asia and competing with traditional suppliers from the Middle East, according to the Parisbased International Energy Agency.

Asia will account for almost 80 percent of global demand growth this year, with China alone responsible for a third, IEA data show.

“The next area we see being backed out if the U.S. production continues growing is some of the Latin American producers such as Colombia and Venezuela,” said Chauhan of Energy Aspects.

PetroChina’s Liaohe refinery processed about 30,000 tons of Colombian crude as of October 20, its parent company, China National Petroleum, said on its website October 21. The plant ran 792,000 tons of imported oil last year, or about 15 percent of its total throughput.

Suppliers included Russia, Brazil and Venezuela. Mao Zefeng, PetroChina’s Beijing-based spokesman, didn’t answer five calls to his mobile phone seeking comment.

Processed crude China Petroleum and Chemical Corp.’s Maoming refinery processed crude from Brazil’s Ostra field for the first time last month, the company known as Sinopec said on its website Sept. 17. China’s purchases of Russian crude increased by 57 percent in September, the customs data show.

“China will continue to import more crude from Russia next year,” said Wech of JBC. “Imports from Latin America are also likely to increase as Mexican and Venezuelan volumes are gradually eased out of the U.S. Gulf Coast.”

Bloomberg News

9

October 27, 2014

Greater China

State economist sees 2015 growth slowest

He thinks a decrease in exports and property development will be the main cause of a slowing of growth down an improved sentiment in Chinese economy as GDP expanded by a better-thanforecast 7.3 percent in the third quarter from a year earlier. While the government has relaxed home-purchase controls and pumped liquidity to lenders, the economy also got support from a pickup in exports in September.

Stimulus

Construction will determine the evolution of the economy next year

C

hina’s economic growth is expected to be at 7 percent in 2015 unless the central government imposes stronger-thanexpected stimulus measures, according to Fan Jianping, chief economist at a state research institute.

A decrease in exports and property development, two “engines” fuelling China to be the world’s second-largest economy, will be the main cause of a slowing of growth,

Fan, who works at the State Information Centre under the National Development and Reform Commission, told an industry conference.

Fan’s forecast is in line with a median estimate of 51 analysts in a Bloomberg News survey as Chinese leaders have signalled they will tolerate a weaker expansion, leaving the economy heading for the slowest full-year growth since 1990. Chinese leaders will set a gross domestic product

growth target of about 7 percent for 2015, according to 13 of 22 analysts polled

by Bloomberg.

“I don’t rule out that we will see on-year expansion lower than 7 percent in some single quarters next year,” Fan said. He said his forecast was based on his agency’s research, which uses China’s industrial production as a key indicator to the economic growth.

Fan’s remarks may cool

Auto market growth may halve this year Nissan has said its China sales fell by 20 percent in September from a year earlier

G

rowth in China’s auto market, the world’s biggest, will halve to 7 percent this year weighed down by a slowing economy, the head of an industry body said on Saturday.

“Personally, I think growth this year can reach 7 percent,” Dong Yang,

secretary general of the China Association of Automobile Manufacturers (CAAM), told reporters on the side-lines of an industry conference in Shanghai.

“The economy is slowing.

The auto industry would reflect that but typically lags the economic cycle by a bit.”

CAAM had forecast China’s auto market, which grew by 13.9 percent last year, to expand at 8.3 percent in 2014. Dong said CAAM will not make any official revisions to its forecast.

Carlos Ghosn, head of Japanese carmaker Nissan Motor Co Ltd and its French

“In at least six months, economic growth is unlikely to pick up remarkably,” Fan said in Shanghai. GDP expansion in three months from October is seen at 7.2 to 7.3 percent, which will lead the full-year growth to about 7.3 percent as reading in the fourth quarter has bigger weighting, he said.

China set 2014 GDP growth target at 7.5 percent.

China’s government is holding off broad stimulus, with Premier Li Keqiang expressing a preference for policy improvements and People’s Bank of China Governor Zhou Xiaochuan vowing to stick with a prudent monetary stance.

China’s premier typically announces the annual growth aspiration at the National People’s Congress in March,

alliance partner Renault SA, told the same conference he was still optimistic about China’s outlook.

“From time to time we have slowdown ... but fundamentally I’m still very optimistic on the fact that the long-term trend in China is up and carmakers should be prepared for that,” Ghosn said, pointing to China’s low car ownership level compared with other major markets.

Nissan has said its China sales fell by 20 percent in September from a year earlier, the third straight month of decline, due to sluggish sales of light commercial vehicles and increased competition in the passenger car segment.

During the first nine Carlos Goshn, Nissan head, posing with a model. Nissan has said its China sales fell due to sluggish sales of light commercial vehicles and increased competition in the passenger car segment

after policymakers meet late in the year at the Central Economic Work Conference to hash out policies.

China’s economic growth remained unchanged at 7.7 percent in 2013 and may ease to 7.3 percent this year, according to the median estimate of 51 analysts in a Bloomberg News survey.

Bloomberg News

I don’t rule out that we will see on-year expansion lower than 7 percent in some single quarters next year Fan Jianping chief economist State Information Centre under the National Development and Reform Commission

months of the year, overall vehicle sales in China rose 7 percent from the same period a year earlier, according to CAAM data.

China’s annual economic growth slowed to 7.3 percent in the third quarter - the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.

Reuters

From time to time we have slowdown ... but fundamentally I’m still very optimistic on the fact that the long-term trend in China is up and carmakers should be prepared for that Carlos Ghosn Nissan Motor Co Ltd & Renault SA head

10

October 27, 2014

Greater China

China launches Asian Investment bank amid rivals’ mistrust Australia, South Korea and Indonesia don’t join the bank while U.S. deploys pressure campaign

Chinese President Xi Jinping (C) shows the way after a group photo with members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014

A

ustralia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Westerndominated multilateral lenders.

China’s US$50 billion Asian Infrastructure Investment Bank (AIIB) is seen as a challenge to the World Bank and Asian Development Bank, both of which count Washington and its allies as their biggest financial backers.

China, which is keen to extend its influence and soft power in the region, has limited voting rights in these existing banks despite being the world’s second-largest economy.

The AIIB, launched in Beijing at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia, aims to give project loans to developing nations. China is set to be its largest shareholder with a stake of up to 50 percent.

Indonesia was not present and neither were South Korea and Australia, according to a pool report.

Japan, China’s main rival in Asia and which dominates the US$175 billion Asian Development Bank along with the United States, was also not present, but it was not expected to be.

Media reports said U.S. Secretary of State John Kerry put pressure on Australia to stay out of the AIIB. However, State Department spokeswoman Jen Psaki said: “Secretary Kerry has made clear directly to the Chinese as well as to other partners that we welcome the

idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency. We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly.”

In a speech to delegates after the inauguration, Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank.

“For the AIIB, its operation needs to follow multilateral rules and procedures,” Xi said. “We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences.”

details such as the AIIB’s governance and operational principles.

“We have continued to demand rationality in areas such as governance and safeguard issues, and there’s no reason (for Korea) not to join it,” South Korean Finance Minister Choi Kyunghwan said in Beijing on Thursday after attending a separate regional meeting.

The Seoul-based JoongAng Daily quoted a South Korean diplomatic source as saying: “While Korea has been dropped from the list of founding members of the AIIB this time around, it is still in a deep dilemma on what sort of strategic choices it has to make as China challenges the U.S.led international order.”

Personal lobbying The Australian Financial Review said Kerry had personally asked Australian Prime Minister Tony Abbott to keep Australia out of the AIIB. “Australia has been under pressure from the U.S. for some time to not become a founding member of the bank and it is understood Mr Kerry put the case directly to the prime minister when the pair met in Jakarta on Monday following the inauguration of Indonesian President Joko Widodo,” the paper said.

South Korea, one of Washington’s strongest diplomatic allies in Asia, has yet to say it will formally participate in the bank. Its finance ministry said last week it has been speaking with China to request more consideration over

Because of very big financing needs of the region it is understandable to have a new idea of establishing a bank Takehiko Nakao Asian Development Bank president

The AIIB is expected to begin operations in 2015 with senior Chinese banker Jin Liqun, exchairman of investment bank China International Capital Corp, expected to take a leading role.

The memorandum of understanding signed on Friday said authorised capital of the bank would be US$100 billion and that the AIIB would be formally established by the end of 2015 with its headquarters in Beijing, state news agency Xinhua said.

Takehiko Nakao, the president of the Manila-based Asian Development Bank (ADB), said the AIIB should function in line with international governance, labour and environmental standards.

“I hope the new bank will adhere to these standards,” Nakao told Reuters in a phone interview.

He acknowledged there was an overlap of the AIIB’s role with that of the ADB. “But again, because of very big financing needs of the region it is understandable to have a new idea of establishing a bank,” Nakao said, adding: “We will consider the appropriate collaboration after it is really established.”

The ADB, created in 1966, offers grants and below-market interest rates on loans to lower to middleincome countries. At the end of 2013, its lending amounted to US$21.02 billion, including co-financing with other development partners.

China has a 6.5 percent stake in the ADB, while the United States and Japan have about 15.6 percent each.

Reuters

Stay in the finest hotels in Macau and read Business Daily news where it matters

11

October 27, 2014

Asia

Analysts forecast dark end of the year for Japan Japan’s economy is floundering and analysts polled by Reuters cut their annual growth forecast for a fifth straight month, saying there is no chance the Bank of Japan will meet its 2 percent inflation goal by the next fiscal year

W

ith demand still suffering from an April sales tax hike and disappointing factory output, most analysts expect the BOJ to ease policy further before the fiscal year ends in March.

The majority expect that to happen early in 2015.

The BOJ launched an unprecedented burst of monetary stimulus last April aimed at reflating the economy, pledging to double the monetary base to 270 trillion yen (US$2.50 trillion) over two years, which has helped to send the yen down about 15 percent against the dollar.

But not a single economist polled said that it would succeed in getting inflation to the 2 percent target by fiscal 2015/16. It was last at 1.1 percent, without the tax hike effect.

“The inflation goal gets out of sight,” wrote Stefan Grosse of NORD LB. Consumer price inflation without the April sales tax hike effect will probably rise 1.1 percent in this fiscal year and next, roughly in line with the previous survey.

But with oil prices falling sharply, all central banks are soon going to be faced with lower inflation, which is particularly worrying for the BOJ and the European Central Bank as deflation risks loom.

That means those inflation forecasts are likely going to be chopped in coming months.

“The global economy is not

helping the plans of (Prime Minister) Shinzo Abe. Low commodity prices are bad news if the Bank of Japan is absolutely fixed on the inflation goal,” said Grosse.

The economy will grow just 0.2 percent for the fiscal year to March 2015, a Reuters poll of 24 analysts showed, down from a 0.3 percent projection made last month and falling from a 1.0 percent growth forecast in May. They project only 1.3 percent growth in the next fiscal year starting April 2015, with a slowdown from that in 2016/17 to 1.2 percent,

KEY POINTS Analysts cut FY2014/15 econ forecast for 5th straight month BOJ to miss its inflation target of 2 pct next fiscal year Analyst expect further easing from the BOJ within this fiscal

unchanged from September’s poll.

“The likelihood of economic stagnation has been rising,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.

During the third quarter, the economy probably rebounded an annualised 2.9 percent, according to the poll, but that would be less than a half of the 7.1 percent contraction in the second quarter, the biggest contraction since early 2009, after the sales tax hike bit harder than expected.

That also is a sharp downgrade from 3.6 percent growth forecast in the September Reuters poll.

But economists expect 2.1 percent expansion in the fourth quarter, unchanged from last month’s projection.

Even with the prospect of economic stagnation, thanks in part to the April tax hike, a majority of analysts said they expect the government to proceed with plans for another sales tax hike next October.

But not all of them think that’s a good idea.

“Given the prospects of a slower global growth, it would be difficult for the prime minister to risk another tax hike slump on the economy,” said Grosse.

The poll showed 18 of 21 analysts predict the government will raise the tax as planned, while three said it would postpone it, hardly changed from last month’s survey.

Businessmen carrying umbrellas walk past a display showing closing information of Tokyo’s Nikkei Stock Average in Tokyo

Reuters

India picks Spike anti-tank missile Modi’s government opts for the Israel missile over U.S. Javelin Nigam Prusty

Spike is a man-portable ‘fire and forget’ anti-tank missile that locks on to targets before shooting

I

ndia has opted to buy Israel’s Spike anti-tank guided missile, a defence ministry source said on Saturday, rejecting a rival U.S. offer of Javelin missiles that Washington had lobbied hard to win.

India will buy at least 8,000 Spike missiles and more than 300 launchers in a deal worth 32 billion rupees (US$525 million), the source said after a meeting of India’s Defence Acquisition Council.

Prime Minister Narendra Modi’s five-month-old government wants to clear a backlog of defence orders and boost India’s firepower.

“National security is the paramount concern of the government,” the source quoted Defence Minister Arun Jaitley, who also holds the finance portfolio, as telling the procurement panel.

“All hurdles and bottlenecks in the procurement process should be addressed expeditiously so that the pace of acquisition is not stymied.”

Among other business cleared by the panel, India will issue a request for proposals to supply six submarines, added the source, who was not authorised to comment on the record and did not elaborate.

Spike is a man-portable ‘fire and forget’ anti-tank missile that locks on to targets before shooting. It is produced

by Israel’s Rafael Advanced Defence Systems, which declined to comment.

It beat out the rival U.S. Javelin weapons system, built by Lockheed Martin Corp and Raytheon Co, that Defence Secretary Chuck Hagel had pitched during Modi’s visit to Washington at the end of September.

Senior U.S. officials had said they were still discussing the Javelin order as part of a broader push to deepen defence industry ties with India by increasing the share of production done in the country.

Analysts estimate that India, the world’s largest arms buyer, will invest as much as US$250 billion in upgrading its Soviet-era military hardware and close the gap on strategic rival China, which spends three times as much a year on defence.

Reuters

12

October 27, 2014

Asia Myanmar ready for Mekong business challenges Myanmar has chosen two teams to enter the Mekong Business Challenges-2014 slated for March 15, 2015 in Hanoi, capital of Vietnam, official sources said yesterday. The two Myanmar business teams, which won at the professional level of the Fourth Myanmar Business Model Contest-2014 on Saturday, will compete with smart teams from Cambodia, Laos, Thailand, Vietnam and China’s Yunnan Province.

The Myanmar business model contest was jointly organized by the Union of Myanmar Federation of Chambers of Commerce and Industry and the Cross-Border International Education Support Foundation of Japan.

Cambodia’s rubber exports up Cambodia has seen a 29-percent increase in dry rubber exports in the first nine months, but revenues dropped 9 percent due to global decline of rubber price, the Ministry of Commerce said on Saturday. During the January-September period this year, the Southeast Asian nation exported 67,514 tons of dry rubber, up 29 percent from 52,242 tons over the same period last year, the ministry said in a report. The revenues from the exports stood at US$113 million, down 9 percent from US$124 million over the same period last year, it added.

Myanmar to host financial conference The conference will discuss challenges for countries in striving for access to finance. The meeting, slated for October 29-30, is expected to see key stakeholders in the region, including ASEAN finance ministers, policy makers, academics, practitioners and officials from UN Development Program, UN Capital Development Fund, World Bank and Asian Development Bank. During the conference, two key papers will be presented on issues of how financial inclusion can help government policies and measures to ensure sustainable and equitable economic growth in ASEAN, reducing inequity and creating sustainability as well as women’s economic empowerment in the role of finance.

South Korean Q3 GDP rebounds amid doubts Policymakers will be particularly concerned by data showing weaker sales abroad dampened spending on production equipment Christine Kim

S

outh Korea’s economic growth quickened in the third quarter as government and consumer spending rebounded, but exports were knocked by cooling global growth, a sign that more monetary easing may be required to sustain a fragile recovery.

Underscoring the tenuous economic momentum, the Bank of Korea said a large part of the consumption uptick was merely payback from a slump in the second quarter, when a ferry accident dented domestic travel and retail spending.

That took some of the shine off Friday’s BOK data showing the economy grew a seasonally adjusted 0.9 percent in July-September from the second quarter. It followed a 0.5 percent rise in the second quarter and matched the median 0.9 percent forecast in a Reuters survey of 21 analysts. “(Third-quarter growth) was driven by domestic components, following weak readings in the previous quarter. But trade contracted and consumer confidence has not picked up meaningfully,” said HSBC economist Ronald Man in a note.

“This suggests that policymakers in Korea will maintain an accommodative stance to support growth and we forecast the Bank of Korea to hold its policy rate at 2.00 percent over the foreseeable future.”

Policymakers will be particularly concerned by data showing weaker sales abroad dampened spending on production equipment, suggesting a fragile economic recovery after growth slowed to its weakest pace in nearly two years in the June quarter.

“South Korea is doing relatively well compared to other countries but growth is not yet firm,” said BOK Governor Lee Ju-yeol during a meeting with local conglomerate CEOs on Friday.

“Despite questions on what may happen to household debt, we lowered rates because it was important we

KEY POINTS Consumption and construction up, investment down Exports suffer first drop in a year Central bank chief says growth still not firm BOK official says Q3 growth benefited from govt spending, weak Q2 growth

keep the spark of recovery alive.”

The Bank of Korea has cut interest rates by 50 basis points to match a record-low 2.00 percent in two moves this year.

After the latest cut earlier this month, the central bank gave no clear signal that its easing cycle had ended, keeping the door open for another reduction.

Global headwinds The export-reliant economy, home to global titans such as the world’s biggest smartphone maker, Samsung Electronics Co Ltd, and car maker Hyundai Motor Co, has struggled since April from the effects of the ferry disaster and sluggish export growth.

On Thursday, Hyundai reported a 29 percent year-on-year fall in quarterly net profit, hit by a strong local currency and slowing sales in its key U.S. and South Korean markets.

While Asia’s fourth-largest economy is seen to have passed a trough in the second quarter, analysts worry a tottering global economy

Indonesia simplifies mining licensing

could hamper the recovery.

Highlighting global uncertainties, Friday’s data showed exports fell 2.6 percent from the previous three months, the first quarterly decline since the third quarter of 2013, when they dropped 1.1 percent.

A cooling Chinese economy and the threat of recession in Europe have raised doubts about global demand.

“As exports out of China weaken, our shipments are declining as well because South Korea mainly exports intermediate products to China,” Jung Yung-taek, head of the central bank’s statistics department, told reporters.

South Korea’s manufacturing activity shrank in September to the lowest in three months as domestic and export demand cooled, a survey found earlier this month.

And industrial output in August had its worst monthly fall since the 2008 global financial crisis.

Despite cutting rates to shore up momentum, the full benefits of the BOK’s monetary medicine won’t be evident until the end of the fourth quarter, or early next year, due to the lagged transmission effects on the real economy.

A raft of new policies launched by Finance Minister Choi Kyung-hwan after he took office in July would also have provided only a modest boost to growth in the third quarter, as the bulk of the measures still need parliamentary approval.

From a year earlier, South Korea’s gross domestic product rose 3.2 percent in the September quarter, below an expected 3.3 percent and slowing from a 3.5 percent increase in the second quarter.

The Bank of Korea estimated private consumption gained a seasonally adjusted 1.1 percent in the third quarter after a 0.3 percent decline in the second. Capital investment fell 0.8 percent, after a 1.1 percent rise in the second quarter.

Reuters

Bank of Korea headquarters in Seoul

The Indonesian government has cut the number of licenses required to do business in the country’s mining sector in a bid to attract more investment, an official said here on Friday. Director General for Coal and Minerals at the Indonesian Ministry of Energy and Mineral Resources R. Sukhyar disclosed that the number of licenses needed for exploration had been cut to 71 from 101. “We do not want investors to be hampered while doing business here,” he said at the directorate general of minerals and coal of the ministry.

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 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.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

13

October 27, 2014

Asia

Asian economic growth to languish as China slows India, Malaysia and Thailand were the few economies for which economists made slight upgrades to growth projections Sumanta Dey

E

merging Asia will contribute less to the global economy in 2015 than was expected just months ago as a slowdown in China drags on growth in the region, partially offset by acceleration in the United States, Reuters polls showed.

Until recently the primary engine of global growth, most Asian economies have slowed, hamstrung by erratic exports, sluggish domestic demand, capital outflows and political and policy uncertainty.

At the same time, many of Asia’s major trading partners in the West are grappling with disinflation and weak demand, making it difficult for central banks there to move away from aggressive monetary stimulus.

Estimates for 2015 GDP growth were either cut or left unchanged for nine Asian countries in the latest poll of over 200 economists conducted over the past week, with Hong Kong, Indonesia and Singapore bearing the brunt of the downgrades.

These latest lacklustre forecasts follow a similarly tepid performance this year, during which China’s economy slumped to its slowest pace of growth since the global financial crisis.

“The Chinese economy is

unbalanced at present with an excess of investment, much of which has been financed via debt,” said Jay Bryson, global economist at Wells Fargo.

“The slowdown that is under way in China is partially policy-induced, and the days of double-digit Chinese economic growth appear to be a thing

Hong Kong, Indonesia and Singapore (pictured) bearing the brunt of the downgrades

of the past.”

China’s economy is expected to expand 7.4 percent this year, narrowly missing the government’s 7.5 percent annual target, as Beijing tries to derive more future growth from consumer demand rather than exports. In 2015, economists predict growth to slow further to 7.1 percent.

Also among the primary reasons for the protracted slowdown is the risk that China’s overheated property market might crash, triggering ripple effects through a highly leveraged economy and further dragging on consumer demand.

Effects from a slowdown in the world’s second largest economy have trickled through to South Korea, Hong Kong, Singapore and Indonesia, with growth estimates downgraded in the latest survey.

India, Asia’s third largest economy, was among the few bright spots. Growth there is expected to pick up to its fastest pace this fiscal year since 2010-11 on the view that Prime Minister Narendra Modi will unveil much needed reforms to attract investment.

Reuters

14

October 27, 2014

International Pemex 3rd-qtr loss widens Mexico’s state-owned oil company Pemex reported a much deeper third quarter loss on falling crude output and prices, the company said in a filing with the Mexican stock exchange. Pemex said its quarterly loss totalled 59.65 billion pesos (US$4.44 billion) during the July to September period, compared with a year earlier loss of 39.14 billion pesos (US$2.98 billion). The company reported third-quarter revenues of 406.5 billion pesos for the quarter, down 0.7 percent compared with same period last year, due mostly to fewer crude and condensate exports.

Investors look to stock exchanges to tap into African growth The BRVM exchange based in Ivory Coast, which covers eight west African countries, already gets more than half of its volume from international investors practices and sharing technologies,” said Anthony Attia, chief executive of Euronext Paris.

The exchange operator in March signed a cooperation deal with Algeria’s stock exchange and agreed to provide Tunisia and three Middle Eastern exchanges with trading technology.

Tanzania talks with Total, BP

‘Financial arms race’

Tanzania has held talks with France’s Total and Britain’s BP over oil and gas exploration, its energy ministry said on Saturday, aiming to add to major companies active in its thriving energy sector.

Companies already present in the east African state include Norway’s Statoil, Brazil’s Petrobras, Royal Dutch Shell , BG Group and Exxon Mobil.Total executives were in Tanzania’s commercial capital Dar es Salaam this week with Energy and Minerals Minister Sospeter Muhongo, the ministry said. “Total has expressed interest to explore for gas and oil in the Lake Eyasi (open acreage area),” Muhongo said in a statement.

Nader urges Apple to raise wages Consumer advocate Ralph Nader sent a letter to Apple Inc. CEO Tim Cook urging the company to reduce its spending on share buybacks and use the money to raise wages, the Wall Street Journal reported. The five-time presidential candidate wrote in a letter published by the paper that poverty wages and harmful conditions are “a consequence of tolerating outrageous stock buybacks.

‘Designed by Apple in California’ has a nicer ring to it than ‘assembled by workers paid about a dollar per hour, working 11-hour shifts, and sleeping eight to a room … in Wuxi, China’,” wrote Nader.

Ex-Bank employee guilty of insider trading A former Bank of New York Mellon Corp employee pleaded guilty to insider trading based on tips from a former Merck & Co Inc. employee about potential pharmaceutical mergers. Federal prosecutors in New York said David Post, 41, a product manager at the bank, received non-public information from a former Rutgers Business School classmate about three companies: Idenix Pharmaceuticals, Ardea BioSciences and ViroPharma Inc. The connection was confirmed when the U.S. Securities and Exchange Commission amended a parallel civil complaint.

Russia’s sovereign rating a notch above junk Standard & Poor’s ratings agency affirmed Russia’s sovereign rating at a notch above junk status, warning a downgrade may follow if more sanctions are imposed on Moscow for its role in the Ukrainian conflict. The agency affirmed the country’s long- and short-term foreign currency sovereign ratings at BBB-/A-3 after cutting them in April. S&P also said another cut might come if Russia’s monetary policy or exchange-rate flexibility weakens. It maintained a negative outlook on Russia.

South Africa has by far the most developed market on the continent, with around 400 companies listed. (Pictured) Johannesburg Stock Exchange

F

acing subdued growth at home, a growing number of Western investors are now looking to Africa’s “frontier markets” for high returns and hoping the continent’s budding exchanges can help them tap in.

The IMF predicts sub-Saharan Africa’s economy will expand by 5.1 percent this year and 5.8 percent in 2015 -- the highest growth outside Asia -- despite the heavy economic toll from the Ebola epidemic.

“The Americans are beginning to take a look, the whole world is looking, because it’s the last big territory with a lot of opportunities for fast growth,” said Hubert Segain, a partner at law firm Herbert Smith Freehills, at a recent conference.

This new appetite for African investments has driven a proliferation of stock exchanges across the continent, with countries such as Mozambique, Uganda and Tanzania setting up their own markets.

“In the 1990s, there were a dozen, today they have more than doubled,” said Segain.

These markets offer African companies a means to access Western capital in a stable and transparent environment, governed by more defined rules than private investments.

The BRVM exchange based in Ivory Coast, which covers eight west African countries, already gets more than half of its volume from international investors, according to its chief executive.

Double-listing is one path we are exploring, but the heart of our approach is the sharing of good practices and sharing technologies Anthony Attia chief executive Euronext Paris

Western exchanges are also looking to get into the game, linking up with their African cousins and tempting companies to double-list.

Segain said more than 10 African companies, or those with assets on the continent, have debuted recently on the London Stock Exchange, one of the world’s largest equity markets which has been on a marketing drive on the continent.

“Double-listing is one path we are exploring, but the heart of our approach” is “the sharing of good

But the potential for profits also comes with many challenges.

“The first hurdle is seeing Africa as a single entity. It brings together very different geographical areas with varied levels of political and economic stability,” said Attia.

Another major problem is liquidity, as there are still only a limited number of players in Africa’s financial markets.

Liquidity is important because it allows investors and companies to be flexible with their holdings.

Without it, it can be difficult to find buyers and sellers of shares.

BRVM, which started up in 1998, has only 37 companies from eight countries listed. Its chief executive Edoh Kossi Amenounve believes it will take another five or six years for it to reach a decent size.

“Asset managers are essentially local... there are very few foreign funds operating on African stock markets,” said Jean-Jacques Essombe, a partner with Paris law firm Orrick Rambaud Martel.

South Africa has by far the most developed market on the continent, with around 400 companies listed, followed by Egypt and Nigeria, both with around half of that, said Segain.

The Johannesburg-based JSE is also far and away the largest by market capitalisation, with US$378 million, more than four times as much as its nearest rival Nigeria.

“Levels of market capitalisation are low, as are trading volumes, which represent an obstacle for investors,” noted Karim ZineEddine, director of research at Paris Europlace.

The variety of legal and financial systems in Africa, coupled with a lack of financial infrastructure, also present difficulties.

“There should also be more regulation, but not too much, because it must incorporate the cultural aspects of the countries concerned,” said Essombe.

Regional exchanges, such as Ivory Coast’s BRVM exchange, are one way to smooth out national differences.

But, said Segain, this can cause problems as a stock market is often seen “as a tool for sovereignty”, and so regional exchanges can prompt “a kind of financial arms race” between countries.

Crucially, share markets need to tailor their services according to their clients, as the needs of an African and US investor are not the same, said Orrick Rambaud Martel partner Pascal Agboyibor.

“The most important thing is to work first on a local ecosystem and not try to copy international models,” said Attia.

AFP

15

October 27, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

TAIPEI TIMES About 400 former highway toll collectors rallied outside the Chungli rest stop on the Sun Yat-sen Freeway (National Freeway No. 1), in Taoyuan County to protest against the government and Far Eastern Electronic Toll Collection Co, who they say are responsible for their unemployment.

The rally began on Saturday at 9am, with the crowd of protesters shouting slogans and demanding that the government and Far Eastern take into consideration the period they have been and are to remain unemployed, as the way seniority is assessed has an impact on their pensions.

THE KOREA HERALD British banking group Standard Chartered aims to foster South Korea as the hub for renminbi internationalization amid the Chinese currency’s increasing clout in the global market, its board chairman said in an interview. “If the global economy is to grow successfully in the future, currency is going to be an important part of that. That is why we believe the internationalization of the renminbi is going to be part of the economic story,” John Peace told Yonhap News Agency in an October 23 interview at the group’s Seoul headquarters.

THE JAPAN NEWS The Tokyo metropolitan government said it will switch part of its planned ¥20 billion’s worth of debt securities for retail investors into Australian dollar-denominated notes. The foreign currency notes will be the first central government or municipal debt securities in the post-war period in Japan to be denominated in any currency other than the yen, according to Tokyo government officials.

Of the municipal securities, ¥5 billion will be Australian dollar debt maturing in five years while the rest will be yen notes maturing in three years.

PHILSTAR The series of international road shows conducted by the Aquino administration to drum up interest for major infrastructure projects has lured big Canadian and American companies to participate in biddings for Public-Private Partnership (PPP) projects in the country. PPP Centre executive director Cosette Canilao said the Philippines has successfully showcased close to 50 PPP projects worth about US$21 billion during a road show in North America, including Toronto and Montreal in Canada as well as New York and Washington in the US.

Euro may see fading reserve demand James Saft

Reuters columnist

T

he euro, long the beneficiary of central bank reserve buying, may be seeing that support ebb and possibly reverse.

If so, and all else being equal, downward pressure on the euro may mount at a time when the European Central Bank, struggling to avoid a third recession since 2008, will find this quite useful.

Global central bank reserves, at more than US$12 trillion, are a massive force in setting the price of currencies and have a major impact in offsetting or magnifying monetary and economic policy.

One of the big stories of the past 15 years has been the huge growth of global central bank forex reserves, particularly in China, which went from having very little at the end of the last millennium to nearly US$4 trillion today. That was pretty simple: when you have a current account surplus from profitable exports you do business in dollars and end up holding them.

After all 87 percent of currency exchanges (which by definition involve two currencies) include

Now remember, countries which export profitably end up holding dollars. In turn they sell some of these dollars in order to have more diversified reserves, buying euros, sterling and yen, among others.

dollars, showing its stunning dominance as an international means of exchange.

But, according to Stephen Jen of hedge fund SLJ Macro Partners, that exerted downward pressure on the dollar, as central banks then sought to diversify their reserves in order to hedge dollar risk. The euro was a beneficiary, at least up until the euro area crisis.

But though the euro’s share of reserves declined from 2008 to 2011, much of that was a decline in value rather than a decline due to reserve management.

That may be changing.

“In contrast to the pattern pre-2009, central banks have stopped accumulating EUR reserves beyond what has been needed to offset the variations in EURUSD (prices),” Jen and SLJ colleague Joana Freire write in a note to clients.

“The risk going forward could be an outright divestment from the EUR by central banks.”

Now while euro area officials would quail at any suggestion that central banks are retreating from the euro zone single currency as a stable source of reserve value, that seems unlikely to be what is happening.

Coming as it does at a time when the ECB is struggling to make sufficiently simulative policy, a slowdown in reserve buying of the euro could be extremely useful, at least to the euro zone.

There have already been some signs that private investors, seeing the writing on the wall in terms of monetary policy and growth, have turned euro-negative, sending it from US$1.36 in July to US$1.26 now.

Changing global economy The euro may also suffer, and the dollar benefit, as emerging markets, which drove the last 15 years of reserve accumulation, see their economies change.

Not only has China said it wants to accumulate less in reserves,

but many expect the (arguably) largest economy in the world to now be in an epochal shift from an export-based to a consumption-based economy.

That process, which may also be happening elsewhere in emerging markets, may imply that the very strong growth of central bank reserves may slow, or even begin to reverse.

Jen also argues that Chinese investors will export capital, as they seek to diversify, something which, if allowed, will lessen reserve accumulation by the PBOC. Now remember, countries which export profitably end up holding dollars. In turn they sell some of these dollars in order to have more diversified reserves, buying euros, sterling and yen, among others.

That process has been huge, with global reserves growing by something on the order of US$10 trillion in a decade and a half, as globalization deepened.

It has also, you could argue, exerted a steady, subtle downward pressure on the dollar, as reserve managers sell dollars to buy other currencies.

To the extent that we think that whole process will slow or reverse, then we should expect it to drive the value of the dollar up and the value of the yen, sterling and particularly euro down.

And of course what is a boon for the ECB, giving them a bit of needed stimulus, could end up being a headache for the Federal Reserve, depending on how thing play out.

A rising dollar will crimp demand for U.S. exports and be a wet blanket on inflation pressure from imported goods. That might be ok if the U.S. is doing reasonably well, but will pose an issue if its economy slows.

On the whole, the very long period of huge reserve growth has been marked by bubbles, crashes and mismanagement.

The transition will be tricky, but may well be for the good.

Reuters

16

October 27, 2014

Closing Wenchang to launch space station

Bangladesh cancels sugar tender due to low price

China’s fourth space launch centre, the Wenchang satellite launch centre in south China’s Hainan Province, will launch the country’s space station and cargo spacecrafts. Tao Zhongshan, chief engineer of the Xichang launch centre, told Xinhua yesterday that the new centre will be used mainly for geosynchronous orbiters, large-tonnage space stations, cargo spacecraft, and large polar orbit satellites. Wenchang has an advantage for transportation of modules of such spacecraft as it is located near a seaport. The site’s low latitude will also help the carrying capacity of rockets by about 10 percent, compared to Xichang.

Bangladesh Sugar & Food Industries Corp has cancelled a tender to export 25,000 tonnes of sugar to the European Union, with an official saying the only bid it received - of US$295 a tonne from London-based ED&F Man Sugar was too low. The state sugar agency issued its first tender since 2012 earlier this month as it struggles with huge stocks amid rising raw sugar imports by private refiners. Private refiners in Bangladesh imported around 2 million tonnes of raw sugar in the fiscal year that ended in June.

East Africa’s engagement of oil firms boosting discoveries In 2013, East African nations increased the number of oil blocks from 37 to the current 46

E

ast African governments’ efforts to engage major oil companies which are fully equipped to deploy modern and versatile petroleum exploration technologies is boosting oil and gas discoveries, a Kenyan official said.

Ministry of Energy and Petroleum Commissioner for Petroleum Martin Heya told an oil and gas forum that ended late on Saturday in Nairobi that the use of Full Tensor Gradionometry (FTG) and 3D seismic surveys that increase the precision of targeting of subsurface structures that trap hydrocarbons is turning the region into a major hydrocarbon production area. “Kenya, Tanzania, Uganda, Rwanda, Burundi, Ethiopia Somalia and Mozambique have all benefited from advanced technologies,” Heya said during the Third East Africa Upstream Summit.

“The region is also developing local technical experts who can monitor oil and gas contractor operations as well as verify exploration results as projects progress,” he said.

However, he said the region has to overcome the lack of oil and gas infrastructure that could affect revenues.

“A significant mismatch between the pace of discovery and implementation of corresponding infrastructure projects could pose a challenge in monetizing the

A natural gas flare

Senior Japan official calls for tax delay

China military spending efficiency

A

discoveries,” he said.

Kenya has drilled a total of 69 wells since oil exploration efforts began with encouraging discoveries in three basins.

So far, 12 of the wells are discovery wells, with nine containing crude oil and two holding natural, while the Anza Basin contains both oil and gas.

The country’s estimated crude oil reserves is about one billion barrels.

“The current increased success is also attributed to Kenya’s subdivision of sedimentary basins into smaller units,” Heya said.

Kenya’s Sessional Paper of 2005 on Energy provided for the reduction of block sizes so as to curb tendencies by oil companies to horde them.

In 2013, the East African nations increased the number of oil blocks from 37 to the current 46.

Presently, 41 have been licensed to 21 international oil companies.

The energy ministry official said that Kenya, Tanzania and Uganda all have stand alone petroleum exploration laws for governing upstream petroleum operations.

These laws vest title to petroleum deposits in the national government and are designed to create a favourable legal environment for exploration by oil companies.

Kenya Pipeline Managing Director Charles Tanui said a rapid revolution is being witnessed in the oil industry in the East and Central Africa.

He said the region is now the world’s top hydrocarbon exploration area with over 250,000 square kilometres of unexploited land mass.

Tanui said four separate petroleum basin systems have been proven to contain multi- billion barrels, adding that Kenya and Uganda intend to develop 852 kilometre cross border pipeline for transportation of petroleum products.

Xinhua

Richest Vietnamese businessman arrested

C

P

top Japanese government official said Prime Minister Shinzo Abe should delay a planned sales-tax increase, the strongest sign yet that economic weakness is causing concern among those close to the premier ahead of the difficult tax decision.

“I think it should be delayed” by a year and a half to April 2017, the prominent official told a small group of people in a recent conversation on condition of anonymity. He expressed concern that raising the national sales tax too soon after a damaging April hike could derail an economic recovery.

Powerful interests like the Finance Ministry, the Bank of Japan and major corporations want Abe to raise the tax as planned next year to keep Japan’s promise to reduce the biggest debt burden in the industrial world. But the economic and political environment is making it harder for Abe to make unpopular policy choices.

Recovery in the world’s third-biggest economy is struggling, Abe’s popularity has taken a hit with two Cabinet ministers resigning in political scandals.

hina is to introduce a results-based management system to ensure efficiency in military spending.

According to a circular approved by the Central Military Commission and made public yesterday, military expenditure management and control will be improved to maximize the output of the spending.

Individuals or units will be held accountable for inefficiency, said the circular issued by the General Logistics Department of the People’s Liberation Army (PLA). The circular said the management system will be piloted this year at PLA headquarters and regional military commands in five areas such as fiscal management and military hospitals. The scheme will become universal by 2020.

Zhao Keshi, head of the PLA general logistics department, said the assessment of output and results will be introduced throughout the allocation, use and supervision procedures.

The system will ensure military funds being effectively transferred into combat capability, he said.

The circular said modern warfare is based on huge consumption of money and materials, and cost-output management should always be an important consideration for the military.

olice have arrested one of Vietnam’s richest businessmen as part of an investigation into banking fraud that could deepen investor concerns about the troubled sector.

Ha Van Tham, the former chairman of the private Ocean Bank, was taken into police custody Friday, the State Bank of Vietnam (central bank) said on its website.

It said “serious violations of the laws by Ha Van Tham” were discovered during a probe into a bank restructuring project, leading to his removal from his post and subsequent arrest.

“The State Bank of Vietnam is closely cooperating with relevant authorities to strictly deal with the violations at Ocean Bank under the law,” it added without giving further details.

The Ministry of Public Security said Tham had been detained for violating “lending regulations”, a crime which reports said carries a jail term of up to 20 years.

The state-run Tuoi Tre newspaper reported that Tham had approved a loan of 500 billion Vietnamese dong (US$23.5 million) in 2012 to the Trung Dung real estate company without proper collateral.

Reuters

Xinhua

AFP