Macau Business Daily, Dec 19, 2014

PAGE 2&4&10

MOP 6.00 Closing editor: Joanne Kuai Year III

Number 692 Friday December 19, 2014

Publisher: Paulo A. Azevedo

President Xi Jinping in town

C

hinese President Xi Jinping arrives in Macau today. It will be his first official visit in five years. Xi has a busy schedule ahead of him. Official 15th anniversary celebrations and the inauguration of the fourth-term government of Macau. He will also meet with outgoing officials. Some pundits believe Xi’s visit implies tightening control of the gaming industry. Others interpret it as central government support. Meanwhile, local activists are unhappy at not being granted permission to rally. And don’t rule out ‘unexpected’ activities.

The ties that bind

Property perceptions Chinese property prices declined again last month. Confirming the sector to be a real drag on the national economy.

The data, however, does suggest a bottoming out

PAGE 12

Chinese whispers

Trade liberalization is in the air. The mainland has signed a new trade pact with Hong Kong and Macau on the eve of President Xi Jinping’s visit to the MSAR. It is believed to contain a mostfavoured treatment provision. Extending

any CEPA-plus preferential treatment offered to other countries and regions to the SARs as well

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December 18

Name

%Day

Tencent Holdings Ltd

6.27

Galaxy Entertainment

3.21

Power Assets Holding

2.44

China Life Insurance

2.41

CNOOC Ltd

2.33

BOC Hong Kong Holdin

-0.79

Sino Land Co Ltd

-1.15

Li & Fung Ltd

-1.19

Bank of Communicatio

-1.34

China Merchants Hold

-1.35

Source: Bloomberg

China’s market liquidity has turned surprisingly tight in recent days.

This, despite rate cuts in November. Encouraging speculation about a possible response from the central bank. Or even imminent cuts in reserve ratio requirements

I SSN 2226-8294

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PAGE 14

Sense of achievement Celebrations of the establishment of the Macau Special Administrative Region are scheduled for tomorrow. Some facts and figures provide broad brushstrokes of the changes. Highlighting the massive strides made in economic and social development in the past 15 years

HSI - Movers

U.S judge dismisses Steve Wynn lawsuit PAGE 10

Japan auto lobby: ‘Sense of crisis’ hanging over industry PAGE 16

2014-12-19

2014-12-20

2014-12-21

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12˚ 18˚

13˚ 19˚

2 | Business Daily

December 19, 2014

Macau

President Xi’s Schedule President Xi Jinping arrives in Macau this morning and will meet with Chief Executive Fernando Chui Sai On soon after

Agenda of Mr. Xi Jinping’s Visit to Macau

Today (19 Dec) Morning

Meeting with Macau’s Chief Executive Chui Sai On During the day

P

resident Xi, who is also the Secretary General of the Communist Party of China’s Central Committee and Chairman of the Central Military Commission, is to stay in the city for two days to officiate at the 15th anniversary celebrations of Macao’s return to the motherland, as well as the inauguration ceremony of the fourth-term of government of the SAR tomorrow.

After meeting Mr. Chui in the morning, Mr. Xi is to meet with outgoing officials of the Macau Government and will attend a welcoming banquet in the evening hosted by the government. He will also meet with local representatives from different sectors and attend a screening of a celebratory variety show titled ‘Dream of Macau, Heart of China’.

Prior to officiating at the inauguration ceremony tomorrow morning, Mr. Xi will attend a flag rising ceremony at 8 o’clock. In the afternoon, he will visit the Hengqin Campus of the University of Macau before meeting with incoming officials from the administration, legislation and judiciary.

Mr. Xi is scheduled to leave the

Mr. Xi Jinping arrives in Macau

Meeting with outgoing officials from Macau Government Meeting with local representatives from different sectors

Night

Welcoming banquet hosted

by Macau Government Celebratory variety show: Dream of Macau, Heart of China

Tomorrow (20 Dec)

Morning

city tomorrow afternoon.

It is the second time Mr. Xi has visited Macau in the last five years.

He made an inspection tour of the SAR in January 2009 as vice president, meeting local residents and inspiring them to tide over the global financial crisis.

Experts believe his tour is expected to enhance cooperation between Macao and the mainland and guarantee that the great cause of ‘One country, two systems’ can be passed down to generations to come.

Flag raising ceremony in celebration of the 15th anniversary of the Macau SAR 15th anniversary celebration of Macau’s return to China Inauguration Ceremony of the Fourth-term Macau Government Meeting with incoming officials from administration, legislation and judiciary

Afternoon

Visit to University of Macau Campus in Hengqin Mr. Xi Jinping leaves Macau

Factbox: Development of Macau seen in figures Macao is to celebrate the 15th anniversary of its return to China’s sovereignty tomorrow.

The following are the facts and figures about the Macao Special Administrative Region’s (SAR) economic and social development during the past 15 years > The area of Macao has expanded from 22 square km in 1999 to more than 30 square km in 2013 due to land reclaimation from the sea. Its population has grown from 420,000 to 630,000 nowadays. > Macao’s gross domestic product (GDP) reached MOP413.47 billion (US$51.76 billion) in 2013 year from MOP50.27 billion in 1999, with an average annual growth of 16.2 percent. The GDP per capita jumped from US$15,000 in 1999 to US$87,000 in 2013. > The Macao SAR is ranked the 7th freest economy in the Asia-Pacific region and the 29th among 170 economies in the world, according to a 2014 report on the Index of Economic Freedom released by the Heritage Foundation headquartered in Washington,

the United States. > Until September 2014, 111 countries or territories have granted visa-free access or visa-on-arrival to holders of the Macao passports. > After the Mainland and Macao Closer Economic Partnership Arrangement (CEPA) was signed in October 2003, 10 additional supplements to CEPA have been inked. > Some 68.28 million mainland visitors have traveled to Macao and 49 cities on the mainland have launched an individual visitor scheme with the Macao SAR since the tourism plan was introduced in July 2003. > Macao received 29.32 million visitors

last year, about 47 times the figure of local population. > The mainland has adopted 383 measures for opening the service trade sector to Macao businesses and conducted tradefacilitation cooperation in 10 categories with Macao since the start of 2014. > The unemployment in Macao dropped from 6.3 percent upon Macao’s return to China in 1999 to 1.7 percent. > The life expectancy of Macao residents rose from 80.5 years in 1999 to 85, the second longest in the world. > At least 13 percent of Macao’s area has been protected as heritage conservation

zones since the Historic Center of Macao, a collection of over 20 locations, was listed as the UNESCO World Heritage in 2005, the 31st designated World Heritage site in China. > The Macao SAR hosted 964 conventions and 66 exhibitions in 2013. > Macao launched a 15-year compulsory education scheme in 2007, which is among the few in the world that provide freeeducation from kindergarten to senior high school. > Soldiers from the People’s Liberation Army Garrison in Macao have donated 500,000 cc of blood in Macao over the past 15 years.

Xinhua

Business Daily | 3

December 19, 2014

Macau

Macau, mainland ink new trade liberalisation deal A new trade liberalisation agreement inked by both parties aims to remove restrictions for 58 types of service sectors here that want to provide service in Guangdong Province Stephanie Lai

sw.lai@macaubusinessdaily.com

U

pon the imminent 15th Macau handover anniversary, the governments of the city and mainland China signed a new trade liberalisation deal yesterday that seeks to provide easier conditions for Macau service providers to set up businesses in Guangdong Province.

The trade liberalisation deal, which is a new edition of the Closer Economic Partnership Arrangement Agreement (CEPA), is set to benefit the Macau companies that have previously been subjected to more restrictions than their mainland counterparts in the provision of services in the province. The deal will enter into effect on March 1 next year, removing all of the restrictions on 58 service sectors - including advertisement services, photography, meetings and conventions, restaurants, tour guide and goods transportation – so that they will have the same market entry conditions as mainland companies.

The trade liberalisation agreement was signed yesterday evening by the Vice-Minister of Commerce, Gao Yan, and the Macau Secretary for Economy and Finance, Francis Tam Pak Yuen. On the same day, the Beijing official also signed a similar cross-border trade liberalisation deal with the Hong Kong Government.

Ms. Gao, who talked briefly after inking the agreement, noted to media here yesterday that the new deal contained a most-favoured treatment provision stating that any CEPA-plus preferential treatments the mainland may offer to other countries and regions will be extended to Macau to ensure the city enjoys the most preferential liberalisation measures.

The latest deal inked between the Macau Government and its mainland counterpart, different from the previous editions of the Closer Economic Partnership Arrangement Agreement, is set to adopt a ‘negative list’ for the first time.

The concept of a ‘negative list’, as adopted in the Shanghai Free Trade Zone that officially opened in September last year, refers to a catalogue of restrictions on outside investment.

The ‘negative list’ approach means that if a sector is not on the list, foreign companies can invest in it without any restriction or jointventure requirements; overseas entities just need to register for their projects without applying for approval.

However, the local government did not release the content of the negative list signed under the new trade liberalisation deal to media yesterday.

For the mainland government, telecommunications and cultural services are two areas that are deemed ‘sensitive’, which means it imposes more restrictions on investment terms for Hong Kong and Macau enterprises that want to

establish a commercial presence on the mainland.

The previously signed edition of CEPA allowed Macau businesses to set up wholly-owned entertainment premises in Hengqin and Qianhai, the Special Economic Zone in Shenzhen.

For telecommunication services, under the existing CEPA terms, Macau service providers are also allowed to set up a wholly-owned or jointly-owned company in Dongguan city and Zhuhai.

For trade in goods with the mainland, which at current terms means many as 1,313 items can be traded tariff-free, the total export value of the local goods exported to the mainland reached MOP80.04 million (US$10.2 million) for the first eleven months of this year – which was 44 times the export value of MOP1.83 million when the CEPA agreement was first implemented in 2004 when only 273 items were covered by the tariff-free measure.

4 | Business Daily

December 19, 2014

Macau NMA slams IACM’s neutralisation of handover protest

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They complain that authorities have intentionally neutralised their demonstration plans on the handover anniversary because of President Xi’s visit. Now the group say they are tempted to organise some ‘unexpected’ activities forced by the ‘intended’ delay

HOSPITALITY

Kam Leong

kamleong@macaubusinessdaily.com

Plausible numbers?

When attempting to analyse the trends in MICE events (Meetings, Incentives, Conferences, Exhibitions) one particular source of difficulty lies in their diversity and the wide variation in their typical numbers.

For instance, averages for attendance of events are extremely variable, both between the various categories of event and over time. Meetings of all types – government, associations, and companies – had an overall average attendance of 92 persons in the full period for which figures are available; that is, since the first quarter of 2009. But the highest quarterly average recorded for any kind of meeting in that period was 236 persons, and the lowest was 54. Similarly, the total average for conferences was 462 participants, while the highest and lowest quarterly averages were 1,566 and 144, respectively.

As we are not talking about individual readings but averages, these variations are somewhat surprising. Differences between categories compound the difficulties. Just compare the global average for meetings, mentioned before, and the global average for exhibitions, which stands at 20,463. Global averages encompassing all types of events are essentially meaningless as indicators. If we take the third quarter figures, recently published, we get side-by-side 26 exhibitions, with an average attendance of almost 20,500 people, and 187 meetings, with an average number of participants standing at 75.

50000

5000

500

50

2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Mee,ngs

Conferences

Incen,ve

Exhibi,ons

Oscillations within each category throughout the year are also very pronounced. That feature is highlighted in the chart by the very steep changes in successive quarters.

Some apparent seasonality also follows neatly different cycles in the various types of events. Besides, some figures look implausibly high, especially in the case of exhibitions. A good example of that is the last quarter of 2013, where 24 exhibitions attracted an average attendance of more than 38,000 people.

J.I.D.

695,456

attendants to 26 exhibitions, 2014Q3

T

he New Macau Association (NMA) has slammed the Civic and Municipal Affairs Bureau (IACM) for ‘intentionally’ delaying notifying the pan-democracy group about the unavailability of the proposed venue for the assembly the group planned to stage on Saturday.

The group claims this would lead it to organise action that would not be expected by the authorities.

NMA, which is to stage a rally as well as an assembly on the handover anniversary, informed media yesterday that they had received letters delivered by hand from IACM on Wednesday evening at 6 o’clock. The letters informed the group that Jardim de Penha, which it had planned as the ending point of the protest and venue for the assembly, had been closed for maintenance thus actions in the park were not allowed.

As well as IACM’s rejection, the Public Security Police (PSP) called the group for a meeting at a similar time.

The group said that it had informed IACM about the demonstration and assembly on November 28, the earliest day the law allows for such notification, claiming a reply by the authorities after 12 working days was ‘unlawful’.

“According to the past experience of NMA, holding a demonstration on December 20, the IACM in the past [would] communicate to us the restrictions imposed on the demonstrations within a couple of

days after receiving our notification,” member and former president of the Association, Jason Chao, said.

Mr. Chao also perceives that the delayed reply from the authorities had effectively prevented any legal challenges that may be brought by the group “as previously the court had refused to hear such appeals on the ground of insufficient time for processing.”

Meanwhile, the incumbent president of the NMA, Sulu Sou Ka Hou, said the ‘non-cooperating’ acts of the authorities will force the group to consider organising “unexpected” actions. He did not exclude the possibility that the group may try to submit a petition directly to President Xi Jinping during his visit to Macau, despite the fact he claimed they were still discussing such actions.

Even though NMA did not get the requested site, they say they do not expect to be allowed to assemble at Nam Van Recreation Centre because, according to Chinese-language media All About Macau, the Nam Van area, as well as the square opposite the Legislative Assembly, has been fenced off.

These new fences may also influence the route of the group’s rally – which is planned to start form Tap Seac Square, then pass by Rua do Campo, Avenida Doutor Mário Soares, Avenida Panoramica Do Lago Nam Van, Calçada da Praia and end at Jardim de Penha.

In fact, NMA was to meet with

PSP on the route and location for their demonstration at half past ten last night. There was no update from the democratic group before this story went to press.

HK pro-democracy activists attempting to come today Meanwhile, two Hong Kong pandemocrats and legislators - Leung Kwok-hung, also known as ‘Long Hair’, and Albert Chan Wai-yip were planning to visit Macau today.

They planned to protest to President Xi about Beijing’s limitations on Hong Kong’s 2017 election for Chief Executive by universal suffrage. The two Hong Kong legislators also urged the Hong Kong and Macau people who would be in town today to wear yellow and hold a yellow umbrella – the symbols of Hong Kong’s ‘Umbrella Revolution’.

In fact, Hong Kong Chief Executive CY Leung Chun-ying will also be in Macau today and tomorrow to attend the celebrations of the handover anniversary.

NMA said that they had not been contacted by the Hong Kong activists so far. On the other hand, Mr. Chao predicted that the possibility that the legislators could enter Macau’s territory would be ‘very slight’, following reported cases of students supporting the Umbrella Revolution and journalists from Hong Kong being barred from entering the territory.

6 | Business Daily

December 19, 2014

Macau

8,000 cross borders during extended hours

A

ccording to Public Security Police, over 8,000 people have crossed the three inland borders connecting the city to Zhuhai during extended entry hours, that saw the Border Gate – Gongbei portal operated with twohour entry extension, while the Lotus Port-Hengqin border as well as the Industrial Zone border in Ilha Verde worked round-the-clock starting from yesterday.

The closing hour of the busiest of inland checkpoints at Border Gate – Gongbei portal was adjusted to 1:00 am instead of 12:00 midnight, with opening hours extended to 6:00 am from the previous 7:00 am.

Under the new border crossing measures, the police said the Border Gate – Gongbei portal has handled a total volume of passenger traffic of 5,814 people during the extended border entry hours, which it deemed

as effectively alleviating the usually hectic passenger traffic during the morning rush hours of 7:00 am to 8:00 am.

The Border Gate – Gongbei portal handles the heaviest visitor traffic to and from the city, where local authorities reported before that the daily volume that the checkpoint handles is around 300,000 people.

The checkpoint at the Cross Border Industrial Zone, connecting

Ilha Verde and Maoshengwei in Zhuhai, saw 1,153 people crossing from 12:00 midnight to 7:00 am, which represents a much bigger daily passenger volume than the 350-odd people crossing the industrial zone checkpoint during this time span seen before the special border crossing measure was implemented.

Compared to the other two inland borders, the cross-border industrial zone checkpoint has a more restricted access to the type of visitor that can enjoy the 24-hour border crossing measure: besides workers in the park with special passes, only mainland Chinese labour working in the city, mainland students studying in Macau and Macau residents can cross the checkpoint in the zone from 12:00 midnight to 7:00 am.

The Lotus Port-Hengqin border handled 1,293 people from 12:00 midnight to 9:00 am yesterday, police reported. Before the measure was implemented, this border opened at 9:00 am and closed at 8:00 pm; while Hengqin island is still in a development stage with ongoing infrastructure and tourism projects, the border straddling the island and Macau used to handle a daily passenger volume of 13,000 people.

S.L.

Congratulations on the 15th Anniversary of the Establishment of Macau SAR

Passengers on Macau-Taiwan routes up 6 pct

L

ocal airport operator Macau International Airport Co Ltd (CAM) said yesterday that passenger volume on the MacauTaiwan route had increased 6 per cent this year as at last Sunday compared to the same period last year. Consequently, CAM believes that it is a good time for airlines to enter the market, and encourages airlines to actively use the open

fifth freedom rights to expand the aviation opportunities. Meanwhile, Taiwanese low-cost carrier Tigerair Taiwan officially launched its flights between Macau-Kaohsiung yesterday, while its Macau-Taipei route took off the day before. It is now the fourth airline to offer Macau-Taiwan routes after Air Macau, EVA Air and TransAsia Airways.

Hengqin authorities to woo young Macau entrepreneurs

H

engqin New Area is to establish a RMB2 billion venture capital fund supporting young Macau people setting up business in the mainland region, Chineselanguage newspaper Macao Daily reported yesterday. The authorities claimed that they would support the individual business projects of young people from the SAR as well as those business projects cooperated on by these young people and other internal or external parties. In addition to offering a down payment of RMB2 billion for them to collectively set up

their business, Hengqin New Area will provide offices at lower than average market price. Moreover, those who invest in Hengqin will also be offered subsidies for their offices, as well as some other nine enabling policies to support their financial services, taxes, etc.

8 | Business Daily

December 19, 2014

Macau Macau Yacht Club AGM causes controversy A member of Macau Yacht Club says that tomorrow’s Annual General Meeting lacks legitimacy and that he fears it may be used for people with commercial interests to take control of the non-profit institution João Santos Filipe*

jsfilipe@macaubusinessdaily.com

A

member of Macau Yacht Club, Jorge Fão, fears that tomorrow’s Annual General Meeting may be used for commercial interests to take control of the nonprofit institution. Macau Yacht Club is the owner of a plot of land in Lam Mau Marina, which according to the former member of the Legislative Assembly is worth more than MOP800 million.

“This Annual General Meeting seems troubled and it has no legitimacy”, Fão claimed yesterday,

speaking to Business Daily. “According to the law, general meetings can only be called by the President or Vice President of the General Assembly.

However, this one was summoned by the Secretary of the General Assembly, Luís Miguel Francisco O”.

The fact that the meeting was scheduled for tomorrow at 12:30 p.m. in Plaza Restaurant, on the day of the celebrations of the 15th anniversary of the handover of Macau, also raises concerns for this member of the

Macau Yacht Club. The agenda for tomorrow includes the election of the new leading group of the institution.

“I’m concerned with this date.

It seems to have been strategically chosen in order to avoid having people attend it, as there will be the celebration of the handover, which most members of the Club will attend”, he said.

Macau Yacht Club owns a plot surrounding the Lam Mau Marina, where the institution is building its clubhouse. In 2007, the Club signed a contract with the Realgain company that would oversee construction. In return, the Club’s leadership would ask the government for permission to build a residential tower and shopping complex, which was later denied. In addition, the construction works have been frozen since 2011 because of a dispute between the British Virgin Islands-based Realgain and its contractor, Yung Kwong Constructions.

“The Macau Yacht Club is a nonprofit institution but its land plot is worth a lot of money. I’m not saying that this is the case but I’m afraid that this meeting may elect people that have commercial interests related to the land development”, Mr. Fao said. “If a new leading group is interested in changing

the statutes and exploring the land for their own benefit, they may succeed.

Anything you may be able to build on that plot is worth a lot”.

“Around eight years ago, the government sold a plot of land near Lam Mau Marina that was bought for more than MOP800 million. That plot was a bit larger than the one owned

by Macau Yacht Club. However, eight years ago the value of land in Macau was much lower”, he explained Mr. Fão also told Business Daily that he had questioned the last elected President of the General Assembly, José Maneiras, about the Annual General Meeting. However, Mr. Maneiras replied that he was no longer the President of the Club’s General Assembly. Contacted by Business Daily, Mr. Maneiras confirmed that he was no longer the President of the General Assembly of Macau Yacht Club but declined to comment further on any issue related to the Club.

Business Daily also contacted Macau Yacht Club for a position on the current operation of the yacht club and whether it would be used for commercial interest as described

by Mr. Fão. However, by the time the story went to press, no answers were forthcoming. *With Stephanie Lai

Jangho wins Louis XIII hotel rooms bid

B

eijing-based builder Jangho Group Co Ltd announced on Wednesday evening that its local subsidiary company, Sundart Engineering Services (Macau) Limited, has won the bid for the renovation works of Louis XIII Macau. The contract that the Shanghai-listed company won is worth HK$70.5 million (US$9.09 million), which will account for 4.73 per cent of the annual income of the

company, according to its filing with the Shanghai Stock Exchange. The company will be in charge of the work on the standard rooms, superior suites and corridors of Louis XIII located in Cotai Strip. The project, meanwhile, is expected to take nine months. In fact, Sundart had also won tenders for renovation works from Galaxy Entertainment Group, Melco Crown as well as Sands China’s The Parisian Macau before.

Congratulations on the 15th Anniversary of the establishment of the Macau SAR

10 | Business Daily

December 19, 2014

Gaming

Xi’s visit to Macau deals cold deck to VIP gamblers

A

s Chinese President Xi Jinping arrives in Macau today for his first official visit in five years, the message from Beijing is clear: the world’s biggest gambling centre cannot remain a one-industry town.

Xi’s pervasive anti-graft campaign contributed to a disastrous year for major casino companies, which have lost a combined US$58 billion (MOP464 billion) in market value over the past six months as VIPs stayed away.

The former Portuguese colony became a paradise for Chinese government officials and rich businessmen to flaunt their wealth and indulge themselves with private jets and sumptuous hotel suites. Gambling revenue hit US$45 billion last year, seven times Las Vegas’s take.

But it also became a pathway for extracting money from China – something the government is targeting aggressively.

China extended a crackdown on illicit money transfers into Macau, giving its Economic Crimes Investigation Bureau access to transactions made through the statebacked UnionPay credit card, the South China Morning Post reported on Wednesday.

The move, timed just ahead of Xi’s high-profile visit, is the latest in a string of actions aimed at curbing illicit funds leaving the country, a

Xi’s visit definitely means more control on the gaming path, especially for VIPs Junket operator

priority for Xi as he goes after corrupt officials who have fled overseas.

UnionPay has been a conduit for growing numbers of Chinese to illegally send billions of dollars abroad, a Reuters special report showed in March.

Macau ‘demise’ The corruption link helps explain Beijing’s interest in seeing Macau expand beyond casinos into more family-friendly entertainment.

Li Gang, China’s representative in Macau, warned last week that ‘the dominance of one industry can lead the city to prosperity, but it also can lead to its demise’.

Gambling merited barely a mention in an editorial this week in the Communist Party’s official newspaper, the People’s Daily, praising Macau as a platform for international trade and a world heritage site.

Junket operators who lend money to wealthy mainland Chinese gamblers said they would keep a low profile during Xi’s visit, which marks the 15th anniversary of Macau’s handover from Portugal. He is expected to voice his support for Macau diversifying beyond gambling.

‘Xi’s visit definitely means more control on the gaming path, especially for VIPs,’ said one junket operator who declined to be named, referring to the high-rollers who accounted for two-thirds of Macau’s revenue last year but now represent just 56 percent.

Hong Kong-listed casino stocks have plunged 32-51 percent since the start of the year, widely underperforming the benchmark Hang Seng Index, which has dropped 2 percent in the same period.

New casinos, new restrictions

China is pushing for new development focusing on culture, sports and retail, instead of prioritizing gambling.

If casino companies don’t comply, it may affect their licenses. Discussions on license renewals start next year, and the earliest concessions expire in 2020. The government has said it’s looking at how effectively operators provide non-gaming amenities in their new resorts.

Casino moguls including U.S. billionaires Sheldon Adelson and Steve Wynn are also under pressure to add non-gaming elements to secure coveted gambling tables.

Adelson, who has led diversification efforts in Macau with an exhibition arena and hotels, is building a mock Eiffel tower replica, while Wynn is building a palatial US$4 billion resort with a massive lake and airconditioned gondolas.

Some junket operators said they welcomed Xi adding his voice to the calls for diversification because gambling accounts for the bulk of Macau’s tax base and left the city vulnerable to sharp downturns.

‘I think Xi’s trip is a good thing for Macau, for the central government to show support and ensure stability,’ said a junket operator. ‘There is a lot of negative influence right now.’

Reuters

U.S. judge throws out slander lawsuit filed by Wynn

A

U.S. judge has dismissed Steve Wynn’s lawsuit accusing prominent shortseller Jim Chanos of slander over an alleged statement that the casino mogul violated a U.S. anti-bribery law.

U.S. District Judge William Orrick in San Francisco ruled on Tuesday that Chanos was giving an opinion protected under the U.S. Constitution.

Wynn, who heads Wynn Resorts Ltd, did not immediately respond to a request for comment, while Chanos declined to comment.

Chanos, founder of New York-based hedge fund Kynikos Associates LP, mentioned Wynn during an April conference in Berkeley, California, about gambling and corruption in Macau.

Chanos told the conference he was concerned about risks

casino operators face because of the U.S. Foreign Corrupt Practices Act, which bars U.S.-listed companies from bribing government officials anywhere in the world.

Chanos also said, according to Orrick’s ruling: ‘Almost any company doing meaningful amounts of business in China probably could be found in violation of the FCPA.’ Orrick said in a written

opinion: ‘This comment is clearly hyperbolic and cannot be considered to be defamatory.’

Wynn, 72, sued in September, saying Chanos’ comments were false and defamatory, made with reckless disregard of the truth and wrongly suggested that he violated a criminal law.

In rejecting those claims, the judge also ruled that Chanos did not act maliciously.

Under U.S. protections for free speech, a public figure who sues for slander generally must show that a speaker acted with “actual malice.”

Wynn is worth US$3 billion, according to Forbes magazine. Chanos is known for shorting Enron Corp stock, or betting that it would go down rather than up, months before the energy trader’s December 2001 bankruptcy.

Reuters

12 | Business Daily

December 19, 2014

Greater China Special website for tipoffs during festival China’s top corruption eradication authority opened a new channel on its official website for tipoffs related to lavish behaviour at year end. The Communist Party of China’s (CPC) Central Commission for Discipline Inspection (CCDI) said the initiative would put the central authority’s frugal policies into practice and curb bad practices such as using public funds for gifts, during the New Year festivities and the traditional Spring Festival. The CCDI’s website will name and shame all cases involving disciplinary violations on a weekly basis starting from December 29.

U.S. extends antidumping duties A U.S. trade panel voted to extend antidumping and countervailing duties on lightweight thermal paper from China after the first five-year review of the measures imposed initially in 2008. The U.S. International Trade Commission (ITC) voted against revoking the existing duty orders on lightweight thermal paper from China, saying it “would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.” The U.S. Commerce Department is required to remove an antidumping or countervailing duty order, or terminate a suspension agreement.

Avon unit pleads guilty The China unit of Avon Products Inc. pleaded guilty on Wednesday in connection with a bribery scheme and Avon agreed to pay US$135 million to resolve related civil and criminal charges. U.S. District Judge George Daniels accepted the plea and approved an agreement to defer the charges, which the direct seller of beauty products had disclosed it had reached earlier this year to resolve a multiyear foreign bribery investigation.

Half of the settlement amount covers a criminal fine, and the other half covers civil charges from the U.S. Securities and Exchange Commission.

Less privilege in college enrolment

Math, science and sport competition winners will no longer receive extra points on their college application, the Education Ministry announced amid China’s college admittance reform. The ministry also cancelled bonus points added to results on the national college entrance exam, or gaokao, based on good morality and physical performance. In China, gaokao results are the major assessment standard for college enrolment of students. The exam saw some 9.3 million test takers in 2013. Bonus points are also common for students from Taiwan, ethnic minorities, children of martyrs and returned overseas Chinese.

Home prices fall for third month The price fall came in spite of the government relaxing its lending rules in October and cutting interest rates in late November Xiaoyi Shao and Pete Sweeney

C

hina’s home prices fell in November for a third consecutive month versus year-ago levels, Reuters calculations from official data showed yesterday, pointing to an intractable property downturn despite government efforts to energise the market.

Average home prices in 70 major Chinese cities were down an annual 3.7 percent last month from 2.6 percent down in October, the biggest drop since Reuters started calculating nationwide housing prices.

The National Bureau of Statistics data showed new home prices fell year-on-year in 68 of the 70 major cities it monitors, up from 67 in October.

Yu Liang, president of leading residential developer China Vanke Co said at the weekend China was facing an inventory overhang that

KEY POINTS Nov home prices fell for 3rd month y/y Prices -0.5 pct on month vs -0.8 pct in Oct Property market sees tentative signs of bottoming out No quick rebound due to high inventories would take 13 months to clear.

The price fall came in spite of the government relaxing its lending rules in October and cutting

Stabilisation signs despite investment sliding Wage and job growth remained stable, and export orders picked up, helping to offset weak internal demand

C

hina’s economy showed mild signs of stabilisation in the fourth quarter but corporates remained cautious on investment, a business survey found, highlighting stubborn resistance to efforts from Beijing to reinvigorate growth.

“While the rebound is certainly not an impressive one, sales, profits, and employment have all improved a bit during the second half of the year,” the China Beige Book said in a research note distributed to clients, citing findings from its quarterly survey of 2,000 Chinese companies.

“Still, Q4’s improvement defies Beijing’s claims of rebalancing toward stronger consumption,” it added in its report, pointing out that strong service performance was not accompanied by signs of rising end-user demand.

The report set for publication yesterday follows a series of disappointing macroeconomic indicators in November, including

a negative surprise from industrial activity, weak inflation readings and slack output, although loan growth and foreign direct investment have recovered slightly.

However, the survey showed respondents were increasingly wary of capital expenditure, posting a fourth straight quarter of decline.

Only 47 percent of respondents said they intended to increase capex - a third straight record low for the poll - while 12 percent cut capex.

Declining investment intentions were particularly negative for services, with a 16 percentage point decline, and real estate, which saw a 26 percentage point plunge.

The report said the majority of the spending slowdown came from the state sector, but noted that both state-owned and private firms had slower year-on-year capex growth.

The report also highlighted the challenge the slowdown poses for

interest rates in late November, intensifying fears that the slack property market, which accounts for about 15 percent of China’s economy, could hold back economic growth.

Data last week that showed further signs of economic fatigue in China’s economy, with factory growth and investment expansion slowing.

China’s real estate market has been plagued by falling prices and high inventories in recent months, crimping demand in 40 economic sectors ranging from steel to cement and furniture.

“We see GDP growth cooling further to 7 percent in Q4 2014, and to 6.8 percent in 2015 from 2014’s anticipated 7.3 percent, as property-related headwinds offset any uplift from the US recovery or intensifying policy support,” Tao

monetary policy, arguing that further easing measures may do more harm than good given the reluctance of business leaders to increase spending.

Weak economic indicators have led to widespread calls for further stimulus, including a potential cut to bank reserve requirement ratios that could create an estimated 2.4 trillion yuan (US$387.8 billion) in fresh liquidity after applying the money multiplier.

The China Beige Book cast doubt on assumptions that this would necessarily trickle into fresh productive investment.

“Deflation may foreshadow more attempts at monetary easing, but the half-hearted attempts thus far simply have not worked...if falling oil prices and a deflation threat lead monetary authorities to try strong easing measures, the result will likely be limited to out-of-control prices for equities.”

Chinese stock markets rallied strongly in November and early December, which analysts now attribute largely to a flood of new credit entering the system as a result of a surprise interest rate cut and a quiet relaxation of loan-to-deposit ratios at banks.

That phenomenon is similar to what occurred during China’s stimulus package in 2009, when easy credit fuelled property and stock speculation, leaving Chinese firms heavily in debt.

Reuters

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Business Daily | 13

December 19, 2014

Greater China

Wang, China economist at UBS, said in a note.

No quick rebound The NBS data showed China’s home prices fell 0.5 percent in November, easing from a month-

on-month drop of 0.8 percent in October.

Vanke’s Yu said the rate cut and regulatory easing had helped the market, but “it’s hard to say the industry is recovering at this stage.”

While the housing market is expected to remain weak well into

Hong Kong firm settles with SEC The SEC’s case against Baker Tilly marks the latest in a string of cases against so-called “gatekeepers” such as auditors and attorneys Sarah N. Lynch

A

Hong Kong-based accounting firm will disgorge auditing fees and temporarily cease accepting new U.S. clients after U.S. regulators on Wednesday sanctioned the firm over audit failures tied to a company suspected of fraud.

The U.S. Securities and Exchange Commission said that Baker Tilly Hong Kong Limited, director Andrew Ross and former director Helena Kwok “ignored red flags” of US$59 million in related-party transactions reflected in accounting records for China North East Petroleum Holdings Limited.

The SEC said that Baker Tilly will disgorge US$75,000 in audit fees, plus cease accepting new U.S. company clients until it undergoes a compliance review by an independent consultant.

Ross and Kwok also agreed to settle by paying penalties of US$20,000 and US$10,000, respectively, and face a three-year bar from practicing as accountants before the SEC. An attorney for Baker Tilly could not be immediately reached for comment.

The SEC’s case against Baker Tilly marks the latest in a string of cases against so-called “gatekeepers” such as auditors and attorneys whom the agency says are uniquely positioned

to help detect or prevent fraud before it affects investors.

“Auditors play a critical gatekeeper role in our financial markets, and Baker Tilly failed to uphold U.S. auditing standards,” Antonia Chion, an SEC associate director in the enforcement division, said in a statement.

It also marks yet another case tied to fraud at China-based companies that list in U.S. markets. For the past few years, the SEC has been investigating and charging companies and in some cases, their auditors, in a rash of accounting scandals.

The accounting problems have caused investors to lose billions of dollars, and led to dozens of delisting and deregistration of Chinese companies.

The SEC charged China North East Petroleum, the company at the heart of the Baker Tilly complaint, with fraud in 2012. It was delisted and deregistered that same year.

The SEC alleges that Baker Tilly failed to properly audit the company’s year-end financial statements, which did not disclose the “magnitude” of the related-party transactions involving the company’s CEO and the CEO’s mother.

Reuters

next year, it is showing some tentative signs of bottoming out.

Official data last week showed property sales hit 132.2 million square metres in November, the highest level in the past 11 months, though still down 11.1 percent from a year earlier.

“The recovery momentum is still weak,” said a senior executive at a mid-sized listed developer in Beijing, noting the market may have already found the bottom of the cycle. “The property market should not get worse in future,” he said.

Reuters

14 | Business Daily

December 19, 2014

Greater China

Cash crunch fans expectations of RRR cut Market speculation ran wild when the PBOC announced an interest rate cut in November

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hina’s market liquidity has turned surprisingly tight in recent days despite rate cuts in November, arousing speculation over a possible response from the central bank or even cuts in reserve requirement ratio (RRR) soon.

The Shanghai Interbank Offered Rate (Shibor), a key barometer of interbank lending cost, rose on every term on Wednesday, with one-month rates hitting a five-month high of 5.2770 percent and the three-month rate witnessing its largest daily increase of 17 bps in a year.

An anonymous investment manager in Beijing told Xinhua the market has been in a capital crunch since Tuesday, with few banks willing to lend, referring to the liquidity as “in an awful state”.

Analysts attributed the situation to coming initial public offerings (IPO), maturity of the medium-term lending facility (MLF) and banks’ strengthening efforts to attract deposits to meet the yearly goal.

The last round of IPOs from 12 companies in the year will start this week, receiving enthusiastic response from stock investors who have put

The monetary market will still suffer as the 500-billion-yuan MLF conducted by the People’s Bank of China (PBOC) three months ago will become due soon Chen Long, analyst, Bank of Dongguan

aside big bucks for new shares amid the precious rising streak.

Guotai Junan Securities estimated capital worth up to 2.4 trillion yuan (US$392.2 billion) has been frozen for the IPOs, marking record high, adding to the money shortage.

“But even if without the new share subscription, the monetary market will still suffer as the 500-billionyuan MLF conducted by the People’s Bank of China (PBOC) three months ago will become due soon,” Chen Long, analyst with Bank of Dongguan said.

The MLF is believed to have something to do with the reluctance of large state-owned banks to lend in the interbank market.

Despite the circumstance, the central bank has yet shown intention to react as it continued to suspend reverse repurchase agreement (repo) on Tuesday.

However, experts pointed out there is a high possibility of an injection of liquidity from the central bank. A lowering of RRR is also likely.

Chen said the PBOC will definitely carry out measures to inject money in the short term, although a heated stock market, depreciation of the yuan and outflow of hot money has restrained strong measures.

As the money crunch continues, reverse repos and RRR cuts will be increasingly probable, Chen said.

His views were shared by Xu Gao, chief economist with Everbright

Securities, who said tight liquidity has caused funding costs to run high, contradicting central bank’s intention to reduce cost of financing for real economy.

Market speculation has run wild after the PBOC announced an interest rate cut on November 21, with investors betting the bank will conduct more loosening measures, reducing the interest rate again or cut RRR to prop up the economy.

The speculation may not be groundless as China’s eased inflation provided more leeway for the policy makers to adopt more relaxed monetary measures.

However, the central government’s coherence to “prudent monetary policy” reiterated during the toplevel economic policy meeting last week has cast any hasty loosening measures in doubt.

In addition, finance insiders said unexpected bullish shares and warming investment will make the central bank hesitate when mulling operations to pump money.

Peng Xingyun, researcher of Institute of Finance and Banking under Chinese Academy of Social Sciences, said lowering RRR will become a trend in policy adjustment in the medium-to-long run, bringing about positive changes in interest rates and pave way for rate liberalization.

The PBOC implemented targeted RRR cuts for some banks in April and June respectively, while even earlier cuts can be traced back to May 2012.

Xinhua

FX regulator closely monitoring rouble slide The yuan has been under pressure in the last month due to increased year‑end dollar demand

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hina is closely monitoring the slide in the Russian rouble, the foreign exchange regulator said yesterday, as the currency of one of its major energy importers struggles to avoid a free-fall.

Wang Yungui, head of policy and regulations for the State Administration of Foreign Exchange (SAFE), told a news conference that China was not overly concerned about signs of forex outflows in recent months.

“Under the circumstance, signs of capital outflows in certain months are normal. Overall, we still see net capital inflows,” he said, adding that many companies have opted to park export income overseas instead of selling off hard currency to banks, given the strong two-way fluctuations in the yuan spot market.

Xiao Lihong, another SAFE official, said the government was stepping up investigations into fake trade deals, following widespread suspicions that strong export figures in September and October were inflated

by manipulated invoices designed to smuggle yuan into China in order to speculate on the stock markets.

However, she said recent unusual spikes in exports of jewellery and precious metals were not closely linked to speculative capital flows, addressing media reports.

“There is no close link (between them) but we cannot say there is no problem,” she said.

The yuan has been under pressure in the last month due to increased year-end dollar demand by some firms and growing market expectations of more policy easing after the central bank made a surprise cut to interest rates in November. Such easing is seen as negative for the yuan.

The central bank has signalled it does not want the yuan to collapse, strengthening the official guidance rate but traders said it has been intervening less in the spot market, which is allowed to trade 2 percent higher or lower than the midpoint on any given day.

Reuters

Business Daily | 15

December 19, 2014

Asia

Japan PM wants a closer central bank Analysts say Abe will need a central bank board broadly supportive of his reflationary strategy Leika Kihara

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wo vacancies opening up in the Bank of Japan next year give premier Shinzo Abe a chance to tip the board’s balance in favour of further monetary stimulus, removing a headache for his hand-picked central bank head.

The board’s composition has taken on greater significance after Governor Haruhiko Kuroda won a tight 5-4 vote in October’s surprise expansion of an already radical monetary experiment that pumps roughly US$84 billion each month into the economy.

The October move exposed a board rift, suggesting it would be difficult for Kuroda to push forward with further stimulus, which many analysts think will be needed next year as the central bank struggles to reach its 2 percent inflation goal.

The five-year term of two board members, including one who voted against October’s

action, ends next year.

Ryuzo Miyao, a 50-yearold former academic and a policy dove who supported October’s policy easing, is due to leave the board in March.

More importantly, the term of Yoshihisa Morimoto, who voted against the expansion in policy, expires in June.

The 70-year-old former utility executive reluctantly voted for the introduction of the so-called quantitative and qualitative easing (QQE) last April and has been sceptical of the policy since then. His concern is that by gobbling up so many government bonds, the BOJ is moving dangerously close to bankrolling public debt.

A more sympathetic board will ease Kuroda’s task as some members have openly raised doubts about the feasibility of QQE, even as Abe and the central bank chief have insisted that steady progress is being made to jump-start Japan’s economy

and defeat years of grinding deflation.

Board fragmentation stays Critics say the BOJ’s huge asset-purchase programme has only had modest success.

Stocks have rallied and a tumble in the yen has boosted exporters’ earnings, but a sustainable pick up in wages, business investment, inflation and broad economic growth have yet to take hold.

The prime minister is usually presented with a list of candidates prepared by the Ministry of Finance (MOF) in consultation with the BOJ. The prime minister’s endorsement is usually a formality.

Abe is likely to break with that tradition and intervene more heavily in the personnel choices, and is seen as being less receptive to the views of the MOF bureaucrats.

Government nominees for BOJ posts must be approved by both houses of parliament.

Samsung’s holding company debuts on local bourse The firm got to have the 14th-largest market capitalization with 15.26 tln won

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heil Industries, the de-facto holding company of South Korea’s largest conglomerate Samsung Group, debuted on the local main bourse yesterday, with a record-high subscription to its initial public offering (IPO) shares in the country’s history.

During last week’s pre-order session, 30.06 trillion won (US$27.3 billion) was offered to subscribe for the Cheil Industries IPO shares, topping the previous high of 19.22 trillion won for IPO shares in 2010 of Samsung Life Insurance, the group’s flagship financial unit and the country’s biggest life insurer.

Cheil Industries closed at 113,000 won, more than doubling the IPO price of 53,000 won and up 6.6 percent from its opening price of 106,000 won.

The company, which is 45.6 percent owned by Samsung Group owner Lee Kun-hee and his three children, got to have the 14thlargest market capitalization with 15.26 trillion won.

Chairman Lee has a 3.7 percent stake in Cheil Industries, with his only son and heir apparent Jae-yong holding a 25.1 percent stake. Lee’s two daughters own 8.4 percent stakes in the company each.

Samsung has sought to made public some of its units and transform business portfolio to smoothly transfer the management

US$27.3 billion

offered to subscribe for the Cheil Industries IPO at last week’s pre-order session

control from Chairman Lee to his three children since Lee was hospitalized for a heart attack in May. Trading volume of Cheil Industries shares in its market debut was 1.37 trillion won, surpassing the previous high of 1.35 trillion won for IPO shares of Samsung SDS, which was listed on the main bourse last month.

Cheil Industries, formerly known as Samsung Everland, is seen as the group’s de-facto holding company as it has a 20 percent stake in Samsung Life Insurance, a major shareholder of Samsung Electronics.

Xinhua

Japanese Prime Minister Shinzo Abe leaves the podium after concluding a news conference at headquarters of the LDP in Tokyo

Opposition parties turned down the ruling party’s nominees for governor in 2008, leaving the position vacant for three weeks.

However, Abe’s ruling coalition has a majority in both houses of parliament, so he does not have to yield to the opposition.

While a new line-up may make life easier for Kuroda, the BOJ board will remain divided because dissenters

to October’s decision are suspicious of expanding QQE further, some analysts say.

“The dissenters in October’s action probably still feel they made the right decision,” as consumer sentiment remains gloomy in a sign the latest stimulus did little to boost confidence, said Izuru Kato, chief economist at Totan Research Institute.

Reuters

16 | Business Daily

December 19, 2014

Asia Vietnam’s remittances reach US$12 billion Overseas remittances to Vietnam are estimated to hit US$12 billion in 2014, local Vietnam News reported yesterday, quoting sources from the Central Institute for Economic Management (CIEM). The figure would be equivalent of 8 percent of the country’s Gross Domestic Product (GDP), and placed Vietnam on the list of the world’s top10 overseas remittance recipients in 2014. A recent survey by CIEM showed that in the period 2010-2012, around 57 percent of Vietnam’s remittances came from the United States, followed by those residing in Canada (8.4 percent), Germany (6 percent), Cambodia and France (each with 4 percent).

Indonesia says will cut budget deficit Indonesia is aiming to cut the country’s budget deficit to one percent of gross domestic product in 2019 partly through a reform of the tax system, Finance Minister Bambang Brodjonegoro said yesterday. A shortfall in tax revenue estimated at US$6.15 billion threatened to push the 2014 budget deficit in Southeast Asia’s largest economy to breach a legally binding limit of 3 percent of GDP. Indonesia has imposed a temporary travel ban on selective individuals with outstanding tax bills as part of a crackdown on tax evasion. It had also reached an agreement with Singapore to step up efforts to share tax-related information.

Japan auto lobby sounds alarm over weak domestic sales Both Toyota Motor Corp and Honda Motor Co Ltd cut their domestic vehicle sales targets when they announced their second-quarter results in November and October respectively Maki Shiraki

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he head of Japan’s auto lobby yesterday said a “sense of crisis” hung over the industry, with unexpectedly weak domestic sales revealing the failure of government stimulus policies and currency turmoil hitting key export markets.

Japan Automobile Manufacturers Association (JAMA) Chairman Fumihiko Ike said an April sales tax hike was only partly to blame for the domestic sales weakness, citing the government’s failure to boost consumption.

“We are seeing continued weakness

in domestic new car sales that go beyond a backlash to the April sales tax hike,” he said, adding that new car sales were down by double digits after the tax hike.

Ike, who also serves as Honda chairman, said Prime Minister Shinzo Abe’s stimulus policies - known as Abenomics and designed to end years of deflation - had failed to encourage spending on big-ticket items like cars.

“Abenomics is not having clear traction across the country and even though as an industry we benefit from the weaker yen, we feel a sense

KEY POINTS Industry feels ‘sense of crisis’: Ike

Yangon int’l airport sees more arrivals

Abenomics failing to boost car sales: auto group Russian currency turmoil hits key export market

of crisis about the fact that cars are actually not selling,” he said.

Ike also said plunging emergingmarket currencies were having an “undeniable” impact on Japan’s auto sector.

Automakers could be hit hard by the erosion of purchasing power in key emerging markets, such as Russia, where the rouble dived as much as 20 percent against the dollar earlier this week and is down by some 50 percent against the U.S. currency so far this year.

Asian automakers see Russia as a particularly attractive market, and the currency volatility struck just as they were ramping up their presence in the country.

Ike also said automakers were beginning to talk unofficially about whether the inflators in Takata Corp air bags - blamed for five deaths in the United States and Malaysia - should be replaced after a certain number of years.

More than 20 million cars carrying Takata’s potentially defective air bags have so far been recalled worldwide.

The cars are mainly older models equipped with inflators made in the early 2000s by Takata.

“Right now we are working to stop this (problem) from spreading further around the world, but unofficially we have started talking about that issue,” Ike said.

Reuters

Thailand regains rice trade crown The number of tourist arrivals through Myanmar’s Yangon International Airport alone reached 931,236 in the first 11 months of this year, up over 200,000 from more than 700,000 in the same period of last year, local media reported yesterday. Among them, those from Thailand stood first with 148,260, followed by Japan and China.

In order to boost tourist arrivals in the country, Myanmar has allowed online electronic (e)-visa for travellers from 67 countries so far. Up to now, Myanmar has reached visa exemption agreements with Brunei, Indonesia, Laos, Cambodia, the Philippines and Vietnam.

Bangladesh tea prices keep rising Tea prices in Bangladesh rose for the sixth straight week at the weekly auction Wednesday on strong winter demand amid lower supplies. Bangladeshi tea fetched an average 192.15 taka (US$2.4) per kg compared with 190.19 taka at the previous sale, said an executive with National Brokers Ltd. The price for last week’s auction was revised to 190.19 taka from 190.50 taka. About 2.3 million kg was offered at the auction centre in Chittagong, of which 15 percent went unsold. In the previous auction, nearly 2.4 million kg were offered, with nearly 15 percent remaining unsold.

Global exports rose to a record 40.2 million tons this year, and may climb to 40.5 million tons next year, it said Supunnabul Suwannakij

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ice exports from Thailand will rise to a record next year as sales from reserves and the end of a price- support program help the country retain its position as the largest shipper, the Food & Agriculture Organization said.

Shipments surged 54 percent to 10.2 million metric tons this year, helping Thailand to replace India as the biggest exporter in 2014, the Rome-based agency said in a quarterly report today. In 2015, Thai shipments will gain further to 11 million tons even as local production drops, while India’s shipments will probably contract to 8.2 million tons from 10 million tons this year, the United Nations’ agency said.

The Thai government halted a price-support program in February that had spurred the build-up of record stockpiles as exports fell, enabling India to become the largest supplier. The country’s military, which took power in May, said that

it would press on with sales from the holdings. While dry weather in Thailand caused a water shortage that will cut the crop this season, its exports will keep on rising, the FAO said.

“A development dominating the international rice trade this year has been the resurgence of Thailand,” it said, citing the end of the pricesupport program and sales from public stockpiles. “The ensuing restoration of its competitive edge has permitted Thailand to recapture much of the market share lost to India and Vietnam over the past two years.”

Shipments from Vietnam, the third-ranked exporter, were seen steady at 6.6 million tons this year from 2013, before rising to 6.9 million tons in 2015, the agency forecast.

Thai dominance “Thailand’s market dominance is expected to be largely unrivalled” in

export markets in 2015, the FAO said.

Global production is expected to drop 0.2 percent to 496.6 million tons on a milled basis in 2014-2015 as output in India falls because a weak monsoon delayed planting, the FAO said.

World inventories may decline 2.1 percent to 177.5 million tons as demand rises 1.9 percent to 500.5 million tons, it said. Stockpiles in Thailand may contract to 16.1 million tons in 2015 from a record 17.8 million tons this year, it said.

The new Thai government won’t buy crops directly from farmers as it spurred oversupply, Petipong Puengbun Na Ayudhya, appointed by the junta as minister of agriculture, said on October 1. Thailand is looking to sell 2 million tons to China for delivery in 2015-2016, Commerce Minister Chatchai Sarikulya told reporters on November 14.

Bloomberg News

Business Daily | 17

December 19, 2014

Asia New South Wales to sell electricity network

Local media had reported that country-based state political parties opposed selling that business

Byron Kaye

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ustralia’s New South Wales state said it plans to raise US$16 billion by selling just under half its electricity network, using proceeds from one of the country’s biggest privatisations for major rail, road and other infrastructure upgrades.

State Treasurer Andrew Constance said yesterday he plans to sell electricity transmitter Transgrid, if the government wins an election scheduled for March 2015, followed by half stakes in power retailers Ausgrid and Endeavour Energy.

Country-based energy retailer Essential Energy will remain 100 percent government owned, Constance added.

The sale - technically a 99-year lease - would create more than 100,000 jobs and boost the economy by almost A$300 billion over the next two decades, Constance said.

Australian governments have earmarked for sale some A$130 billion of mature infrastructure to pay for much-needed capital works in the next two years, as they struggle to attract revenue following the end of a mining investment boom.

The so-called “poles and wires” deal has been seen as attractive to large offshore investors like State Grid Corporation of China, the world’s

biggest utility, as it looks to regulated markets like Australia as reliable opportunities.

“State Grid are sitting on a massive war chest of cash that needs to be invested outside the country,” said an Australian utilities analyst who could not be named as he does not formally cover the NSW assets.

“It’s a question (for State Grid) of ‘what do we have to pay to acquire it’ rather than ‘is this a good acquisition’.”

The government of NSW, Australia’s most populous state, had said it wanted to sell the electricity assets and hired investment banks

100,000 jobs created with the sales State Treasurer Andrew Constance’s forecast

UBS AG and Deutsche Bank AG to do a scoping study into how to sell the business.

That study recommended the sale as it was “likely to attract a broad range of domestic and international investors”, Constance said in a statement.

The NSW network had been widely expected to fetch about A$20 billion and Constance confirmed this figure yesterday.

NSW plans to sell Transgrid

privately but may “consider an IPO for Ausgrid or Endeavour Energy should market conditions indicate that this would result in a better outcome for the State”, he said.

An IPO would likely fetch about 1.3 times the asset’s regulated asset value, less than a trade sale which would fetch 1.5 times regulated asset value, the analyst said, suggesting the government would list the assets only if it cannot find a private buyer.

Reuters

18 | Business Daily

December 19, 2014

International Swiss cut rates to negative The Swiss franc hit its lowest against the dollar in more than two years, and touched a two-month trough against the euro, yesterday after the Swiss National Bank said it would introduce negative interest rates. In a brief statement, the SNB said it would impose an interest rate of -0.25 percent on sight deposit account balances of over 10 million Swiss francs as it seeks to discourage safe-haven buying of francs. Global markets have been rocked recently by the unfolding financial crisis in Russia and the continued slide in oil prices, fuelling demand for safety.

U.S. consumer prices fall on gasoline plunge Gasoline prices have recorded their biggest drop since December 2008 Lucia Mutikani

Restoration of U.S.-Cuba ties hailed World organizations and governments from America to Europe hailed an announcement made by the United States and Cuba to restore diplomatic relations following more than half a century of estrangement between the two countries. The announcement came a day after U.S. President Barack Obama and Cuban leader Raul Castro agreed in a phone call on a breakthrough prisoner exchange, the opening of embassies in each other’s countries, and an easing of some restrictions on commerce. Latin American heads of state attending a regional summit in Parana, Argentina lauded the “historic” development.

SNCF mulls buyout of Eurostar’s UK stake French rail operator SNCF is considering using its pre-emption purchase rights on the Eurostar train service to block certain bidders for the stake put up for sale by its partner, the British government, according to Les Echos newspaper. The paper said the British government was about to name a shortlist of bidders for its 40 percent holding in the service that runs from Paris and Brussels to London through the Channel Tunnel.

The stake went up for sale in October and sources have said it could raise 300 million pounds (US$468 million) for UK state coffers.

Carrefour in search of expertise in Brazil Supermarkets group Carrefour has sold a 10 percent stake in its Brazilian business to billionaire Abilio Diniz, securing local retail expertise to support growth in its second largest market and in a first step towards a separate listing.

Diniz’ investment company Peninsula has bought a 10 percent stake in the business for about 1.8 billion reais (US$663 million), the France-based retailer said in a statement on Thursday, confirming information provided on Wednesday by a source with direct knowledge of the situation.

‘The Interview’ costs around US$200 million Sony Pictures’ decision to let Seth Rogen make a comedy about a plot to kill a head of state will potentially cost the studio hundreds of millions of dollars after a devastating cyber-attack linked to North Korea. The Sony Corp. studio spent about US$80 million to make and market the film, whose release was cancelled after threats, according to Wade Holden, a researcher at SNL Kagan. On top of that, there’s the bill for rebuilding Sony’s computer network.

U.S. stocks rallied on the Fed’s vote of confidence in the economy, while prices for U.S. Treasury debt fell. The dollar jumped against a basket of currencies

U

.S. consumer prices recorded their biggest drop in nearly six years in November as gasoline prices tumbled, but did little to change views the Federal Reserve would start raising interest rates in mid-2015.

The Labour Department said its Consumer Price Index (CPI) fell 0.3 percent, the largest decline since December 2008, after being flat in October. The CPI increased 1.3 percent in the 12 months through November, the smallest gain in nine months, after advancing 1.7 percent in October.

Fed officials shrugged off the disinflationary trend as transitory in a statement at the end of a twoday meeting. The U.S. central bank offered an upbeat assessment of the

economy and signalled it was on track to raise borrowing costs in 2015.

“Conditions could be in place to raise rates during the first half of next year,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Fed said it expected inflation to rise gradually toward its 2 percent target. It has kept its short-term interest rate near zero since December 2008.

Wall Street had expected the CPI to dip only 0.1 percent from October and increase 1.4 percent from a year earlier.

While inflation is trending lower, job growth has shifted into higher gear and the pace of slack absorption in the economy has accelerated in recent months. The Labour Department

report also showed average weekly earnings, adjusted for inflation, recorded their biggest gain in six years in November.

Plunging crude oil prices, which hit a new 5-1/2 year low this week on increased shale production in the United States and slowing global demand, are likely to keep overall inflation in check for while.

Underlying price pressures are also ebbing a bit after showing some signs of creeping up in October, but this could also be temporary as the cost of rental accommodation continues to push higher.

Stripping out food and energy prices, the so-called core CPI edged up 0.1 percent after rising 0.2 percent in October. In the 12 months through November, the core CPI rose 1.7 percent after increasing 1.8 percent in October.

“If they (Fed policymakers) delay tightening due to low oil prices, it will be out of caution for the potential economic impact,” said Jay Morelock, an economist at FTN Financial in New York.

“If the fall in energy prices continues, the loss of capital spending by energy companies could cause GDP to fall in the first half of the year.”

Gasoline prices have recorded their biggest drop since December 2008.

They have now declined for five straight months. Within the core CPI, shelter costs increased 0.3 percent last month after rising 0.2 percent in October.

There were also increases in airline fares, medical care and alcohol prices.

But new motor vehicle prices fell as did the cost of household furnishings, apparel and used cars and trucks.

Reuters

KEY POINTS Consumer price index falls 0.3 percent in November Core CPI rises 0.1 percent; shelter up 0.3 percent Gasoline prices post biggest drop since December 2008

Canada seeks 50 millionaires for reignite immigration programme Applications surged over the last decade and the scheme was frozen in 2012 as officials scrambled to clear the backlog Julie Gordon

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anada is looking for 50 wealthy foreigners to join a pilot run of an immigration program for millionaires, although applicants will have to be far richer than those who entered under a previous scheme and will also need language skills to get in.

The federal government, which scrapped its previous investor class visa earlier this year amid criticism it was allowing rich Chinese to buy their way into Canada, will start accepting applicants for the new Immigrant Investor Venture Capital plan in January.

Under the new program, wouldbe immigrants will have to invest a minimum of C$2 million (US$1.7 million) in Canada for a 15-year period and must have a net worth of at least C$10 million, the government

said. They must also meet a new requirement that they speak English or French, among other criteria.

Many of Canada’s wealthy immigrants flock to major cities like Vancouver and Toronto.

Realtors who sell homes in Vancouver’s top neighbourhoods said the new language rules will exclude many people who had hoped to enter under the previous program.

“For investment immigrants, before, if you had enough money, then it was very easy to come here,” said Na An, an agent with Royal Pacific Realty Group. “But with the language requirement, I think they will block a lot of people.”

Na said that could push wealthy foreigners to choose other jurisdictions, like Britain or Australia, or they could

simply enter Canada under a 10-year multiple entry visa.

Launched in the mid-1980s, Canada’s immigrant investor program promised a fast-track visa for foreigners with a net worth of C$800,000 and some C$400,000 to invest. The minimums were later upped to a net worth of C$1.6 million and C$800,000 to invest. There was no language requirement.

The program was wildly popular, particularly with ethnic Chinese investors - first from Hong Kong and Taiwan, and later from mainland China.

But applications surged over the last decade and the scheme was frozen in 2012 as officials scrambled to clear the backlog. Canada officially cancelled the program earlier this year.

Reuters

Business Daily | 19

December 19, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Why are commodity prices falling?

THE NEW ZEALAND HERALD Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a transTasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. The new Tasman Global Access Cable will boost broadband connections between the two countries, with Spark investing US$32 million in the project, due to start next year, the three telcos said in a joint statement.

Alcatel-Lucent was chosen in the tender process to lay the cable, which is expected to be providing traffic data by mid-2016.

Jeffrey Frankel

Professor of Capital Formation and Growth at Harvard University

TAIPEI TIMES Neo Solar Power Corp, the nation’s No.1 solar cell maker, expects demand from the US to rebound, benefiting from a reduction in anti-dumping tariff to an average of 19.5 percent by the US Department of Commerce on solar cells imported from local firms, a company executive said. The new tax rate is lower than the 24.23 percent antidumping tax initially proposed in a preliminary department ruling in July. Chinese rivals are to pay an average of 70 percent in combined antidumping and anti-subsidy tariffs, Hong said, citing figures provided by the commerce department.

THE STAR The World Bank has cut its 2015 growth forecast for Malaysia’s economy to 4.7% from an earlier estimate of 4.9% on expectations of slower export growth and investments in the oil and gas industry as well as moderate private consumption next year. The intergovernmental financial organisation, however, has maintained its expectations of a 5.7% gross domestic product (GDP) growth for Malaysia for 2014. “It is still a robust and strong growth for an advanced middle-income economy,” Ulrich Zachau, World Bank’s country director for South-East Asia, said of the revised 2015 GDP growth estimate for Malaysia.

PHILSTAR Economic Planning Secretary Arsenio M. Balisacan remains confident the Philippine economy will grow faster in the October to December period than in the previous quarter. “Based on the available information, it (fourth quarter) is expectedly better than the third quarter,” he said in a yearend press briefing. In the third quarter this year, the country’s gross domestic product (GDP) grew 5.3 percent, the slowest pace in nearly three years. On the average, the economy grew 5.8 percent in the first nine months of the year. But to be able to achieve the lower end of the government’s target of 6.5 percent, the fourth quarter must expand by 8.2 percent.

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il prices have plummeted 40% since June – good news for oil-importing countries, but bad news for Russia, Venezuela, Nigeria, and other oil exporters. Some attribute the price drop to the US shale-energy boom. Others cite OPEC’s failure to agree on supply restrictions.

But that is not the whole story.

The price of iron ore is down, too.

So are gold, silver, and platinum prices. And the same is true of sugar, cotton, and soybean prices.

In fact, most dollar commodity prices have fallen since the first half of the year. Though a host of sector-specific factors affect the price of each commodity, the fact that the downswing is so broad – as is often the case with big price swings – suggests that macroeconomic factors are at work.

So, what macroeconomic factors could be driving down commodity prices? Perhaps it is deflation. But, though inflation is very low, and even negative in a few countries, something more must be going on, because commodity prices are falling relative to the overall price level.

In other words, real commodity prices are falling.

The most common explanation is the global economic slowdown, which has diminished demand for energy, minerals, and agricultural products. Indeed, growth has slowed and GDP forecasts have been revised downward since mid-year in most countries.

But the United States is a major exception. The American expansion seems increasingly well established, with estimated

annual growth exceeding 4% over the last two quarters. And yet it is particularly in the US that commodity prices have been falling. The Economist’s euro-denominated Commodity Price Index, for example, has actually risen over the last year; it is only the Index in terms of dollars – which is what gets all of the attention – that is down.

That brings us to monetary policy, the importance of which as a determinant of commodity prices is often forgotten.

Monetary tightening is widely anticipated in the US, with the Federal Reserve having ended quantitative easing in October and likely to raise short-term interest rates sometime in the coming year.

This recalls a familiar historical pattern. Falling real (inflationadjusted) interest rates in the 1970s, 2002-2004, and 20072008 were accompanied by rising real commodity prices; sharp increases in US real interest rates in the 1980s sent dollar commodity prices tumbling.

There is something intuitive about the idea that when the Fed “prints money,” the money flows into commodities, among other places, and so bids their prices up – and thus that prices fall when interest rates rise.

But, what, exactly, is the causal mechanism?

In fact, there are four channels through which the real interest rate affects real commodity prices (aside from whatever effect it has via the level of economic activity). First, high interest rates reduce the price of storable commodities by increasing the

Falling real interest rates in the 1970s, 2002-2004, and 2007-2008 were accompanied by rising real commodity prices; sharp increases in US real interest rates in the 1980s sent dollar commodity prices tumbling

incentive for extraction today rather than tomorrow, thereby boosting the pace at which oil is pumped, gold is mined, or forests are logged. Second, high rates also decrease firms’ desire to carry inventories (think of oil held in tanks).

Third, portfolio managers respond to a rise in interest rates by shifting out of commodity contracts (which are now an “asset class”) and into treasury bills. Finally, high interest rates strengthen the domestic currency, thereby reducing the price of internationally traded commodities in domestic terms (even if the price has not fallen in foreigncurrency terms).

US interest rates did not really rise in 2014, so most of these mechanisms are not yet directly at work. But speculators are thinking ahead and shifting out of commodities today in anticipation of future higher interest rates in 2015; the result has been to bring next year’s price increase forward to today.

The fourth of the channels, the exchange rate, has already been functioning. The prospect of US monetary tightening coincides with moves by the European Central Bank and the Bank of Japan toward enhanced monetary stimulus. The result has been an appreciation of the dollar against the euro and the yen.

The euro is down 8% against the dollar since the first half of the year and the yen is down 14%. That explains how so many commodity prices can be down in terms of dollars and up in terms of other currencies.

Project Syndicate

20 | Business Daily

December 19, 2014

Closing Chinese billionaire gets approval for Australian casino

New flight links Chinese tourist resort to Europe

A proposed A$8 billion (US$6.52 billion) Aquis Great Barrier Reef Resort, backed by Hong Kong billionaire Tony Fung, was yesterday granted regulatory approval by an Australian state planning department - clearing its first legislative hurdle. The Queensland Coordinator-General approved the environmental design of Aquis, with the state finding the proposed project posed no unacceptable risk to the Great Barrier Reef, one of Australia’s main tourist destinations. Aquis plans to build a Macau-style casino and resort (Macau MGM terrace pictured), home to 7,500 hotel rooms, theatres, conference centres and a sporting precinct with an 18-hole golf course.

China Eastern Airlines yesterday launched a direct flight between Kunming (pictured), a famed tourist city in southwest China’s Yunnan Province, and Paris. The flight, Yunnan’s first transcontinental air route, will be plied by an Airbus A330. It will depart from Kunming every Monday, Thursday and Saturday, finishing the 9,471-km one-way trip in nearly 13 hours, according to the airline’s Yunnan branch.

Kunming, dubbed the “City of Eternal Spring,” is known for its pleasant climate and picturesque landscape. Air routes connect the city with seven Southeast Asian countries and five South Asian countries.

Shifting from foreign technology to own The campaign could have lasting consequences for U.S. companies including Cisco Systems Inc., International Business Machines Corp., Intel Corp. and Hewlett- Packard Co.

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hina is aiming to purge most foreign technology from banks, the military, stateowned enterprises and key government agencies by 2020, stepping up efforts to shift to Chinese suppliers, according to people familiar with the effort.

The push comes after a test of domestic alternatives in the north-eastern city of Siping that was deemed a success, said the people, who asked not to be named because the details aren’t public.

Workers there replaced Microsoft Corp.’s Windows with a home-grown operating system called NeoKylin and swapped foreign servers for ones made by China’s Inspur Group Ltd., they said.

The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping, the people said.

Security panel China is moving to bolster its technology sector after

anti-trust probes against western companies, including Microsoft and Qualcomm Inc. Recent months have seen Microsoft’s China offices raided, Windows 8 banned from government computers and iPads excluded from procurement lists.

Trade war

Trying to create advanced systems like IBM’s Blue Gene mainframe suppose a major challenge for any country

Edward Snowden revealed widespread spying by the U.S. National Security Agency and accused the intelligence service of hacking into the computers of Tsinghua University, one of the China’s top research centres. In February, Xi called for faster development of the industry at the first meeting of his Internet security panel.

Foreign suppliers may be able to avoid replacement if they share their core technology or give China’s

security inspectors access to their products, the people said. The technology may then be seen as safe and controllable, they said.

China ranks second behind the U.S. in technology spending, with outlays rising 8.1 percent to US$182 billion last year, according to research firm IDC. The U.S. spent US$656 billion, a 4.2 percent increase over 2012.

The push to develop local suppliers comes as Chinese regulators have pursued

In September, the China Banking Regulatory Commission (CBRC) ordered banks and finance agencies to ensure that at least 75 percent of their computer systems used safe technology by 2019. The regulator called on financial institutions to dedicate at least 5 percent of their IT budgets towards the goal.

While the CBRC policy doesn’t make a distinction between foreign and domestic products, it says banks must favour companies who share their “core knowledge and key technology.” It also cautions banks from relying too heavily on one supplier.

About 80 percent of banks’ core servers and systems are made by foreign brands, Yan Qingmin, a CBRC vice

chairman, said.

The CBRC may start accounting for banks’ use of Chinese technology in its regulatory reviews, the Shanghai Securities News reported December 4.

Xi’s Central Military Commission issued a similar, although less detailed, order in October. That document described information security as key to winning battles.

Chinese companies have faced similar pressure overseas. A 2012 U.S. Congressional report said Huawei and ZTE provide opportunities for Chinese spies to tamper with U.S. communications networks.

Huawei has since been shut out from several U.S. deals.

China faces obstacles in replacing foreign software and hardware on a national scale. Almost three decades after paramount leader Deng Xiaoping approved his State Hi-Tech Development Plan, Chinese companies hold a fraction of global market share. They’re still unable to match the most advanced products, such as high-end bank servers.

‘Human errors’ led to deadly Taiwan gas blasts

Shiseido aims to double China sales

HK-mainland sign new trade deal

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rosecutors said yesterday deadly gas explosions in Taiwan were caused by “multiple human errors” as they charged 12 people over the blasts, including the head of a chemical company and government officials.

The disaster killed 32 people and wounded more than 300 in southern Kaohsiung city in July as explosions in underground pipelines sparked massive fires and left trenches running down the middle of some streets, with vehicles thrown onto the roofs of buildings.

In the first indictments since the blasts, prosecutors charged the chairman of LCY Chemical Corp., which operated the pipeline, and 11 others with causing death and injuries by professional negligence and offences against public safety.

“Multiple human errors led to the grave tragedies of 32 people losing their lives and 321 people being injured,” prosecutors said in a statement.

Kaohsiung-based LCY Chemical failed to regularly maintain the underground pipes transporting propene which caused them to rust and damage, leading to the power blasts, the district prosecutor’s office said.

The company also conducted the wrong procedure to test the leaks AFP

apanese cosmetics maker Shiseido Co Ltd aims to double China sales as part of a new business plan, investing in operations and e-commerce in the world’s second-biggest economy as it seeks to make up ground lost to international rivals.

Shiseido has set itself a target of boosting overall sales by at least a third to 1 trillion yen (US$8.4 billion) by 2020. Of that, Chief Executive Masahiko Uotani said, China sales are expected to climb to around 200 billion yen, roughly twice the last fiscal year’s amount.

“China store sales are expected to rise between 5-10 percent but it’s in e-commerce, that we see an extraordinary opportunity,” Masahiko Uotani, who has previously headed Coca Cola Co’s Japan operations, told Reuters in an interview. A marketing expert who took charge in April, Uotani is the first Shiseido president to come from outside the company’s ranks.

In its renewed focus on China, Shiseido is seeking to catch up with nimbler South Korean cosmetic rivals. Helped by keen pricing and the growing popularity of South Korean TV shows and pop music, firms like Amorepacific Corp have won over mainland Chinese.

Reuters

Bloomberg News

ong Kong and the mainland signed a new trade liberalization deal yesterday, which will facilitate Hong Kong service providers to set up businesses in Guangdong province.

The agreement was signed this morning by Vice Minister of Commerce Gao Yan and Hong Kong Financial Secretary John Tsang Chun- wah under the framework of the mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).

The agreement shall come into effect on the day of signing and be implemented on March 1, 2015.

Hong Kong companies have previously been subjected to more restrictions than their mainland counterparts to provide services across the border.

As of yesterday, all restrictions will be removed for 58 service sectors including property, environment and computer installation services and they will face the same conditions as mainland companies.

In addition, the agreement contains a mostfavoured treatment provision which states that any CEPA-plus preferential treatments offered by the mainland to other countries and regions will be extended to Hong Kong so as to ensure Hong Kong will continue enjoying the most preferential liberalization measures offered by the mainland.

Xinhua