Macau Business Daily, Jan 19, 2015

Closing editor: Sara Farr

MOP 6.00

Weighing

Publisher: Paulo A. Azevedo

it all up I

Year III

Number 710 Monday January 19, 2015

t’s now 39pct but could be 43pct.

Analysts are already doing their sums on Macau’s possible casino tax hike.

Secretary for Economy and Finance Lionel Leong Vai Tac, however, says the gov’t is still looking at how best to adjust the tax rate. One major factor will be how well the operators have fulfilled their contracts to date. Thus, the upcoming gaming concession review is critical. Bottom line: Keeping the gaming industry here competitive as regional markets open up, Mr. Leong concluded PAGE 3

Luxury crisis hits Macau and Hong Kong

External Trade Law amendment

Page 2

Macau sex ring bust shows China expanding crackdown on graft

The gov’t is convinced. ATA carnet will benefit the development of the MICE industry. Consequently, it’s amending the External Trade Law. In the first 11 months of last year, there were 470 ATA carnet users. Up from just 29 in the November 2010 to July 2011 period

Page 4

Caesars files Chicago bankruptcy, halted by Delaware judge

Page 2

Page 8

HSI - Movers

Building banner bust

Where is the floor?

Customs authorities have taken action.

Ad banners on a building have been removed following suspicions of trademark violations. Advertising gaming-related ads are, in addition, illegal but continue to proliferate. Macau Customs said it’s keeping a close eye on such activities

And down they continue. Chinese house prices bid farewell to 2014 still falling. Dragging down the economy in their slipstream. In spite of authorities’ fostering measures, the property sector is still struggling

Page

5

Page

Name

9

%Day

Ping An Insurance Gr

1.90

China Mengniu Dairy

1.02

China Resources Powe

0.99

Bank of Communicatio

0.58

China Life Insurance

0.32

China Overseas Land

-2.77

Sands China Ltd

-3.02

Tencent Holdings Ltd

-3.94

China Resources Land

-3.94

Galaxy Entertainment

-4.48

Source: Bloomberg

INTERVIEW www.macaubusinessdaily.com

January 16

All roads lead to Macau The writing for VIP-centric gaming is very much on the wall.

And operators are reading the signs loud and clear. The mass market represents the future. And the operators are preparing accordingly, CLSA analyst Aaron Fisher tells Business Daily.

Although he thinks it’s a stretch, he believes “Beijing is targeting to transform Macau into the number one global tourism destination”

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Brought to you by

Pages 6 & 7

Ed Tracy retires, to serve as Sands China consultant | Page 8

2015-1-19

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2 | Business Daily

January 19, 2015

Macau

Luxury crisis hits Macau and Hong Kong Weakening demand and the Hong Kong protests have both taken their toll on big jewellery chains, luxury watch stores and renowned fashion brands. Cartier, Jaeger-LeCoultre and Burberrys are just some of the A-listers downgrading sales and expectations

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artier owner Richemont said weak luxury watch demand in Hong Kong and Macau halted sales growth in the final quarter of 2014, echoing comments by luxury peers this week.

Swiss watchmakers are grappling with sluggish sales in mainland China, where consumers are no longer spending as much on luxury timepieces, and a downturn in Hong Kong which has been shaken by

pro-democracy protests. The region accounts for about a quarter of Richemont’s sales.

“The decline in sales by the group’s specialist watchmakers reflected both caution on the part of business partners in the wholesale channel and a lower performance of some retail locations, most notably in Hong Kong and Macau,” the maker of IWC and Jaeger-LeCoultre watches said in a statement, abstaining from giving

any kind of outlook.

Earlier this week, British luxury brand Burberry said a fall in sales in Hong Kong in the final quarter of 2014 could hit full-year profitability, and U.S. jeweller Tiffany also cut its profit forecast for 2014, citing a disappointing holiday shopping season and further weakness in Japan.

Sales growth was flat in constant currencies in Richemont’s third quarter to Dec. 31, just below an

estimate for 1 percent growth in a Reuters poll. On a reported basis, sales increased 4 percent to 3.051 billion euros (US$3.59 billion).

While sales in the Asia Pacific region and at the group’s watch brands declined in the quarter, Europe benefitted from a return of tourist shoppers and the Americas still reported good growth.

Demand for jewellery also stayed strong, Richemont said.

Reuters

ATA carnet in external trade law proposed The government says bringing the carnet into law would benefit the development of the MICE industry, making customs clearance and the declaration of merchandise much easier Kam Leong

kamleong@macaubusinessdaily.com

T

he Executive Council has announced that the draft bill on amendments to the city’s current External Trade law, suggesting any trade activities via ATA carnet, an international customs and temporary export-import document, should be regulated in this legal scheme. In addition, the bill proposes allowing merchandisers clear customs prior to customs declaration.

The government has indicated that the development of the MICE industry has boosted the amount of merchandise imported to Macau.

These goods, however, are reexported from Macau not long after.

As such, the government believes that the future implementation of such amendments will integrate the current administrative procedures of different parts of the city’s foreign trade.

“Everyone should know that Macau obeys the principle of free trade. We hope that by improving

the external trade law, the process of our work in [foreign trade] will also improve,” said Council spokesperson Leong Heng Teng.

Mr. Leong also said that such amendments could attract more international MICE projects to consider Macau a destination in addition to encouraging the local

MICE industry to step up to global market [expectations] and break new ground to enhance the development of the industry.

Currently, according to official information from ATA Carnet, such a document, also known as ‘Merchandise Passports’ or ‘Passports for Goods’, is used to clear customs in 84 countries and territories without paying duty and import tax on merchandise that will be re-exported within 12 months.

In fact, according to the spokesman, the city has seen the number of such ATA carnet users increase in the past four years.

“The use of ATA carnet has been increasing in Macau in recent years.

[Initially], there were only 29 cases using such carnet [between November 2010 and July 2011]… Today, between January and November 2014, the number of such [ATA carnet users] has jumped to more than 470,” Mr. Leong said.

“Local enterprises are starting to appreciate and to use such convenient ATA carnet. In addition, considering the development of the Hong KongZhuhai-Macau Bridge in the future, the freight traffic between the regions will also increase. As such, we think that the amendments will benefit the development of the [external trade] field,” he added.

Meanwhile, the amendment will introduce a new option for customs declarations to the city by allowing merchandisers to “clear customs before declaration”. The government says it believes it would simplify the current procedures of customs clearance and enhance convenience.

Mr. Leong indicated that the amended bill will be passed to the Legislative Assembly soon, while amendments, if passed by the legislators, will come into force 30 days after being announced in the Official Gazette.

New hotel slated for Nam Van district

A

new hotel is to be built next to the Finance and IT Centre of Macau (IFT) and Grand Emperor Hotel, on a plot of land straddling Avenida Doutor Mario Soares and Avenida Comercial de Macau.

According to the urban planning proposal issued by the Lands, Public Works and Transport Bureau (DSSOPT), the plot of land occupies some 4,563 square metres with a land concession contract for a hotel.

The property to be built on that plot will be subject to a maximum

height restriction of 97.2 metres according to the latest street alignment construction condition issued.

The proposal also suggests that if the project is to occupy a gross floor area of more than 50,000 square metres the developer must submit the construction plan plus an evaluation report of the project’s impact on the environment for the Environmental Protection Bureau to review.

On Thursday, the Urban Planning Committee will discuss this proposal plus eight others.

J.K.

Business Daily | 3

January 19, 2015

Macau

Leong: Gaming tax adjustment subject to mid-term concession review Secretary for Economy and Finance Lionel Leong Vai Tac says any adjustment to be made to the gaming tax rate will be dependent upon the concession review, a task which academic studies have already pronounced upon Stephanie Lai

sw.lai@macaubusinessdaily.com

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ow the city’s current gaming tax will be adjusted will depend on the government’s upcoming mid-term gaming concession review, a major task that the MSAR Government is committed to embarking upon this year, Secretary for Economy and Finance Lionel Leong Vai Tac told media in a gathering yesterday.

No formal applications for tables received The Secretary for Economy and Finance, Lionel Leong Vai Tac, also told media yesterday that the government has not yet received a “formal application” for the table allocation of Galaxy Phase II or Studio City – two major casino-resort projects that are slated to open mid-year.

Speaking to media on January 12, co-chairman of Melco Crown Entertainment Ltd. Lawrence Ho Yau Lung mentioned that he was “confident” that the government would allow his company to run at least 400 gaming tables at Studio City, with their investment in nongaming activities and promotion of Macau made.

In previous announcements, Galaxy Entertainment Group has also spoken of its confidence in being allotted 500 gaming tables for Galaxy Phase II.

Freshly sworn into office on December 20 following President Xi Jinping’s visit to the territory, Mr. Leong – Macau’s new gaming policy supremo – met with media in a gathering yesterday that marked the start of his first year in office.

When asked whether the city’s current effective tax rate of 39 per cent on casino gross gaming revenue will be adjusted upon the negotiation of the renewal of gaming concessions, Mr. Leong stressed that it was “hard to give an answer” on the subject before the government had examined the gaming concessions renewal.

The city’s six gaming concessions expire between 2020 and 2022.

“As to whether our gaming tax has to be lifted or not, as the Gaming Inspection and Co-ordination Bureau noted on Friday any indication of such [a likely lift of gaming tax] comes from a personal remark only,” he said. The Bureau remark alluded to was published on Friday, and was directed to local media reports

HK-Zhuhai-Macau Bridge:

A target completion date too far

T

he ‘super bridge’ project that is being built across the Pearl River connecting Hong Kong, Macau and Zhuhai may not be opening on time by the end of next year as the transport minister of Hong Kong has announced a possible project completion delay of the city’s boundary crossing facilities and connecting works.

“It seems to me that Hong Kong’s boundary crossing facilities and connecting works cannot be finished in 2016,” Secretary for Transport and Housing Anthony Cheung Bing Leung said at a meeting with the Legislative Council on Friday. An update of the completion date will only be announced after a review to be finished by the Highways Department, Mr. Cheung added.

The Hong Kong-Zhuhai-Macau Bridge, originally slated for completion in 2016, is a project that links Hong Kong with Gongbei in Zhuhai and A Perola in Macau.

Mr. Cheung made the remarks on top of the Hong Kong government’s request to inject an extra HK$5.46 billion into the project on Friday, for which the Legislative Council has signalled its support.

Accounting for cost rises in machinery, materials and labour for the requested budget increase, this additional injection will mean that a total of nearly HK$35.9 billion is to be spent on the reclaiming and developing of the artificial island off Lantau that is to host immigration facilities for the bridge.

S.L.

that cited CLSA’s regional head of consumer and gaming research Aaron Fischer’s remark that the existing tax on gaming could increase from 39 per cent to 43 per cent upon renegotiation of the gaming licences.

“Without the basis of our midterm gaming licensing review, it’s very hard to give an answer [on gaming tax adjustment,” Mr. Leong said. “…

But as our Chief Executive pointed out in his political [manifesto] we’ll work to keep our gaming industry internationally competitive, while at the same time sustaining a healthy development of the industry.”

For the review of the city’s gaming licences, the Secretary briefly mentioned that studies from local academic institutions about the subject had already started – although he did not elaborate upon the major points of the analysis involved.

“As I have noted several times before, for our review of the gaming licensing this year, we’ll mainly see

whether the gaming companies have carried out their promises made in their concession contracts,” said the Secretary when answering questions on the major content of the gaming licensing review.

“For the review we’re also looking into their non-gaming elements, and whether they have conducted their corporate social responsibilities,” Mr. Leong added. “We’ll also consider the elements that can contribute to the healthy development of the gaming industry here, and whether we can work towards the goal of building our city as a world tourism and leisure centre as the central government requests.”

In August last year, Chief Executive Fernando Chui Sai On mentioned of conducting a public consultation on the renewal process of the gaming licensing whilst campaigning for reelection – but how such an initiative will be carried out was not mentioned

by Mr. Leong yesterday.

4 | Business Daily

January 19, 2015

Macau Tax refund via bank transfer The Financial Services Bureau has issued a notice saying that income taxpayers can now apply to receive their tax refund via bank transfer to their local bank accounts. The new measure seeks to simplify the procedure. According to the 2015 financial year budget proposal, the government will continue to give back 60 per cent of income taxpayers’ 2013 contribution, to a ceiling of MOP12,000. Taxpayers can hand in their application at their banks to apply for the service until February 25. The seven banks providing the service are BOC, BCM, CCBC, Luso Bank, BNC, OCBC Weng Heng, and Tai Fung Bank.

Macau sex ring bust shows China expanding crackdown on graft Last week Stanley Ho’s nephew Alan Ho was arrested for alleged operation in a prostitution ring, which resulted in the arrest of 96 people

T

he arrest of a prominent Macau executive in the largest prostitution bust in the city’s history shows China’s President Xi Jinping is broadening his crackdown on corruption to restrict even longtolerated vices.

Police in the former Portuguese colony arrested Alan Ho, handcuffing him and covering his head with a black hood, for allegedly operating a prostitution ring out of the casino complex of his uncle, Stanley Ho. The elder Ho held a monopoly on gambling in Macau for four decades and SJM Holdings Ltd., the company he founded, is still Asia’s biggest casino operator.

The authorities’ latest target of the sex industry comes as Xi wages the most sweeping campaign in decades against bribery, embezzlement and other kinds of corruption in an effort to bolster the legitimacy of the ruling Communist Party. Macau casinos that suffered last year from the fallout of Xi’s crackdown are likely feeling the noose tighten further, particularly on junket operators, middlemen who bring in high- stakes gamblers from the mainland.

“There is undoubtedly a new sheriff in town,” said Steve Vickers, a political risk consultant in Hong Kong.

“This is consistent with President Xi’s call for Macau authorities to show ‘greater courage and wisdom’ and to ‘strengthen and improve regulation and supervision over the gaming industry’.”

No let-up Xi, who visited Macau last month for the 15th anniversary of its handover to China, said this week that there will be no let-up in his “fierce and enduring” battle against

corruption, which has already taken down thousands of senior officials including the country’s former security chief.

Actions including restrictions on illicit fund flows have prompted mainland VIPs to avoid Macau, putting some junkets out of business.

The David Group, a top 10 Macau junket operator, is in the process of shutting its VIP rooms throughout the city, Nomura analysts led by Stella Xing wrote yesterday.

Macau is seeking to curb money flows because of concerns illegal funds are being taken out of the mainland into the territory through junket operators which provide credit to high- end players to gamble in the city.

Alan Ho was among the six people arrested for running the vice ring out of the Hotel Lisboa. Last weekend’s operation was the city’s biggest forced prostitution case since its 1999 handover to China, the Macau Daily News reported. It involved 2,400 suspected sex workers and about MOP400 million (US$50 million) in illicit gains, according to the Macau Judiciary Police.

Alan Ho didn’t respond to queries sent to his work e-mail address.

Entry fee The vice ring collected fees from women in return for allowing them to solicit men in a hotel, according to a statement from the police. The ladies, some of them recruited on the Internet, paid 150,000 yuan as an “entry fee” and a monthly protection fee of more than MOP10,000, they said. The city’s security chief Wong Sio Chak promised to step up police enforcement on the sex trade in Macau after the bust, according to a report

in the Macao Daily News last week.

Macau has long tolerated the sex trade, a natural outgrowth of a casino-focused tourism city, said Carlos Siu, an associate professor at Macao Polytechnic Institute.

“It’s happened to my friends visiting Macau; sometimes pimps will approach men asking if they need such services,” Siu said. “If it’s night, the women might hide in some dark corner pretending to play slot machines, come out and approach you.”

Illegal brothels Wynn Macau Ltd led declines in most casino shares in Hong Kong trading on Friday, falling as much as 2.1 percent. SJM Holdings declined as much as 1.5 percent, while Melco Crown Entertainment Ltd.’s Hong Kong- listed stock fell 1 percent.

Galaxy Entertainment Group Ltd. lost as much as 1.3 percent to. The benchmark Hang Seng Index was down 0.5 percent.

Macau authorities conducted 34 sex trafficking investigations in 2013, compared with 15 a year earlier, the U.S. State Department’s Trafficking in Persons Report published last June showed. Victims, predominantly from mainland China, “are sometimes confined in massage parlors and illegal brothels, where they are closely monitored, forced to work long hours, have their identity documents confiscated and are threatened with violence,” it said.

The State Department ranks Macau Tier 2 , for territories which do not fully comply with minimum standards in the Victims of Trafficking and Violence Protection Act “but are making significant efforts to bring themselves into compliance”.

Staff from Association for Reach Out (Macau) found little evidence of the usually rampant sex trade when they visited Hotel Lisboa and another casino hotel to give out condoms and health information flyers on Wednesday, four days after the bust, said Kendy Yim, executive director of the non-governmental organization providing support for sex workers in Macau.

Nightclubs and saunas These sex workers usually ply their trade in places ranging from casinos to nightclubs and saunas, receiving little social and government support, said Yim, adding there are no concrete statistics on the size of the industry because of the hushed nature of the profession and lack of accurate surveys.

“Often these are young, female migrant workers with little local support,” said Yim. “They are very much marginalized and may face all sorts of dangers; violence is one of them, and unsafe sex and exploitation from their employers is another.”

The police sting on a high-profile location like the Hotel Lisboa, and the arrest of a member of the powerful Ho family, heralds of more clean-up operations to come, said Lok Wai Kin, vice president of Macau’s Law Reform Consultative Committee which advises the government on legal matters.

“Macau’s government wants to make the gaming industry a more regulated and lawful one,” said Lok, a law professor at the University of Macau. “You can’t have rampant and in-your- face prostitution in a world-class entertainment destination right?”

Bloomberg

Business Daily | 5

January 19, 2015

Macau Rotunda do Istmo: 600 speeding cases in four days The Transport Bureau says that a speed detection system newly installed in the tunnel at Rotunda do Istmo in Cotai has detected nearly 600 cases of vehicles exceeding the speed limit between January 9 and 12. The Bureau indicated that the situation was very serious. Meanwhile, another new detection system installed in the Hengqin Tunnel had recorded just one speeding case during the same four days. According to the Bureau, the speed limit for Hengqin Tunnel is 50 kilometres per hour while that for the tunnel in Rotunda do Istmo in Cotai is 60 kilometres per hour.

Customs investigating illegal ad Macau Customs said a banner suspected of violating trademark rights was taken down by the advertising agency during their investigation. The authorities claim they are keeping an eye on illegal advertising despite the fact that gaming-related banners, which are illegal, can still be seen in the city Joanne Kuai

joannekuai@macaubusinessdaily.com

M

acau Customs said they had received a tip-off last month regarding some banners on a residential building near the Border Gate in the Northern District that are suspected of violating protected trademarks, according to a statement by the Customs issued last Friday.

Officers from the Intellectual Property Office of the Customs launched an investigation and the banners were taken down by the advertising agency “before the infringement issue deteriorates”.

The authorities claim that they will continue inspecting the area and contact interested parties regarding the protected trademark, in addition to investigating whether any criminal act has been conducted.

The Customs pointed out that the ad in question was related to gaming but stresses that suspected illegal behaviour is related to designs on the banner which resemble trademarks registered with the Macau Economic Services Bureau, and is suspected of violating the Industrial Property Rights Regulation.

The Customs said they firstly approached the building management company who responded with “a negative attitude” and after contacting

the building’s units owners’ committee and with some help of a legislator the Customs officers were able to explain the possible illegitimacy of such advertising.

The advertising agency took down the banner “before the matter deteriorated”. The agency also explained that the design of the banner was done outside of Macau and they were unaware that such advertising

could infringe any regulation.

Ongoing issue Last month, in a reply to a legislator’s written enquiry, the government says it had handled a total of 18 cases related to illegal advertisement postings of gaming activities from the beginning of last year for which the total fines

Is it now?

Investors are hoping that the recent recovery of credit in China could boost the VIP segment here, given that a wave of high-roller rooms is shutting down Luís Gonçalves

Luis.goncalves@macaubusinessdaily.com

I

t looks like all cards are being put on the second half of this year. Two new mega casino resorts are in the pipeline (Studio City and Galaxy), which it is hoped will attract millions of new mass players, there are more favourable comparisons to give positive headlines, and now the signs of a recovery in China could boost the high roller segment, still the

most important customer base here.

The VIP segment is traditionally linked to economic cycles as most of the high rollers are businessmen who tend to bet more when times are good. The latest data from credit flows in China point to a likely recovery in the coming months that the market hopes is translated into more gamblers here,

despite the anti-graft campaign. ‘China credit growth is finally showing some signs of improvement, and if this trend continues, we could see better results in Macau in late 2015’, wrote Wells Fargo on Friday in a note to clients.

The US bank says that credit in China expanded 37 per cent in December from a year ago, a growth that

applied have amounted to only 30,000 patacas (US$3754.8).

As regulated by local law No. 7/89/M, advertisements that feature gaming activities as their main content are banned in the city. Violation of the rule can result in a fine of 2,000-12,000 patacas for an individual offence or a fine of 5,000-28,000 patacas for a legal person that violates the rule.

In the reply to Legislator Chan Meng Kam’s enquiry by the then-chief of public works, Mr. Wong Chan Tong said that the government had launched a total of 18 cases investigating illegal advertisements related to promoting gaming activities in the past two years, delivered via banners posted outside residential buildings and mobile phone junk messages.

However, when passing through the border gate, many banners and advertisements related to gaming can still be seen, claiming they are authorised to run legal gaming activities online by the government.

The Macau Economic Service – the department responsible for regulating advertising activities – told Business Daily that if advertising is related to gaming, the Bureau will enforce the law according to the Advertising Law.

compares to a plunge of 40 per cent in the third quarter of 2014 that triggered a sell-off in mainland assets. Overall, in 2014 the total credit granted by banks in China dropped 5 per cent versus an increase of 9 per cent in 2013. This week, Beijing is scheduled to release 2014 GDP data, an event that the market is watching closely.

‘In our view, Chinese credit growth is one of a few key leading indicators of Macau VIP revenue growth, and was central to both our very bullish call in 2013 and our cautious outlook’, says Wells Fargo. ‘Trailing twelve month credit growth is a strong leading indicator of VIP results, in our view, and is improving.

We believe a 6-12 month lag exists between trailing twelve-month (TTM) total Chinese credit growth and Macau VIP results’. Wells Fargo is now expecting a recovery in VIP growth in the second leg of this year, with

revenues from the segment predicted to go up 6 per cent, after a first half in the red with revenues expected to drop 24 per cent.

But the VIP outlook continues to be challenged by recent events. The arrest of more than 100 people in Macau, including Stanley Ho’s nephew Alan Ho, on charges of illegal prostitution made the news all over the world last week. Rumours of the shutdown of one of the most famous junkets here, David Group, and the closing of 50 VIP rooms in the coming months, are also signals that a recovery is still far away.

Macau’s gross gaming revenues for the fourth quarter of 2014 reached MOP75.8 billion, of which casino gambling accounted for MOP75.58 billion. In addition, VIP Baccarat saw casinos rake in MOP446.1 billion, while mass market Baccarat revenues totaled MOP22.3 billion in the fourth quarter of last year.

6 | Business Daily

January 19, 2015

Macau

“The future of Macau is all about general tourism”

The Chinese crackdown on corruption is forcing the Macau gaming landscape to focus on the mass market and turn the territory into a global tourism destination, CLSA analyst Aaron Fischer explained in an interview with Business Daily. Renewed gaming licences are also expected to generate an increase in gaming taxes João Santos Filipe

jsfilipe@macaubusinessdaily.com

Since June last year, gross gaming revenues have been falling. Do you expect this scenario to change anytime soon?

The first half [of 2015] is still going to be very tough. We [CLSA Hong Kong] are predicting that gaming revenues are going to be down 29 per cent during the first quarter of the year and another 20 per cent during the second quarter. If you look at the monthly revenues of recent months and the revenues of the first half of last year it sort of implies that revenues are going to go down because of the comparison base. Everybody is expecting the first half of this year to be weak, which means that companies need to fight hard for market share and do a better job in

The operators do not have a choice but to invest in non-gaming

terms of serving the customer.

February 2014 was the best month ever for the gaming industry because of a 40 per cent year-onyear growth. How much do you expect GGR to drop next month?

A lot. I’m not sure whether we have already done a forecast but it can go as far as hitting a 50 per cent drop. It will be close to a 40 per cent fall for sure. February this year will represent the worst month in terms of percentage decline.

In the fight for market share, what gaming operators are you expecting to perform better this year?

I don’t believe in any significant change. When the new casinos open they’ll add new VIP rooms.

From what we’ve been seeing in the past, when a junket wants to go into a new casino, they tend to direct more visitors to the junket rooms in the existing casinos of that company. Due to this reason Galaxy may do quite well during the first half of this year because they have the first property to open [Galaxy Phase II].

Then, do you expect companies to prioritise market share during this year?

At the moment they’re really

focused on the new projects.

Every gaming company has a new project, which will open in the next few years and so they’re making sure that these projects will develop correctly in relation to market changes and making sure they have enough attractions for the mass market.

Is this non-gaming focus the new way for the Macau gaming industry?

Yes, companies really need to focus on getting the next project right and making sure that they invest heavily in the non-gaming segment. They need to make sure they tick all the boxes because the government has said they will not be given any extra gaming tables unless they invest more money in non-gaming. So in order to get the extra tables they need to invest more in non-gaming, which is already happening. For instance, Melco Crown has announced details of their new project [Studio City], which is very exciting with the Batman ride and other forms of family entertainment plus the Pacha Club.

Considering the development of all these non-gaming facilities, can it be viewed as a threat to the gaming

industry as visitors may spend less time at the gaming tables?

The operators do not have a choice. The Macau gaming industry is tightly controlled by the government and if you want to have a licence in Macau you need to abide by the government’s wishes. That is the standing point.

If you are not okay doing what the government asks you to do then you may risk losing your licence.

The government has said to invest in non-gaming and that is a very clear message. For example, if any company decides not to open hotel rooms, retail areas or any shows, the government is probably going to say that they are not going to get any gaming tables at all.

However, if operators spend money on entertainment facilities, as Melco Crown has done, they are in a better position to get these tables.

Shedding VIPs Can the mass market be as profitable as the VIP segment?

In fact, mass market is more profitable than the VIP market.

While in the VIP segment the profit margin is only 10 per cent, in the mass market the profit margin is 40 per cent. So the goals of the companies are to get rid of the VIP gaming tables and bring customers to tables in the mass market area.

In relation to the mass market, will supply continue to create more demand?

Certainly. The reason we believe in this is because if you look at hotel occupancy it ranges from 90 to 100 per cent. Hotel room rates are very high and the minimum bet on the table is exceptionally high.

Looking at this data, we definitely believe that supply will bring demand.

Business Daily | 7

January 19, 2015

Macau

We’re expecting that with the renegotiation of the licences, the tax on gaming will increase from 39 to 43 per cent

decline. The market is fairly mature. However, if you meet someone that has done something inappropriate in China, that one may not want to go to Macau anymore. That is causing the decline in the VIP segment numbers. Another thing is market penetration. If you’re someone who is wealthy in China and loves gambling there’s a good chance that you have already been brought to Macau. We think that the market has been pretty well penetrated.

As the gaming market will focus on the mass market more people will come to Macau. But is there a risk that the Central Government may not allow so many visitors to enter Macau?

The Central Government made it clear that they want to develop Macau into Asia’s number one entertainment destination. I actually think Beijing is targeting transforming Macau into the number one global tourism destination. This may be a bit too ambitious given what Macau has to offer. The workforce is very small, the population is very small and the land [area] is very limited.

Diversification

Then what are your expectations concerning this segment of the market?

The future of Macau is all about general tourism. There’s going to be a huge increase in the number of Chinese tourists visiting Macau over the next five years. In 2013, roughly 100 million people left China for tourist purposes and we believe that in the next five years the number of trips will be 200 million. We’re expecting a huge increase in the number of tourists.

But is Macau as a tourism destination attractive for these visitors?

We believe so. In the past these visitors have not been able to come to Macau because they have not had access to hotel rooms, as even if the market was focused on the VIP segment, hotel occupancy was above 90 per cent. However, the future of Macau is all about mass market and non-gaming.

Will these non-gaming attractions increase the length of stay of tourists?

It will be a little bit longer. Macau will never be a place where tourists will stay for four to five days. At this moment, the average length is about one and a half days.

However, it can increase to 1.8 days or two days but not longer than that. Ultimately, Macau is a very small place and unless you’re really into gaming a weekend is the most appropriate time to spend in Macau.

The anti-corruption policies of the Chinese Central Government are driving VIP gamblers away from Macau. Do you expect the VIP segment to recover in the future?

The glory days of the VIP market are over and it will continue to

Politicians have been very focused on diversifying the economy. What are the possibilities of developing other industries in Macau?

It’s very difficult. The best opportunity that Macau has is to develop the tourism industry and the government recognises this.

They were fully supportive of issuing the gaming licences and they helped to build a lot of the infrastructure as well, such as the Hong Kong-Zhuhai-Macau Bridge, the Light Rapid Transport and the expansion of the airport and ferry terminal capacities.

Right now there is a three per cent cap on the increase in number of gaming tables per year. But the operators’ gaming tables expectations are higher than this cap…

Correct. All the six gaming companies will tell you they’ve applied for a number of gaming tables that range from 400 to 700.

For instance, SJM has said they would like to have around 700 gaming tables. I believe Wynn asked for around 500 gaming tables. If you add up all these gaming tables requested then the result does not equal a three per cent increase per year. We’re expecting a lower addition of tables during this year that can range from 20 to 30. Then they will receive half of the requested number of tables in the year of the opening of the new projects and the other requested half after one year of operations.

The review process of the gaming licences will begin this year. Do you believe that a tax increase on gaming will result?

We’re expecting that with the

Beijing is targeting to transform Macau into the number one global tourism destination

renegotiation of the licences the tax on gaming will increase from 39 to 43 per cent.

Is there room in the market for another operator?

Unless the golf course [on Cotai] was rezoned there’s not really much land available. Also, the government has tried to somehow control the growth. But, of course, it is possible that they may issue one licence to someone already operating casinos.

Melco Crown and Galaxy will need 16,000 employees to staff their new resorts. The unemployed force of Macau is around 6,000 people. How much do you think labour costs will climb?

When we do our modelling we expect labour costs to increase 15 per cent. The fact that there are a lot of casinos opening is good news for Macau people. Even if you’re not in the gaming industry wages are definitely going up.

Dealers are required to be Macau residents. How will casinos tackle this?

They have to direct Macau people inside their organisations from other departments and train them to be dealers. They can also try to hire Macanese working in other industries. Unless the government decides to change the regulations, which we do not expect, there is no other choice but to increase salaries.

In terms of competition, there are a lot of new places opening casinos.

Should Macau be concerned about regional competition?

Not really because Macau still

benefits from its location on the doorstep of China. The scale here is enormous in terms of the number of casinos and we believe Macau doesn’t have to worry. If we look at Singapore, which is three hours away, those two casinos there are performing fantastically and the market went from zero to US$6 billion in two years.

However, during that time Macau doubled from US$19 billion to US$40 billion.

And what about Japan?

Japan is really one market that we’re very excited about.

Notwithstanding if the legislation to legalise gaming is approved this year, we’re not expecting the first casino to open until 2021 or 2022, which is still 5 or 6 years away.

The interviewee Aaron Fischer is the regional head of Consumer and Gaming Research at CLSA, which he joined in 2005. He has been covering Macau and Asian gaming sectors for 10 years, and was ranked No.1 Best Hong Kong Analyst

by Wall Street Journal in 2012.

Mr. Fischer previously worked as a consumer analyst at Goldman Sachs in London and at Arthur Andersen as a chartered accountant.

8 | Business Daily

January 19, 2015

Gaming

Ed Tracy retires, stays on as Sands China consultant

S

ands China, the largest foreign casino operator in Macau, announced Edward Tracy will retire as president and chief executive officer ahead of the opening of a new resort this year.

The step-down will take effect March 6, the Hong Kong-listed company controlled by billionaire Sheldon Adelson said in a Hong Kong stock exchange statement. Tracy, who’s been leading the company for more than three years, will stay on as a consultant and he had no disagreement with the company, it said. No successor was announced in the statement.

The management change comes as Sands is preparing to open its fifth casino in Macau, one of the first new projects to open after the city suffered its first annual drop in revenue as China’s anti-corruption crackdown crimped spending by high-end players. New properties are expected to help operators to drive back traffic and boost revenue.

“This was unexpected,” said D.S. Kim, a Hong Kong-based analyst at JPMorgan Chase & Co. “We expect the transition to be smooth and do not expect this news to have any major impact on fundamentals, including the schedule for new projects.”

Kim said a replacement may be announced soon as the board will meet on January 23, and he’s confident there was no dispute between Tracy and the company, he wrote.

Trump executive Sands China became the first foreign company to open a casino in Macau in 2004 after the city ended local casino mogul Stanley Ho’s fourdecade monopoly in the city.

Tracy has been a president at Sands China since 2010 and took on the additional title of CEO in 2011, the company said. He has more than 20 years of experience in the gaming and hospitality industry. The executive was formerly a CEO of the Trump Organization, which included casino, hotel and entertainment entities.

Las Vegas Sands Corp.’s Macau operations accounted for more than 60 percent of the parent’s revenue in 2013. The company and other casino operators in the former Portuguese colony are shifting resources away from high-stakes gamblers to cater for vacationing Chinese and other mass market patrons by opening glitzy malls, theaters and hotels.

Bloomberg

Caesars files Chicago bankruptcy, halted by Delaware judge

T

he operating unit of Caesars Entertainment Corp, the largest U.S. casino company, filed for Chapter 11 bankruptcy in Chicago to cut US$10 billion of debt, but a Delaware judge intervened to halt the case before it got started.

The unusual legal standoff marked the start of a more public phase of complex and contentious debt negotiations. Until now, the company’s attempts to cut interest payments after years of red ink have been kept mostly private.

Caesars maintains it has the support of its senior noteholders to implement the bankruptcy plan, which would reduce the operating

unit’s debt to US$8.6 billion from US$18.4 billion.

The bankruptcy was filed overnight

by Caesars Entertainment Operating Company Inc and 179 affiliates in the U.S. Bankruptcy Court in Chicago.

However, junior noteholders, led by the Appaloosa Management hedge fund, filed an involuntary bankruptcy petition against the operating unit on Monday in Delaware. They argued at an emergency hearing in Wilmington on Thursday that their case should take precedence and the bankruptcy should proceed in Delaware.

Kevin Gross, the Delaware judge, agreed to put the Chicago proceeding on hold, but said he would allow

routine “first-day” requests, such as those that would enable employees to be paid.

Gross asked what agreements he might be disrupting by issuing a stay and taking time to sort out which court would handle the case.

“There is no deal with the firstlien noteholders, there is no deal with second-lien noteholders and there is no deal with unsecured creditors,” said Bruce Bennett, a Jones Day attorney who represents the junior noteholders.

He argued that the backing of senior noteholders was bought with impermissible payments, and said the Delaware case might require

a full-blown trial before it could be dismissed. Bennett said he was planning to take testimony from Gary Loveman, Caesars’ chief executive.

Adding to Caesars legal headaches, a U.S. District judge in Manhattan ruled Thursday that the parent company will have to defend a suit that alleges it violated federal law by removing guarantees of some of the operating unit’s most junior debt.

Creditors have brought numerous lawsuits recently alleging fraud over transfers of assets out of the operating unit. The transfers have included choice properties such as the Linq entertainment complex in Las Vegas assets.

Caesars has said the transfers removed capital-intensive projects from the operating unit in return for fair value, but the creditors allege they were moved to benefit the parent company and Apollo Global Management and TPG Capital.

The two private equity firms led the US$30 billion leveraged buyout of Harrah’s Entertainment in 2008 to create Caesars.

The buyout ran into trouble almost immediately as the economy slid into a deep recession and gambling proliferated in the United States to the point of saturation. Caesars also failed to get a foothold in Macau with its access to the Chinese market.

Under the restructuring plan, the operating unit will be split into a casino company and a publicly traded real estate investment trust.

There are no plans to close any casinos, and Caesars said it is operating normally.

After the Delaware hearing, U.S. Bankruptcy Judge Benjamin Goldgar in Chicago entered various routine orders that mark the start of any bankruptcy case. The parties will return to Gross’s court later this month to argue if the involuntary petition was valid.

“I would hate to bring the case [to Wilmington] and then dismiss the involuntary. That would be a little bit of egg on my face,” Gross said.

Reuters

Business Daily | 9

January 19, 2015

Greater China

Home prices fall again On a month-on-month basis, home prices fell 0.3 percent in December Xiaoyi Shao and Koh Gui Qing

C

hina’s new home prices fell in December for the fourth straight month and are expected to continue heading lower this year, pointing to a persistent property downturn that is increasingly dragging on the broader economy.

Average new home prices across China fell 4.3 percent last month compared with year-ago levels, a faster decline than the 3.7 percent drop seen in November, according to Reuters calculations from official data published yesterday.

The deepening falls in house prices fall indicate government efforts to revive the slumping market have yet to halt price declines, although lower prices and easier borrowing conditions appear to have translated into improved sales numbers.

The housing market is expected to remain weak into 2015 on excess supply, though a market collapse is seen to be unlikely.

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 to furniture.

“We expect the housing cool down to run into this year,” said Liu Yuan, the head of research at Centaline, a property consultant, in Shanghai.

“In most tier 2 or tier 3 cities, inventory destocking remains the main task for local property markets in 2015.”

Economists believe the cooling housing market will continue to pose the biggest risk to the world’s secondlargest economy, even as Beijing tries to stimulate overall growth.

“We expect China’s GDP growth to slow further in 2015 to 6.8 percent, as the on-going property downturn leads to further weakness in construction

and industrial production, and related investment,” Tao Wang, China economist at UBS, wrote in a note.

China is due to release GDP data for the fourth quarter on Tuesday, with growth expected to slow to 7.2 percent in the fourth quarter, the weakest since the depths of the global crisis.

Chinese developers will launch more housing projects in 2015 as they strive to meet sales targets and boost market share - at the risk of adding to already-bloated inventories, a survey conducted by Reuters showed on Wednesday.

“Inventories are high. We can’t raise prices until after the market digests them,” said the chief executive officer of a developer based in southern

KEY POINTS Dec home prices fell for 4th month y/y Prices -0.3 pct on month vs -0.5 pct in Nov Property downturn seen to persist in 2015

Guangdong province.

“The sales went up but prices didn’t - it won’t be easy for us to raise prices.”

Property sales in 70 major cities hit the highest level seen in 2014, up nearly 9 percent, in December from November, according to data from the National Bureau of Statistics (NBS).

The NBS data also showed new home prices fell year-on-year in 68 of the 70 major cities it monitors, unchanged from in November.

On a month-on-month basis, home prices fell 0.3 percent in December, the eighth consecutive monthly fall, but at a slower pace than the 0.5 percent dip in November.

Reuters

Central bank scholar sees GDP growth up to 7.3 pct The government is expected to announce fourth-quarter GDP on January 20

1.6 pct

2015 consumer price index rise forecast

by Song Guoqing PBOC advisor

People’s Bank of China headquarters

C

hina’s economic growth may be as high as 7.3 percent this year, partly due to falling commodity prices, the official Xinhua news agency quoted an academic advisor to the central bank’s monetary policy committee as saying.

Song Guoqing was also quoted telling a forum that China’s consumer price index may rise in 2015 by about 1.6 percent, saying the sharp decline in prices of commodities including crude oil, iron ore and copper presented “a large bonus” for the economy.

Xinhua said Song’s views were echoed by Ma Jun, chief economist of the People’s Bank of China’s (PBOC) research bureau.

The central bank had said in a report seen by Reuters in midDecember China’s economic growth could slow to 7.1 percent in 2015 from an expected 7.4 percent last year.

China’s annual economic growth likely slowed to 7.2 percent in the fourth quarter of last year, the

weakest since the depths of the global crisis, a Reuters poll in early January showed, which would keep pressure on policymakers to head off a sharper slowdown this year.

The expected slowdown in growth of the world’s second-largest economy, from 7.3 percent in the June-September quarter, means the full-year figure would undershoot the government’s 7.5 percent target and mark the weakest expansion in 24 years.

China’s reform-minded leaders have shown greater tolerance of slower growth, but a further slowdown could fuel job losses and undermine public support for changes.

The PBOC loosened loan restrictions to encourage banks to step up lending.

At the forum, Ma estimated annual gross domestic output growth would increase by 0.12 percentage point if the price of crude oil drops by 10 percent year on year, Xinhua said.

Reuters

10 | Business Daily

January 19, 2015

Greater China Visitor tax refunds broadened China has broadened a tax refund scheme for overseas visitors to make it nationwide in a bid to attract tourists and boost domestic consumption, the state-run Xinhua news agency reported late on Friday.

Under the plan, foreign tourists as well as visitors from Hong Kong, Macau and Taiwan who have lived on the mainland for no more than 183 days are eligible for an 11 percent rebate on consumer goods purchased at designated department stores, it said. The minimum purchase is 500 yuan at any one store in one day, the report said.

China growth hit 24-year low in 2014 Economists are broadly expecting further monetary policy tinkering this year Kelly Olsen

China Telecom studying Mexico investment Third-largest carrier China Telecom is studying a possible investment in Mexico, a day after Reuters reported that it is preparing a possible bid for Mexico’s new US$10 billion mobile broadband network.

Reuters, citing sources, reported on Friday that China Telecom is looking for Mexican partners to join it in a consortium for the mobile broadband project, with up to several billion dollars of financing already secured from Chinese state-controlled banks. The proposed network is part of a wider reform designed to break billionaire Carlos Slim’s hold on the Mexican telecoms business.

Alibaba’s social networking for biz China’s Alibaba Group Holding Ltd, the world’s biggest e-commerce company, is piloting a mobile messaging app aimed at marrying social networking with business, an Alibaba spokeswoman said on Friday, as the company expands its enterprise services. The app, called DingTalk, was quietly made available in December and is still in beta testing, according to its website. Capable of carrying conference calls and group messaging, DingTalk targets small- and medium-sized enterprises, many of which are already Alibaba’s customers. The company has 8.5 million active sellers on its various e-commerce platforms, according to Alibaba’s initial public offering prospectus.

Overseas Land sales blocked Property developer China Overseas Land & Investment (COLI) said that local authorities had blocked sales at one of its projects in the city of Shenzhen for administrative reasons, and this would not have any impact on its finances or operations.

Around 2,900 units at a residential project owned by COLI called Yuejing Garden have been blocked from pre-sale, the website of Shenzhen’s Urban Planning Land and Resources Commission shows.

However COLI said in a statement that this blockage was not due to it failing to comply with legal requirements.

China bars 3 brokerages Securities regulator said it had barred three major brokerages from opening new margin trading accounts for clients for three months. CITIC Securities, Haitong Securities and Guotai Junan Securities fell foul of the regulator following investigations focused on high risk margin trading as China’s stock markets sizzled in the final quarter of 2014. On the Shanghai Stock Exchange alone, the outstanding value of borrowings for margin trading has reached 767 billion yuan (US$124 billion), more than double end-July’s 284 billion yuan, according to latest data.

C

hina’s annual GDP growth slowed to its weakest rate in more than two decades in 2014, according to an AFP survey, projecting further deceleration in the world’s second-largest economy this year.

The median forecast in a poll of 15 economists saw the Asian giant’s gross domestic product (GDP) expanding 7.3 percent last year, down from 7.7 percent in 2013.

That would be the worst full-year result since the 3.8 percent recorded in 1990 -- the year after the Tiananmen Square crackdown.

The National Bureau of Statistics (NBS) releases the official GDP figures for the fourth quarter and the whole of 2014 on Tuesday.

For this year, the economists see growth slowing further to a median 7.0 percent, as Chinese leaders proclaim a “new normal” of slower expansion and emphasise economic reforms.

“China may introduce many restructuring and reform measures this year and this may have some negative impact on economic growth,” ANZ economist Liu Li-Gang told AFP. He said that they might include changes to state-owned enterprises, financial reforms such as interest rate liberalisation and looser restrictions on private banks.

China, a main driver of global growth, was beset last year by problems ranging from weakness in manufacturing and trade to financial worries over rising debt levels and falling real estate prices, which have sent shockwaves through the key property sector.

For October to December 2014, the survey saw GDP as having risen a median 7.2 percent year-on-year.

That would be marginally weaker than the third quarter’s 7.3 percent, and the worst quarterly result since the first three months of 2009, when growth logged a 6.6 percent expansion during the global financial crisis.

Authorities appeared to take last year’s performance largely in their stride, sticking to a scenario whereby the country’s consumers take the

lead in underpinning expansion in coming years, emphasising in public statements the quality of growth rather than its size.

“China has entered a new normal of economic growth,” Li Baodong, a vice foreign minister, told reporters on Friday, repeating a newly favoured phrase of the country’s leaders.

“That is to say we are going through structural adjustment and the structural adjustment is progressing steadily.”

Purveyors of high-quality consumer goods such as neighbours Japan and South Korea, as well as Europe and the United States, could stand to benefit from the remodelling of the economy.

But the implications of slowing Chinese growth for the rest of the world are already visible.

Commodity exporters such as Australia have suffered, after profiting immensely from China’s boom years when expansion averaged 10 percent, hitting 14.2 percent as recently as 2007.

Growth target There were limits to official nonchalance in Beijing, however, as a series of measures dubbed “ministimulus” by economists were put in place from April, while in November the central People’s Bank of China cut interest rates for the first time in more than two years to try to put a floor on the slowdown.

Economists are broadly expecting further monetary policy tinkering this year, but say the focus will be on structural reforms over the temptation of stimulus.

“This would be similar to economic policy making in the late 1990s, which resulted in a decade-long reform dividend,” Brian Jackson, Beijing-based economist with IHS Economics, said in a research note. “Put together, that points to weakening growth in 2015.”

An official expansion target of “about” 7.5 percent was set for last year. The goal is traditionally pegged at a level that is easily achieved, and is usually approximated to provide wiggle room for positive spin just

in case.

It has not missed its mark since 1998 and the Asian economic crisis, but Premier Li Keqiang, who oversees the economy and is the country’s second most senior official, has repeatedly dismissed concerns about undershooting the benchmark, emphasising instead the importance of indicators such as job creation -- a key factor in supporting consumer confidence.

“Slower growth is not a problem as long as the quality is high, which

China may introduce many restructuring and reform measures this year and this may have some negative impact on economic growth Liu Li-Gang ANZ economist

means for the same growth rate, more jobs are created while income distribution imbalances are reduced,” Shen Jianguang, economist at Mizuho in Hong Kong, told AFP. But ANZ’s Liu said that 2014 had shown it was now “relatively difficult” for China to achieve 7.5 percent growth.

“Premier Li will likely lower the growth target to 7.0 percent in March,” he said. “Seven percent is a fairly good growth target, given China’s huge economic base and scale.”

AFP

Business Daily | 11

January 19, 2015

Greater China

Hong Kong exchange proposes trading controls

Hong Kong Stock Exchange trading lobby

Most of the world’s major exchanges use an auction at the end of the trading session to reduce volatility and market manipulation

market up to international standards, but Hong Kong’s powerful local brokers have maintained their strong opposition, claiming it would benefit larger players.

Most of the world’s major exchanges use an auction at the end of the trading session to reduce volatility and market manipulation when calculating closing prices.

Buy and sell orders are pooled during a five or 10 minute period and then matched at the best available price. In a so-called continuous trading session, by contrast, share orders are matched immediately.

The exchange’s Lee said the proposed closing auction, to be introduced in two phases, would differ from the 2008 mechanism and be modelled on the Singapore Exchange’s closing session.

The exchange also proposed introducing new volatility controls that would restrict a stock price to a trading band if it behaves erratically.

Volatility controls came into vogue following the May 2010 Flash Crash, when the Dow Jones Industrial Average dived nearly 1,000 points in a matter of minutes.

The consultation will last 12 weeks and will close on April 10, the exchange said. It will summarise comments and, subject to market feedback, implement the proposals “as soon as practicable”, it added.

Reuters

Michelle Price and Lawrence White

T

he Hong Kong stock exchange has proposed a closing auction and other trading controls to help bring its out-dated market structure in line with major exchanges elsewhere and restore the city’s lustre as an international financial market.

Hong Kong Exchanges and Clearing Ltd on Friday published a consultation on reintroducing a closing auction and installing new volatility controls, features common in other big global exchanges.

Hong Kong, home to the world’s

sixth-biggest stock market, is keen to attract more international listings, which have trailed off in recent years and suffered a major blow with the loss of Chinese Internet giant Alibaba’s US$25 billion listing to New York last year.

The exchange also wants to promote a landmark trading link with Shanghai that began in November but has so far seen limited activity.

“It is unbefitting to Hong Kong as an international financial centre not to have a closing auction,” said Roger

Lee, the Hong Kong exchange’s head of market operations.

The exchange had launched a closing auction in May 2008 but suspended it just 10 months later after it failed to soften the market’s end-of-session price swings. During one session, HSBC’s shares dived, sparking popular outcry and fears of market manipulation.

Institutional investors and global banks have since campaigned for reintroducing an enhanced version of the closing auction, to bring the

It is unbefitting to Hong Kong as an international financial centre not to have a closing auction Roger Lee Hong Kong stock exchange head of market operations

Premier Li urges nuclear firms to boost overseas presence China aims to raise total capacity to 58 gigawatts by the end of 2020

C

hina will push its big nuclear firms to improve their competitiveness and boost their presence overseas as it bids to become one of the world’s dominant nuclear energy powers, the country’s premier Li Keqiang said.

“To continue the struggle to become a strong nuclear energy power, China must comprehensively raise the industry’s competitive advantages, promote nuclear power equipment overseas, and ensure the industry is absolutely safe,” Li said at a ceremony to mark the 60th anniversary of the launch of China’s civilian nuclear power programme.

Speaking at the same ceremony, Chinese president Xi Jinping said the nuclear sector was “an important cornerstone of China’s national security”, state news agency Xinhua reported.

China has 22 reactors in operation and another 26 under construction, and aims to raise total capacity to 58 gigawatts by the end of 2020, up from 20 GW now, but it needs to go much further to meet its low-carbon energy targets.

“Maybe we are now looking at 200

GW by 2030, making it the leading nuclear country by capacity, but there is still potential for nuclear to take an even greater share,” said Agneta Rising, director general of the World Nuclear Association, at a conference in Beijing on Thursday.

China hopes its domestic reactor programme will create opportunities abroad, and China’s two biggest state nuclear firms, the China National Nuclear Corporation (CNNC) and China General Nuclear Corporation (CGN), have already agreed to invest in Britain’s Hinkley Point nuclear project.

Wang Zhongtang, chief engineer at the State Nuclear Power Technology Corp (SNPTC), said Thursday that China was also well on its way to securing projects in Turkey and South Africa.

China’s nuclear programme, including its own-brand reactors, will mainly rely on “third-generation” AP1000 technology designed by U.S.based Westinghouse, following a technology transfer agreement in 2006.

While the launch of the world’s first AP1000 in Zhejiang province has been delayed until 2016, the country has been making steady progress on its own

A control room of a nuclear power station

third-generation models, including the Hualong I, jointly developed by CNNC and CGN for the purpose of winning overseas projects.

Zheng Hua, deputy chief engineer with CGN’s reactor design unit, said last month that China hoped to develop Hualong I reactors in Britain,

building on the agreement to invest in Hinkley Point.

China is also considering a plan to merge CNNC and CGN in order to pool their resources and improve their competitiveness overseas, sources told Reuters late last year.

Reuters

12 | Business Daily

January 19, 2015

Asia U.S. pressures Bangladesh on labour rights Bangladesh must do more to support workers’ rights and fight unfair labour practices before officials consider restoring U.S. trade benefits, the U.S. Trade Representative’s office said on Friday. The United States revoked trade benefits for Bangladesh in mid-2013 after a garment factory collapse and a factory fire killed more than 1,200 people. An administration review found that, although more than 2,000 safety reviews of factories had been carried out in the last year, several hundred more still had to be done.

Malaysia ‘moves on’ from capital controls Malaysia has “moved on” from using controls to manage capital flows, its central bank governor said on Friday, signalling it would not resort to such measures amid a falling currency and slowing economic growth. “Extreme measures such as capital controls are for extreme periods. We are certainly not experiencing such extreme conditions,” Zeti Akhtar Aziz told Reuters.

The ringgit was Asia’s weakest currency in 2014 and has also been the most under pressure in 2015, hit by Malaysia’s dependence on foreign portfolio flows, budget pressures from falling oil revenues and concerns over indebted local companies.

India seeks drones suppliers India may buy unmanned aerial vehicles, or drones, from other countries if the United States does not ease current export restrictions on such aircraft, a key Democratic senator said on Friday.

Senator Mark Warner of Virginia, who will join President Barack Obama during a trip to India on January 26, said he was concerned that other countries could rush in to sell India the equipment it desires if the United States drags its feet. U.S. aerospace and arms companies have been pressing the U.S. government for years to ease current tight restrictions on foreign sales of unmanned vehicles.

Household debt worries Bank of Korea Outstanding mortgage loans owed by households jumped 9.9 percent in November over a year earlier Choonsik Yoo

T

he South Korean central bank chief’s surprisingly stern warning on Thursday against betting on an imminent policy easing showed it was far more concerned about rising household debt than uncertain economic growth prospects.

This concern makes sense given that household debt, already among the heaviest in the world at 1.6 times average disposable income, has been growing at its fastest in years over recent months on the back of a recovering property market.

Reuters calculations show each South Korean household was carrying some 40 million won (US$37,000) of loans owed to financial institutions as of November.

Bond yields shot up and foreign investors dumped bond futures on Thursday after Bank of Korea (BOK) Governor Lee Ju-yeol said economic growth would quicken, oil-driven disinflation is good, and household debt is a concern.

“He sounded surprisingly hawkish and made it very clear that household debt is a very important factor and far more important than low inflation for policy,” Park Sang-hyun, chief economist at HI Investment & Securities, said on Friday.

Getting the rate of household debt growth to below the rate of disposable income growth is a top economic policy goal set by President Park Geun-hye, and senior government figures have once-again expressed their concern over debt levels in recent weeks.

“It’s one of the very few things that we can never compromise on, and policy authorities will have to get more vigilant going forward,” a

senior government official told Reuters last month.

The ratio of household debt to annual disposable income stood at 161 percent in 2013, rising for a ninth consecutive year and a sharp rise compared to 144 percent five years before, the broadest central bank measure shows.

Outstanding mortgage loans owed by households jumped 9.9 percent in November over a year earlier, central bank data shows, marking the fastest pace since data compilation began in

If the market believes the BOK has an upward (rate) bias to its outlook or there is any disconnect between monetary policy decisions and the BOK’s forecast changes, it could cause serious communication problems Young Sun Kwon economist Nomura

December 2008 and following a 9.5 percent rise in October.

South Korean policymakers are concerned that if borrowing grew to extreme levels, defaults by households could undermine the banking system and might in an extreme case spark a flight of capital out of Asia’s fourthlargest economy.

The Bank of Korea also attaches a special meaning to the fact that the policy interest rate, the 7-day repurchase agreement rate, is now at the 2 percent level matching the record low touched during the peak of the 2008-2009 global financial crisis.

“Generally speaking, you may need a much more serious situation than normal to take the rate into an area never entered before,” a senior official at the Bank of Korea told Reuters in late December.

Especially surprising to many analysts was that Governor Lee aimed his rhetoric against those betting on an interest rate cut even after trimming the central bank’s economic growth forecast for this year by half a percentage point.

“We are particularly surprised by the BOK’s decision to allow the negative output gap to grow and to last longer because it is in direct contrast to its previous behaviour,” Young Sun Kwon, economist at Nomura in Hong Kong, said in a note to clients on Friday, referring to the lowered growth forecasts.

“The central bank communicates its forecasts, not its commitments, with the market,” said Kwon of Nomura, who worked at the Bank of Korea for several years.

Reuters

Bank of Korea main building in Seoul

Japan lends US$270 mln to Kenya Kenya signed a US$270 million loan deal with Japan on Friday to help expand capacity at Mombasa port, a busy facility that is the main trade gateway to east Africa. The port handles fuel, consumer goods and other imports for Uganda, Burundi, Rwanda, South Sudan, Democratic Republic of Congo and Somalia, as well as regional tea and coffee exports. Container traffic through the port reached about one million twenty foot equivalent units (TEUs) in 2014, up 11.9 percent on a year earlier. The port management said it expected a 30 percent increase to 1.3 million TEUs in 2015.

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Business Daily | 13

January 19, 2015

Asia

Modi committed to achieving budget deficit goal Rajesh Kumar Singh

The government is struggling to contain the deficit at 4.1 percent of gross domestic product in the year to March 31. It is still looking to raise funds through asset sales and has taken advantage of weak oil prices to hike fuel levies.

The 64-year-old prime minister said it would be difficult to revive economic growth but promised to deliver a combination of big-bang and incremental reforms. “The objective must be to improve the welfare of the people,” Modi told business leaders.

These included reforms to the power sector to ensure round-theclock supply, and following up on a shakeup of the coal sector that would open up mining and marketing to private-sector and foreign players.

India’s Prime Minister Narendra Modi

I

ndian Prime Minister Narendra Modi said he was committed to meeting this year’s budget deficit target, welcoming a cut in interest rates by the Reserve Bank of India on the back of falling inflation.

In a speech, Modi said his government would cut wasteful spending, streamline the payment of welfare benefits and raise investment in roads and railways to boost economic growth in Asia’s third-

largest economy.

Modi’s comments signalled his assent to RBI Governor Raghuram Rajan’s call for “sustained high quality fiscal consolidation” as a condition for further monetary easing after a surprise quarter-point cut on Thursday.

“We are committed to achieving the fiscal deficit target announced in the budget,” Modi told an Economic Times event. “We have worked systematically in this direction.”

The prime minister promised to deliver a combination of big-bang and incremental reforms

agenda through parliament and did not rule out calling a joint session of both houses to enact key legislation.

Modi has resorted to issuing a string of temporary executive orders to keep his reform drive on track because he does not command a majority in the upper house of parliament.

To permanently enact these orders he could call a joint session in which his nationalist Bharatiya Janata Party and its allies would command an overall majority.

Jaitley said he doubted that the political opposition could be persuaded to back the government’s reforms but said it faced defeat at the polls if it failed to do so. Delhi holds a regional election on February 7.

Reuters

Turning point Addressing the same event, Finance Minister Arun Jaitley said earlier that the RBI’s quarter-point cut in its main policy rate, to 7.75 percent, marked an important turning point for the economy.

“Hopefully, it will add to growth, add to investment,” said Jaitley, who has called repeatedly for lower interest rates.

He said the government was keeping its options open on pushing its reform

KEY POINTS PM welcomes RBI’s surprise rate cut Finance minister sees it spurring growth and investment

14 | Business Daily

January 19, 2015

International Peru says slowdown’s touched bottom Central bank said on Friday the country’s sharp economic slowdown over the past year had likely bottomed out in November with the weakest monthly growth in more than five years. The bank’s chief economist, Adrian Armas, said growth in December would mark the start of a rebound and was “certainly” better than November’s 0.31 percent yearon-year expansion, the weakest since June 2009. December growth data is scheduled for release mid-February. Preliminary data shows higher demand for cement and imported goods.

Cameron, Obama promote EU trade pact British Prime Minister David Cameron said on Friday that he and U.S. President Barack Obama believe this year will be pivotal for a trade pact between Europe and the United States. “We agreed that 2015 should be a pivotal year for an ambitious and comprehensive EU-US trade deal, which could benefit the average household in Britain by 400 pounds a year,” Cameron said at a news conference with the American president.

Russia unveils 2014 net capital outflows Russia’s central bank said on Friday that net capital outflows in 2014 amounted to US$151.5 billion, the largest on record. The bank also said the 2014 current account surplus amounted to US$56.7 billion and the trade surplus stood at US$185.6 billion.

Maduro seeks oil talks with Mexico

Venezuelan President Nicolas Maduro wants to meet with his Mexican counterpart Enrique Peña Nieto to discuss a slump in crude oil prices when they attend a summit in Costa Rica at the end of January, a diplomatic source said.

Maduro is wrapping up a tour that took him to China, Russia Iran, Qatar, Saudi Arabia and Algeria, in what OPEC delegates described as a diplomatic push

by Venezuela and Iran for an OPEC oil output cut. The diplomatic source said Maduro has proposed a meeting at a summit of Latin American and Caribbean leaders.

Foreigners buy U.S. assets Foreigners bought long-term U.S. securities in November, with investors buying agency and corporate bonds, as well as equities. Data from the U.S. Treasury Department showed on Friday that net purchases of long-term U.S. assets were US$33.5 billion in November, after outflows of US$1.4 billion in October. But including short-dated assets such as bills, overseas investors sold US$6.3 billion in U.S. assets in November, compared with a revised inflow of US$179.5 billion the previous month.

Investors in general tend to focus on long-term assets.

Swiss franc shock shuts out some FX brokers The franc surged as much as 40 percent to a high of 0.8500 per euro after the Swiss central bank lifted its 1.20 per euro cap Anirban Nag and Steve Slater

T

he Swiss franc shock reverberated through currency trading firms around the world on Friday, wiping out many smallscale investors and the brokerages that cater to them and forcing regulators to take a closer look at the sector.

Some major banks also lost out when the Swiss National Bank scrapped its three-year-old cap on the franc against the euro without warning on Thursday, including Britain’s Barclays which lost “tens of millions” of dollars, an industry source said.

Retail broker Alpari UK filed for insolvency on Friday, while New York-listed FXCM, one of the biggest platforms catering to online and retail currency traders, said it looked to be in breach of regulatory capital requirements after its clients suffered US$225 million of losses.

FXCM had to turn to Leucadia National Corp, the parent of investment bank Jefferies, to quickly broker a US$300 million loan that was expected to close Friday afternoon.

In the past 15 years, retail currency trading has grown quickly, attracting individuals staking their own money with long trading hours, low transaction costs and the ability to take on huge risks for a relatively small sum.

Retail currency trade makes up nearly 4 percent of global daily spot turnover of nearly US$2 trillion, the latest survey from the Bank of International Settlements shows, having grown from almost nothing in the 1990s.

This small share means the sector poses limited risk to the financial system but retail brokers are much more vulnerable to big losses than banks. Regulators in New Zealand, Hong Kong, Britain and the United States said they were checking on brokers and banks after reports of volatility and losses.

The move “caused by the SNB’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity,” Alpari, said in a statement. “This has resulted in the majority of clients sustaining losses which exceeded their account equity. Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm that it has entered into insolvency.”

Online trading services provider London Capital Group Holding put its franc-related losses at up to 1.7 million pounds (US$2.6 million).

New Zealand foreign exchange dealer Global Brokers NZ Ltd closed due to hefty losses. The national Financial Market Authority said it would “be seeking assurances that the client funds have been protected and segregated”.

The Hong Kong Monetary Authority said it was “following up with the banks on their practice in this regard ... to understand the implication, if any, but we would not comment on the situation of individual banks.”

Britain’s Financial Conduct Authority said it was talking to Alpari, while the U.S. National Futures Association said it was monitoring the foreign exchange brokers it oversees.

Broker woes, regulatory powers FXCM shares fell nearly 90 percent in pre-market hours before being halted for the regular trading session on the New York Stock Exchange. In after-hours action, it resumed trading, rebounding from the premarket losses, but still down 70 percent from Thursday’s close.

SNB’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity Alpari UK statement

Top executives from FXCM went through company books until at least 5 a.m. EST (1000 GMT) on Friday, according to a source close to FXCM. Regulators were in FXCM’s offices in downtown Manhattan on Friday, according to two sources.

A spokesperson for the U.S. National Futures Association said it was in “constant” contact with FXCM, and had been “watching the volatility” as a result of the Swiss central bank move. NFA rules allow a leverage ratio of 50 to 1 on transactions in the Swiss franc, which means even a 2 percent move can wipe out a position.

Not all brokerages suffered. GAIN Capital Holding said on Friday it generated a profit on Thursday from trading, and that its strong financial position will allow it to win market share. Its shares closed up 2.9 percent at US$8.52.

Canada-based foreign exchange broker OANDA said in a statement it “will pardon our clients’ negative account balances associated with this market event” and would not “re-quote or amend” clients’ trades on the Swiss currency.

But Denmark’s Saxo Bank, one of the biggest players in retail foreign exchange trading, said late on Thursday it would potentially set different rates for its clients’ transactions.

Saxo Bank chief financial officer Steen Blaafalk told Reuters some clients had suffered losses but the bank was well capitalised. Retail investors, some of whom face huge losses, protested when Saxo said it might set different rates.

Lawyers said this could be contested.

“I think there will be litigation and disputes over automatic close-outs,” said a financial services lawyer.

Hong Kong media reported clients of HSBC Holdings were able to buy the Swiss currency at below-market rates for several hours through its online system, making several thousand dollars in profits on the trades.

HSBC said online foreign exchange trading for the Swiss franc “is currently operating normally and we will investigate reports that customers could trade at old rates initially after the cap was lifted.”

Reuters

Business Daily | 15

January 19, 2015

Opinion Business

wires

What good are economists?

Leading reports from Asia’s best business newspapers Robert J. Shiller

2013 Nobel laureate in economics, is Professor of Economics at Yale University

THE KOREA HERALD The South Korean government said yesterday it will create a business environment to induce more than 25 trillion won (US$23.2 billion) in investment by local companies to build up the country’s tourism industry and corporate competitiveness.

The plan, formulated jointly by the Ministry of Strategy and Finance, the Ministry of Land, Infrastructure and Transport, the Ministry of Culture, Sports and Tourism and other government agencies, calls for the prompt spending of 16.8 trillion won already earmarked for four mega projects, while attracting 8.5 trillion won to build two integrated resorts with casinos and tourist hotels.

PHILSTAR Inflation could average around three percent this year, lower than the 4.1 percent average in 2014, the research arm of Metropolitan Bank and Trust Company said. The bank has slashed its forecast for the average inflation this year to three percent from 3.7 percent following lower global commodity prices and the declining cost of oil in international markets. “Expect global commodity prices to remain soft for most of 2015, given muted global economic growth prospects and the strong dollar,” Mabellene Reynaldo, research analyst at Metrobank, said in a report.

THE TIMES OF INDIA Railway minister Suresh Prabhu made a strong pitch for increasing investment in the state-run transport behemoth saying its finances were in “deep trouble”. “Railways could contribute significantly but it’s in deep trouble. Operating ratio of railways is extremely challenging and the only we can make it better is to have optimum expenditure and make sure that income levels rise rapidly,” Prabhu told the Airtel and The Economic Times Business Summit. Prabhu is seen as a reformist minister and has been given charge of the crucial portfolio to turn it around.

THE STAR The (Malaysian) Cabinet is expected to discuss MyEG’s online renewal of permits for foreign workers at its meeting this week, said Minister in the Prime Min­ister’s Department Dat­uk Dr Wee Ka Siong. He said he would be forwarding the complaints and views compiled from businesses and employers to the respective government agencies. Some employers supported the online registration as they did not have to queue up at the Immigration Department counters, but others felt that the counter services were still needed, he said.

S

ince the global financial crisis and recession of 2007-2009, criticism of the economics profession has intensified. The failure of all but a few professional economists to forecast the episode – the aftereffects of which still linger – has led many to question whether the economics profession contributes anything significant to society. If they were unable to foresee something so important to people’s wellbeing, what good are they?

Indeed, economists failed to forecast most of the major crises in the last century, including the severe 1920-21 slump, the 1980-82 back-to-back recessions, and the worst of them all, the Great Depression after the 1929 stock-market crash. In searching news archives for the year before the start of these recessions, I found virtually no warning from economists of a severe crisis ahead. Instead, newspapers emphasized the views of business executives or politicians, who tended to be very optimistic.

The closest thing to a real warning came before the 1980-82 downturn.

In 1979, Federal Reserve Chair Paul A. Volcker told the Joint Economic Committee of the US Congress that the United States faced “unpleasant economic circumstances,” and had a “need for hard decisions, for restraint, and even for sacrifice.”

The likelihood that the Fed would have to take drastic steps to curb galloping inflation, together with the effects of the 1979 oil crisis, made a serious recession quite likely.

Nonetheless, whenever a crisis loomed in the last century, the broad consensus among economists was that it did not.

As far as I can find, almost no one in the profession – not even luminaries like John Maynard Keynes, Friedrich Hayek, or Irving Fisher – made public statements anticipating the Great Depression.

As the historian Douglas Irwin has documented, a major exception was the Swedish economist Gustav Cassel. In a series of lectures at Columbia University in 1928, Cassel warned of “a prolonged and worldwide depression.” But his rather technical discussion (which focused on monetary economics and the gold standard) forged no new consensus among economists, and the news media reported no clear sense of alarm.

Interestingly, contemporary news accounts reveal little evidence of public anger at economists after disaster struck in 1929. So why has the failure to foresee the latest crisis turned out so differently for the profession?

Why has it – unlike previous

Nonetheless, whenever a crisis loomed in the last century, the broad consensus among economists was that it did not

forecasting failures – stoked so much mistrust of economists?

One reason may be the perception that many economists were smugly promoting the “efficient markets hypothesis” – a view that seemed to rule out a collapse in asset prices. Believing that markets always know best, they dismissed warnings by a few mere mortals (including me) about overpricing of equities and housing. After both markets crashed spectacularly, the profession’s credibility took a direct hit.

But this criticism is unfair. We do not blame physicians for failing to predict all of our illnesses.

Our maladies are largely random, and even if our doctors cannot tell us which ones we will have in the next year, or eliminate all of our suffering when we have them, we are happy for the help that they can provide. Likewise, most economists devote their efforts to issues far removed from establishing a consensus outlook for the stock market or the unemployment rate. And we should be grateful that they do.

In his new book Trillion Dollar Economists, Robert Litan of the Brookings Institution argues that the economics profession has “created trillions of dollars of income and wealth for the United States and the rest of the world.” That sounds like a nice contribution for a relatively small profession, especially if we do some simple arithmetic.

There are, for example, only 20,000 members of the American Economic Association (of which I am President-Elect); if they have created, say, US$2 trillion of income and wealth, that is about US$100 million per economist.

A cynic might ask, “If economists are so smart, why aren’t they

the richest people around?”

The answer is simple: Most economic ideas are public goods that cannot be patented or otherwise owned by their inventors. Just because most economists are not rich does not mean that they have not made many people richer.

The fun thing about Litan’s book is that he details many clever little ideas about how to run businesses or to manage the economy better. They lie in the realm of optimal pricing and marketing mechanisms, regulation of monopolies, naturalresource management, publicgoods provision, and finance.

None of them is worth even a trillion dollars, but, taken together, Litan’s conclusion is plausible indeed.

The 2010 book Better Living through Economics, edited by John Siegfried, emphasizes the realworld impact of such innovations: emissions trading, the earnedincome tax credit, low trade tariffs, welfare-to-work programs, more effective monetary policy, auctions of spectrum licenses, transport-sector deregulation, deferred-acceptance algorithms, enlightened antitrust policy, an all-volunteer military, and clever use of default options to promote saving for retirement.

The innovations described in Litan’s and Siegfried’s books show that the economics profession has produced an enormous amount of extremely valuable work, characterized by a serious effort to provide genuine evidence. Yes, most economists fail to predict financial crises – just as doctors fail to predict disease. But, like doctors, they have made life manifestly better for everyone.

Project Syndicate

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January 19, 2015

Closing Xiaomi unveils smart-home strategy

Alibaba-backed website Meituan raises financing

The firm announced a new product called the Smart Home Suite with a group of four components that offer security features as it broadens its range of devices that can be controlled by mobile phone. The suite includes a human motion sensor, and a pair of door and window sensors that can be used for home security, Xiaomi President Bin Lin said yesterday in Beijing. The company will start a consumer test of the product January 26, he said. Xiaomi in less than five years has grown to become the world’s third-largest smartphone vendor and, at US$45 billion.

Meituan.com, the Chinese group-discount website backed by Alibaba Group Holding Ltd., raised US$700 million from unidentified investors, with Chief Executive Officer Wang Xing saying it’s now worth US$7 billion. Transaction volumes are expected to increase to 100 billion yuan (US$16.1 billion) this year, and rise to 1 trillion yuan in 2020, Wang said yesterday. At the end of last year, the figure was 46 billion yuan, he said. Meituan, which has about 20 million active daily mobile users and is part-owned by Alibaba, is tapping into China’s surging middle class, which is seeking deals for entertainment and restaurants.

Okada returns to leadership of Japan opposition Isabel Reynolds and Maiko Takahashi

F

ormer Foreign Minister Katsuya Okada was named leader of the main opposition Democratic Party of Japan, as it struggles to rebuild support following

two straight general election losses.

Okada, 61, beat Goshi Hosono, a former nuclear policy minister, by 133 points to 120 in a run-off vote at

Oil slump slashes Saudi Industries profit

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a special party conference in Tokyo on Sunday. Akira Nagatsuma, a former health minister, lost in the firstround of voting.

Chosen the DPJ’s leader for a second time, Okada’s task is to reunite a party hobbled by factionalism, shifting policies and funding shortages, and claw back ground lost to Prime Minister Shinzo Abe’s Liberal Democratic Party. While Okada agrees with much of Abe’s economic agenda, he’s likely to attack the prime minister over policies that he sees as widening the gap between rich and poor.

“Rebuilding the Democratic Party won’t be easy,” Okada said before yesterday’s vote. “What do we need to regain the trust of the Japanese people? We need to change.”

He was deputy prime minister in 2012 when the party lost power to the LDP after voters tired of leadership changes and policy reversals on security and tax during its three years in power.

“Abe has got the opponent he least wanted,” Minoru Morita, an independent political analyst, said by phone after the vote. “Okada has had the upper

hand in their debates. There will be some tough battles in parliament.”

Reducing disparities The DPJ, which is backed

by Japan’s labour union federation, must encourage a diverse range of people, including women, those

What do we need to regain the trust of the Japanese people? We need to change Katsuya Okada leader of the main opposition Democratic Party of Japan

Politician stepped down from an earlier term as DPJ leader after a 2005 election defeat

in the regions and nongovernmental organizations, to work together, Okada said. While Abe’s economic policies are not wrong, the party must come up with its own proposals, he said.

“Japan has become a country with an extremely large gap between rich and poor,” said Okada, the son of a supermarket magnate.

“Don’t you think the DPJ should build a society with less disparity, one that can be a model for the world?”

Abe’s victory in December’s election left the DPJ with only 72 seats in parliament’s more powerful lower house, compared with 290 for the ruling LDP. Former DPJ leader Banri Kaieda lost his seat, sparking yesterday’s party ballot.

The lack of a viable opposition was the main reason Abe’s coalition won a second two-thirds majority, according to three in four voters surveyed by the Asahi newspaper in a December 1516 poll. Only 11 percent said the ruling party won because people wanted to give Abe a new mandate for his policies, the paper said.

Bloomberg News

China expects investment surge in tourism

Sri Lanka minister holds India talks

C

S

audi Basic Industries Corp (SABIC), one of the world’s largest petrochemicals groups, reported a 29 percent plunge in fourthquarter net income yesterday, widely missing analysts’ forecasts because of the tumble of global oil prices.

Chief executive Mohamed al-Mady told reporters the outlook for 2015 is contingent on oil prices and remains unpredictable, but that the company faces challenges early in the year. Light crude plunged US$38.09 per barrel last quarter.

The Gulf’s largest listed company earned 4.36 billion riyals (US$1.16 billion) in the three months to December 31 compared to 6.16 billion riyals a year earlier, SABIC said in a bourse statement, and sales fell 10 percent to 43.4 billion riyals over the year.

Mady said the company, which is 70 percent state-owned, would stick to its long-term strategy of focusing investments in China, North America and Saudi Arabia to be close to either raw materials or SABIC’s markets.

hina’s tourism industry will play a growing role in the country’s economic growth, with direct investment in the sector expected to hit three trillion yuan (US$490 billion) in the coming three years, according to a tourism official.

Li Jinzao, head of the National Tourism Administration, predicted that the 3-trillion-yuan investment would attract additional investment projects worth 15 trillion yuan during the period.

“China’s tourism will play an increasingly important role in boosting investment, consumption and exports,” Li said at a national tourism work conference held last week in Nanchang City in east China’s Jiangxi Province. “Tourism is not just about consumption. Investment is also an important contributor to growth, and the tourism sector has a large demand for investment,” Li said.

Official data showed that direct investment in the tourism industry reached 650 billion yuan in 2014.

The growth rate for tourism investment surpassed the general investment growth rate for the tertiary industry by 5 percentage points.

Reuters

Xinhua

ri Lanka’s new foreign minister Mangala Samaraweera met his Indian counterpart in New Delhi yesterday during a visit to improve strained ties after elections in the island toppled long-time strongman Mahinda Rajapakse.

Relations suffered under Rajapakse, who cultivated close links with China which has invested heavily in Sri Lanka to try to counter regional rival India.The ministers are expected to discuss a range of issues including closer economic cooperation, frequent fishing disputes and Indian concerns about the treatment of Sri Lankan Tamils, many of whom have close ties to India.

Rajapakse fell out with several countries which accused him of turning a blind eye to large-scale human rights abuses as he refused to cooperate with a UN-mandated investigation into the killing of Tamil civilians. Then-Indian Prime Minister Manomohan Singh was among several leaders who boycotted a Commonwealth summit hosted

by Rajapakse in November 2013 over his refusal to allow the international probe.

AFP