Macau business daily, Mar, 13, 2015

MOP 6.00 Closing editor: Joanne Kuai Year III

Number 748 Friday March 13, 2015

Publisher: Paulo A. Azevedo

Squeezing out the last drop

M

acau Water has registered a 10 pct increase in profits. Making MOP58 million in 2014. But the city’s sole water distributor is not satisfied.

And has applied to the gov’t for an 11.8 pct increase in service fee. Twice the expected rate of inflation. Last year, the company requested a 16 pct hike but authorities only agreed to 6 pct. Executive director Felix Fan says water consumption is expected to decline this year. And that 2014 was “a year of harvest, a year of difficulties, and a year of growth” PAGE 3

Industry unravelling The garment industry.

Once a mainstay of the territory. But greatly affected by Macau’s gaming boom. In Q4 2014, its external market declined 5pct.

Almost 90pct of Macau’s garment exporters are expecting a bigger hit this quarter

Reversing out of a cul-de-sac

PAGE

An additional fee is now O.K. So says Transport Bureau director Wong Won with regard to on-call taxis. The issue was central to the former yellow taxis backing out of the market last year. The gov’t invited bids for 100 ‘special taxi’ licences in February

PAGE 2

Break in the clouds Yesterday’s news was a fillip. The issue of new loans is exceeding expectations. Dispelling the clouds of Wednesday’s depressing figures. Analysts warn, however, that seasonal reasons may be burnishing results

2

HSI - Movers March 12

Name

Take it or leave it Not our decision. SJM isn’t forcing staff to take unpaid leave, says Ambrose So. The chief executive chose to clarify an internal memorandum that went public.

Saying the company has no plans to fire employees.

Despite forecasting a 10 to 15pct decrease in gaming revenues in Macau this year. SJM will only apply for more gaming tables once construction of Lisboa Palace is completed

%Day

GAlaxy Entertainment

3.24

Bank of Communicatio

2.90

China Life Insurance

1.97

China Construction B

1.95

China Mobile Ltd

1.89

China Resources Ente

-1.61

Power Assets Holding

-1.66

China Mengniu Dairy

-2.36

Sun Hung Kai Propert

-2.44

China Resources Powe.

-3.23

Source: Bloomberg

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Brought to you by

Macau Literary Festival to kick off next Thursday PAGE 2

Birmingham’s Carson Yeung meeting call invalid PAGE 6

China to review Hong Kong visitors’ policy PAGE 8

Bank of Korea joins easing fever PAGE 11

2015-3-13

2015-3-14

2015-3-15

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18˚ 22˚

2 | Business Daily

March 13, 2015

Macau Improved IVS details released soon The deputy director of the Hong Kong Macau Affairs Office of the State Council, Zhou Bo, said the proposals for improving Macau’s Individual Visit Scheme (IVS), and Hong Kong’s multiple visit scheme, will be announced shortly. The Beijing official announced to Chinese press on Wednesday evening that he is not surprised that problems have arisen in Macau and Hong Kong following the tourism capacity of the two SARs being exceeded given the with the continuous growth of Mainland tourists, claiming the tourism capacity of any city is limited. However, he also indicated that the two cities should improve their tourism auxiliary facilities in order to increase their capacity to accommodate tourists.

On-call taxi services to attract additional fee Cited as the primary reason for the previous on-call taxi operator to exit the market, the government now says it is necessary for on-call taxis to charge additional fee Kam Leong*

kamleong@macaubusinessdaily.com

H

ead of the Transport Bureau (DSAT) Wong Wan said yesterday that an additional fee will be one of the considerations in evaluating tenders for the ‘special taxi service’ licence despite the government rejecting the previous ‘yellow taxis’ stand on this issue just months ago.

Following a closed-door meeting with the Secretary of Transport and Public Works Raimundo Rosario and the Transport Advisory Committee, Mr. Wong told reporters that the government

believes that future ‘special taxis’ providing services via call bookings should charge additional for their oncall services as they are supplementary to the current black taxi service.

Last November, the operation of Van Iek Group yellow taxis claimed that they had proposed to the government permits to charge additional fees for on-call services.

However, the group eventually chose to exit the market as they were unable to reach a consensus with

the government on the issue.

The tenders for the special licences, which will be opened this year, will also consider the bidders’ management scheme, as well as the models of vehicles that they propose to use, according to Mr. Wong.

The re-opening of special taxi licence bids was announced last month, when the government said at least 100 such licences were available.

Meanwhile, Secretary Rosario told reporters that a consensus on

controlling the number of vehicles by hiking related taxes had been reached with the transport committee.

Despite Mr. Rosario saying that vehicle-related taxes have not been increased for years, the government has not yet drawn up any detailed plan for how much, and when, such taxes will be increased.

In fact, this possible measure for controlling vehicle numbers in the city was first announced by Mr. Wong last December.

He proposed then to control the growth rate of vehicle numbers at 4 per cent or below in 2020 by using several means to increase the cost of keeping a vehicle, as well as amending the mandatory vehicle inspection from once a decade to once every eight years.

According to the two officials, the growth rate of the number of vehicles in the city is some 5 per cent every year.

On the other hand, it still remains unknown whether Mr. Wong will continue to serve as the head of DSAT following the expiry of his term in May. Secretary Rosario said that they will soon take a decision on the issue, claiming he is satisfied with the Bureau head’s performance.

For his part, Mr. Wong declined to comment further. *With João Santos Filipe

Literary Festival turns another page W W W. T H E S C R I P T R O A D . O R G

The organiser also said despite having registered losses in the previous editions, this year they are trying to break even. As of this year’s edition, the budget is MOP2.7 mln, with MOP1.5 mln covered by government subsidy

澳 門 文 學 節

F E S T I VA L L I T E R Á R I O D E M A C A U M A C A U L I T E R A RY F E S T I VA L

Joanne Kuai

joannekuai@macaubusinessdaily.com

19-29 三 月 • MARÇO MARCH 2015

T

he Literary Festival ushers in its fourth edition this year. The budget for this year’s edition is set at MOP2.7 million, of which MOP1.5 million is covered by the government, says Ricardo Pinto, the director of the event.

The organiser admitted that previous editions have been registering losses but this year they are aiming to break even. The director of the event still believes in the initiative and the long-term benefits for Macau society,

especially for youngsters.

“We have the ambition to make it grow, and have more and more people to join us and attend our sessions,” said Pinto. “This year, many events will be based at the Old Court Building - a much more visible location, it will help a lot to attract people.”

“This festival was made to make sure literature is in the daily lives of Macau people and get locals more interested in books and reading. If

this also attracts tourists, or helps with diversifying the cultural offers of Macau, of course we will be delighted,” he added.

This year’s highlights include a screening of director Ann Hui’s film The Golden Era at the UA Galaxy Cinemas, a triple bill featuring performances

by LMF (Hong Kong), Gabriel o Pensador (Brazil) and Blademark (Macau), with a solo exhibition by Filipina photographer Xyza Bacani.

Founded in 2012 by local

Macau garment export sector implodes

A

lmost 90 per cent of Macau garment exporters are anticipating a huge drop in sales this quarter according to the most recent survey conducted by Macau Economic Services. In the last quarter of 2014, the sector suffered a decrease in sales in external markets of around 5 per cent with today’s exports a fraction of what garment

companies used to sell five years ago.

The garment industry here was one of the most affected by the casino boom as gaming companies virtually sucked in all the workforce in Macau and sent land prices through the roof.

In the last quarter of 2014, garment exports totalled MOP180 million eight times less than what the industry was selling in the same quarter in

2008 and almost twenty times less than in 2007, official data reveals.

Becoming a residual industry in the Macau economy, garment companies continue to struggle. The most recent outlook reveals that 83 per cent of garment companies expect a substantial decrease in exports this quarter. Only 1.8 per cent expect a slight increase and 13 per cent are

rota das letras • 雋 文 不 朽 • the script road

Portuguese newspaper Ponto Final, the Macau Literary Festival is the first meeting of literati from China and Portuguese-speaking countries to be organised in the world, said the organiser.

The festival is supported by the Cultural Affairs Bureau and Macau Foundation, as well as several other private entities, with local gaming operator SJM – Sociedade de Jogos de Macau - one of the main sponsors.

hoping for a flat performance. That’s the most negative outlook for the industry in years.

Macau Economic Services also gave detailed information about the performance of Macau exports during the third quarter of 2014. The growth of foreign sales slowed down to 6.3 per cent from a hike of 13 per cent in the second quarter of that year.The slowdown was due to an 8.5 per cent drop in sales to China but was partially offset by a rise of 20 per cent in exports to Hong Kong, Macau’s main market.

L.G.

Business Daily | 3

March 13, 2015

Macau

SJM: Not forcing workers to take unpaid leave SJM say they are not forcing workers to do so, just granting unpaid leave upon request Kam Leong

kamleong@macaubusinessdaily.com

A

mbrose So, chief executive of gaming operator SJM Holdings Ltd., said that the corporation was not forcing workers to take unpaid leave. In addition, he said SJM has not yet applied for gaming tables for the new Lisboa Palace project.

Mr. So told reporters in Beijing on Wednesday that SJM workers are not forced to take unpaid leave, while conceding that the corporation will co-operate if workers do want an unpaid vacation, according to local Chinese newspaper Macao Daily.

Last Thursday, SJM released an internal memorandum informing employees that they could apply for leave even if their accumulative working hours are not enough to apply for annual paid leave.

The city’s Secretary for Economy and Finance Lionel Leong Vai Tac, however, urged local gaming corporations not to offer unpaid leave to workers, but paid training instead Despite unpaid leave being available

at SJM, the chief executive said they are not planning to fire employees.

Nevertheless, they will not rush to recruit as vacancies occur as before as one of the ways to decrease cost.

Meanwhile, Mr. So told reporters that SJM will not file an application with the government to apply for gaming tables for their new Cotai project Lisboa Palace this year.

The application will only be submitted once the construction of the project is completed. He claimed that SJM is able to shift gaming tables from its other properties to the new project.

In addition, SJM’s chief executive revealed that the corporation has financial reserves of some MOP24 billion, claiming it does not have any financial difficulty even though the city’s gaming revenues have dropped for nine consecutive months.

Predicting that gaming revenues may still post decreases of 10 to 15 per cent year-on-year in 2015, Mr. So stressed once more that he is optimistic about the development of the gaming industry, claiming that the opening of the Hong Kong-Zhuhai-Macau Bridge will attract more gamblers, especially from Hong Kong.

“Once the Hong Kong-ZhuhaiMacau Bridge opens to traffic, it means that Hong Kong will also have casinos,” Macao Daily quoted Mr. So as saying.

In addition, he claimed he is not worried that gamblers in Macau will be attracted to nearby countries which are developing gaming businesses, such as Malaysia and Singapore. He perceives that these countries may not develop their gaming industry on a large scale as it might affect their overall economic structure.

4 | Business Daily

March 13, 2015

Macau Wine & Dine Festival sales up 68 pct The sales revenue of the Wine & Dine Festival has increased by 68 per cent year-onyear, the president of the Wine Society of Macao, Filipe Cunha Santos, told Chinese language newspaper Macao Daily. According to Mr. Santos, the five-day event held at the outdoor lagoon area of The Venetian Macau between March 4 and March 8 attracted more than 26,500 visitors. The Festival, unveiled two years ago, featured 38 booths of food and wine from around the world, an educational wine school, live entertainment, bands and local performers.

Zeroing C Macau stocks

redit Suisse has decided to sell all of its Sands China stock from its Asia regional portfolio fearing that Macau stocks are going through a bubble like the one that sunk the blue chips market in 2000 and 2001. The Swiss bank added Sands China to its portfolio only last year.

The financial institution’s

strategists are looking at history and seeing similarities between the boom in Macau and previous crises created by financial bubbles like Nasdaq in the 2000’s, Japan in 1987-1998 and the Shanghai stock market in 2006-2007.

Credit Suisse says that in just one and a half years, Macau’s valuation (in terms of price-to-book) more than doubled, trading at 9.3 times book at

one point, and in another year and a half is now trading at around 4.2 times. ‘If history continues to be an accurate guide, P/B could drop 2-3 times more’, the report said. Macau stocks suffered their eighth straight drop in Hong Kong, with Sands China losing more than 3 per cent, MGM China 2.4 per cent and Wynn an additional 3.5 per cent.

Emperor Capital deal to generate HK$44.1 mln

E

mperor Capital approved a loan facility of HK$280 million to a non-disclosed borrower yesterday through its subsidiary Emperor Finance. The deal was announced by the company, which is part of the group Emperor International that controls Emperor Hotel in Macau.

The identity of the borrower was not revealed but in the filing with the Hong Kong Stock Exchange Emperor Capital explained that the borrower ‘is an investment hol din g company incorporated in the British Virgin Islands.’

It also announced that the subsidiaries of the borrower ‘are principally engaged

in investment holding and property investment’.

This deal will allow Emperor Capital to receive a total of HK$21 million in the first three months after the drawdown, which means an interest of 2.5 per cent/month, and another HK$23.1 million from the fourth to the sixth month (interest at 2.75 per cent/

month) after the drawdown.

In total, the loan facility of HK$280 million can generate a profit of HK$44.1 million. The loan agreement set a repayment period of ‘within six months’ of the signing of the deal.

‘Taking into account the security for the loan facility, and the expected revenue to be generated

by the group, the directors are of the view that the provision of the loan facility under the loan agreement is on normal commercial terms which are fair and reasonable and in the interests of the Company and its shareholders as a whole’, it was explained by the board of the company.

J.F.S.

Business Daily | 5

March 13, 2015

Macau

Macao Water profits up 10 pct to MOP58 million in 2014 The city’s sole water distributor has asked the government for an 11.8 per cent hike in its service fee, twice the expected rate of inflation. Water consumption is to slow down this year due to the diversion of many foreign workers to Zhuhai, executive director Felix Fan says Luís Gonçalves

Luis.goncalves@macaubusinessdaily.com

Total investment in MSRIII Water Plant to reach MOP130 million

M

acao Water posted a MOP58 million profit last year and has already applied to the government for an increase of 11.8 per cent in its service fee, the company’s executive director, Felix Fan, said yesterday.

Speaking on the sidelines of the Macao Water Media Spring Lunch event, Mr. Fan said that the city’s sole water provider registered a profit of MOP58 million in 2014. That’s a 10 per cent increase on 2013, when the company made MOP53.5 million.

Despite the higher growth – Macao Water profits went up 8.4 per cent in 2013 – the company’s executive director says it’s still far from its best years. “Macao Water has always been profitable but our peak was MOP70 million in profits. In 2012, we had our worst performance, with a gain of MOP48 million, but we have been increasing ever since”.

The final 2014 results will be published following the company’s general meeting. “Last year, since the comparatively larger increase in water consumption and a minor adjustment to the water resources fee, Macao Water obtained a hard-won better financial performance, giving the company a respite while facing the rapid economic development and high inflation in Macau”, Mr. Fan said. “It was a year of harvest, a year of difficulties, and a year of growth”.

Fee battle The executive director also confirmed to reporters that Macao Water applied to the government last week for an increase of 11.8 per cent in its service fee, two times the

expected rate of inflation here in 2015.

Last year, the company requested a 16 per cent hike in the water fee but authorities only awarded a 6 per cent increase.

The Marine and Water Bureau also issued a press release yesterday, announcing that the government has received the company’s application and will launch a comprehensive review. Factors such as service quality, distribution situation, facilities, company profits and Macau’s inflation rate will all be taken into consideration.

The fee battle is likely to continue between the two parties. “From 2000 to 2013, Macao Water didn’t get any tariff increase, while inflation in the city went up very fast”, Mr. Fan reminded reporters. “In the past two years, we applied for a tariff increase but the Macau Government only gave us a small percentage and below inflation because they want to satisfy the population”, he added saying that it is probably “not enough to maintain the company’s sustainability”. The changes in the service fee does not affect the final price for consumers here.

Macao Water is expecting a slowdown in water consumption this year given the economic slowdown of the city and the opening of the 24-hour border that will likely divert many foreign workers to Zhuhai. “ The economy is slowing down and the new policy of emigration with the 24-hour border will facilitate the travel of imported workers, that are around 150,000 workers here . . . We can imagine because of the high rents in Macau that some of these workers

will move back to China, to Zhuhai, for example”.

Slowdown The company says that only around April or May can it assess the impact of the economic slowdown and the 24-hour border crossing on water consumption because normally the rents end or start after the Chinese New Year. “At this moment, we’re still optimistic”, Mr. Fan said.

The opening of two new casinos this year – Studio City from Melco Crown Entertainment and Galaxy

Phase II – is a positive factor for the company as these properties are expected to be heavy water consumers and could offset the consumption slowdown. The increase in the number of tourists is also positive news for the company.

One of Macao Water’s goals this year is the opening of its MSRIII Water Treatment Plant Extension Project, a project that last year alone saw construction suspended 12 times.

Mr. Fan reiterated that it will start operating in the middle of the year.

The total investment, he said, will be around MOP130 million.

6 | Business Daily

March 13, 2015

Macau

Why the Chinese public can’t get enough bitcoins Goldman Sachs says the yuan is now used in 80 percent of transactions into and out of the cyber currency, topping the dollar, yen and euro. In Macau, Bitcoin ‘ATMs’ are located in pawnshops

A

s if Zhou Xiaochuan didn’t have enough to worry about, China’s central bank governor now has a bitcoin problem on his hands. In a new report, Goldman Sachs says the yuan is now used in 80 percent of transactions into and out of the cyber currency, topping the dollar, yen and euro. Given that the Communist Party’s highest priority is stability, and the rampant use of bitcoin represents nothing if not the opposite, it’s probably only a matter of time until Beijing tries to crack down.

It wouldn’t be the first time. In December 2013 -- at a time when the yuan accounted for about 50 percent of bitcoin transactions -- Zhou clamped down hard on the nascent payment system, citing concerns that it was enabling money laundering and undermining capital controls. On Dec. 5, the People’s Bank of China barred financial institutions from handling bitcoin transactions, concluding it isn’t a currency with “real meaning.”

A few months later, in March 2014, the PBOC went further, ordering banks and payment companies to close the trading accounts of more

than 10 bitcoin exchanges.

But bitcoin traders continue to show up the PBOC. As Goldman Sachs points out, the trading volume inside China has risen markedly -even as bitcoins plunge in value (from about US$1,100 in late 2013 to around US$300) and lose cachet elsewhere. “Bitcoin,” writes Goldman Sachs analyst James Schneider, “has momentum in China.”

What gives? Some people in China are surely buying bitcoin to engage in relatively innocent forms of financial speculation. But they are probably outnumbered by the people who are using it to move yuan out of the country, while circumventing Beijing’s currency controls. That’s partly because China’s broader economic slowdown provides fewer lucrative investment opportunities.

But it’s also because of President Xi Jinping’s ongoing crackdown on corruption, which has made it harder to launder ill-gotten funds. (Hong Kong money changers used to be the laundering method of choice, but are no longer readily available.) Bitcoin’s value gyrates too wildly to be a viable

transactional unit, but it’s proving to be a nifty way to move money across borders beyond the watchful eye of the government.

Bitcoin’s surging popularity in China -- despite the attempts to crack down against it -- underscores how fragile the world’s second-biggest economy is at present. Data released yesterday showed industrial output since the beginning of the year was at its slowest pace since 2009, rising just 6.8 percent in January and February. Deflation also seems to be on the horizon.

As growth slows, the risk of a hard landing for the Chinese economy increases. Officially, Beijing is on the hook for about US$3 trillion of regional debt. (The Japanese investment bank Mizuho Securities says US$4 trillion is closer to the mark.) What’s much harder to estimate is what the financial fallout will be from the more than US$20 trillion of credit churned out by the shadow banking system between 2008 and 2014. If large numbers of borrowers start defaulting on their debt -- and analysts estimate that’s only a matter of time -- Beijing will

almost certainly be on the hook for massive bailouts.

With the market thought to be capped at about 21 million bitcoins, it’s unlikely the currency will pose an overwhelming challenge to the PBOC. But what about other digital currencies created inside China? In November, Wired magazine explored the rise of darkcoin, which is fast becoming the chosen medium of drug merchants and others active on China’s black market.

It’s not hard to imagine the development of other such cryptocurrencies with Chinese characteristics.

When China has previously faced money laundering problems, it had clearer solutions at its disposal. In 2014, for example, Beijing clamped down hard on Macau, the former Portuguese enclave whose casinos had become a favored laundromat for ultra- rich Chinese. But now that China’s facing a stealthier threat in bitcoin, it’s options are more limited.

Zhou is undoubtedly aware of the problem posed by bitcoin, but he may not yet know what he should do about it.

Bloomberg

Business Daily | 7

March 13, 2015

Macau

Receivers: General Meeting called by Carson Yeung invalid Birmingham International shareholder Carson Yeung called a General Meeting for yesterday but company receivers deem it invalid as it failed to comply with the required period notice

Macau citizens banned from buying property in India

João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he appointed receivers of Birmingham International Holdings have informed the Hong Kong Stock Exchange that the Extraordinary General Meeting (EGM) called for yesterday by shareholder Carson Yeung La Sing was invalid.

In spite of being in prison, on 25 and 26 February Mr. Yeung attempted to convene an extraordinary general meeting to appoint and remove new directors to the board of the company by publishing notices in three Hong Kong newspapers, scheduled for yesterday.

However, on Wednesday evening the receivers of the company said the meeting was invalid because the notice period did not meet legal requirements.

‘The proposed Meeting Date does not satisfy the required notice period.

In this connection, the Receivers are of the view that […] any proceedings of the proposed EGM at the Proposed

Carson Yeung

Meeting Date would be invalid, irregular and of no effect’, it was explained.

This meeting is another episode of the internal ‘wars’ raging inside Birmingham International between different factions within the company, which started after Mr. Carson was imprisoned, and have led the company into receivership.

Early this week the company announced a major reshuffle of its board with the resignation of seven directors, including the Chairman and Vice-Chairman. Two directors were fired and another two members of the board were suspended.

Carson Yeung holds approximately 27.9 per cent of Birmingham International Holdings and was the Chairman and Executive Director of the company until the beginning of 2014 when he was convicted on five counts of money laundering and sentenced to six years imprisonment.

M

acau people are banned from buying property in India without prior authorisation from the Reserve Bank of India, it was announced on Wednesday. This ban also includes citizens from Mainland China and Hong Kong.

The People’s Republic of China and the Special Administrative Regions are not alone in figuring on this black list, which also includes Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal and Bhutan.

‘It has been observed that Macau and Hong Kong are the two Special Administrative Regions of China. As they are notified separately, it has been decided, in consultation with the Government of India, that citizens of Macau and Hong Kong will also be included in the list of countries which are prohibited from acquiring/ transferring immovable property in India’, the Reserve Bank of India explained in a press release.

8 | Business Daily

March 13, 2015

Greater China

New yuan loans beat forecasts

Scope of employment survey expanded Outstanding loan growth was 14.3 percent in February China will expand its employment survey to include the whole country in the second half of 2015, up from 65 cities and counties currently, sources with direct knowledge told Reuters yesterday. It also will begin publishing a more comprehensive series of indicators on unemployment, labour market participation and other data next year.

China has two official unemployment measures. One is a passive methodology which measures registered urban unemployment in 31 cities. The other actively surveys employment in 65 cities, but only data from 31 has been used to calculate the rate.

Taiwan not worried by deflation Central bank governor said yesterday the island has no deflation issues and prices will be positive this year.

Governor Perng Fai-nan made the comments in answer to questions from lawmakers. The central bank has said that lower oil prices will keep inflation very mild. Taiwan’s consumer price index, its main inflation gauge, fell for a second month in a row in February, but the year-on-year decline narrowed compared with January.

Bank of China seeing rosy growth in Australia Bank of China is celebrating its growth in Australia and has become a shining example of Chinese companies going global. Bank of China is the largest Chinese company in Australia in terms of asset size and is the first Chinese bank to operate in Australia with a full banking license. By the end of 2014, total assets stood at nearly 30 billion Australian dollars (about US$23 billion) with pre-tax profits exceeding 300 million Australian dollars and after-tax profit of over 200 million Australian dollars. It has now expanded to nine branches with more than 300 employees.

Comfortable with 1-2 pct inflation Whether China further loosens monetary policy this year will depend “very much” on inflation, a central bank adviser said, adding that policymakers will be comfortable if inflation is not in a downtrend but stable between 1-2 percent. Qian Yingyi, a member of the central bank’s monetary policy committee, said authorities would monitor inflation in March and April to judge if deflationary pressures had worsened.

“Many analysts believe that deflationary pressures will continue. If that happens, I won’t be surprised if the central bank continues to reduce reserve requirements as well as interest rates,” Qian told Reuters in an interview.

Samsung to start won-yuan direct trade South Korean tech giant Samsung Electronics Co Ltd said yesterday it will start buying or selling the Chinese yuan for the won from the Seoul market on March 16.

The company would use the Korean yuanwon market, which launched in December, to settle direct transactions between its headquarters and Chinese subsidiaries, a spokeswoman said. She declined to comment on details, including how big such transactions could be. Samsung’s entry could give a major lift to the fledgling yuan-won market. China seeks to boost international use of the yuan.

C

hinese banks extended 1.02 trillion yuan (US$162.9 billion) of new loans in February, well above market expectations, while growth in broad money supply quickened, taking some heat off the central bank as it seeks to boost flagging economic growth.

Economists polled by Reuters had expected new local-currency loans to fall to 750 billion yuan in February from 1.47 trillion yuan in January, which marked a lending surge not seen since mid-2009.

Chinese banks, which face limits on how much they can lend annually, tend to front-load their lending in the beginning of each year in a bid to protect their market share.

Total social financing, a broader measure of overall liquidity in the economy, fell to 1.35 trillion yuan in February, versus 2.05 trillion yuan in January.

Broad M2 money supply (M2) in February rose 12.5 percent from a year ago, the central bank said yesterday, beating expectations of

11 percent and quickening from January’s 10.8 percent, which was the weakest since records started in 1998.

Outstanding loan growth was 14.3 percent in February. Analysts polled by Reuters had expected 13.8 percent, versus the previous month’s 13.9 percent.

Other data released so far for early 2015 show China’s economy may already be at risk of missing the government’s annual growth target of around 7 percent, which itself would

Policy on visitors to Hong Kong to be re

More than 40 million mainland Chinese tourists visited Hong Kong

T

he Chinese government will “refresh” its policy on granting entry permits to its citizens wishing to visit the separately administered territory of Hong Kong, a state-run paper said yesterday, amid mounting anger at hordes of mainland shoppers.

“We are talking with the Hong Kong Special Administrative Region’s government about refreshing the policies covering visits,” Zhou Bo, deputy head of China’s Hong Kong and Macau Affairs Office, told the official China Daily.

Zhou did not say when the talks would end, only that “it will not take a long time”, the newspaper added.

Hong Kong people fume that mainland tourists crowd them out of malls and buy up all available supplies of daily necessities such as diapers and milk powder. Police have used pepper spray to break up confrontations as locals have cursed mainlanders, shouting at them to go back to China.

Zhou said that mainland visitors had been a great boost to the former British colony’s economy, as well as for Macau, but that they had also become a heavy burden.

“Any city would be unable to host such a dramatically increased number of tourists,” he said.

Tensions between Hong Kong residents and mainland Chinese have escalated in recent months due to an influx of cross-border visitors and

Crowded shops are common in Hong Kong and Macau

perceptions over Beijing’s increasing grip on the city.

More than 40 million mainland Chinese tourists visited Hong Kong last year, vastly outnumbering the city’s population of 7.2 million.

Hong Kong Chief Executive Leung Chun-ying has promised to raise concerns about Chinese tourists

with central government authorities while he is in Beijing for the annual session of parliament.

A special administrative region of China, Hong Kong was returned to Chinese Communist Party rule in 1997 under a “one country, two systems” formula that gives it separate laws and an independent

Business Daily | 9

March 13, 2015

Greater China mark a quarter-century low.

Growth in investment, retail sales and factory output all missed forecasts in January and February and fell to multi-year lows, leaving investors with little doubt that the economy is still losing steam and in need of further support measures.

Exports picked up in the first two months but imports slid some 20 percent, pointing to persistent weakness in the economy, while deflationary pressures in the factory sector have intensified.

Hyundai to boost localization in China

With the FTA, S. Korea would become the first car-producing country in the world according to the KAMA data. China is the world’s largest auto market, which held 24.2 million in total demand for cars in 2014. The demand is forecast to grow to 40 million in the long term, said.

FTA advantages

KEY POINTS Feb new loans 1.02 trln yuan vs f’cast 750 bln yuan Feb M2 +12.5 pct yr/yr, vs f’cast +11.0 pct Feb TSF 1.35 trln yuan vs 2.05 trln yuan in Jan But analysts have cautioned about reading too much into economic indicators for January and February alone, given seasonal distortions caused by the timing of the long Lunar New Year holidays. The new year fell on February 19 this year, whereas in 2014 it occurred on January 31.

The central bank aims for 12 percent M2 growth in 2015.

The central bank has cut interest rates twice since November, on top of a cut in bank reserve requirements in February, amid concerns about growing deflationary risks. Economists believe it has embarked on its more aggressive easing campaign since the global financial crisis.

Reuters

eviewed

g last year

Hong Kong Chief Executive Leung Chun-ying has promised to raise concerns about Chinese tourists with central government authorities

Presidents of China and South Korea during last summit in 2014

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yundai Motor, South Korea’s Number One automaker is expected to speed up a strategy of “localization” by expanding its production capacity in China after China-South Korea free trade agreement (FTA) is implemented.

China and South Korea initialled the bilateral trade pact on February 25, about three months after the two countries concluded negotiations on it. Beijing and Seoul began talks on the deal in May 2012.

Under the accord, China and South Korea will eliminate tariffs on more than 90 percent of all products from each other within 20 years after the FTA implementation. The South Korean government aims to sign the pact and get a parliamentary approval by the end of 2015.

In the auto sector, South Korea will abolish tariffs on gasoline buses and trucks from China within 15 years after the implementation. China will eliminate duties on buses and trucks from South Korea within 20 years.

Passenger cars were excluded from the negotiation table.

Hyundai and its affiliate Kia have a combined production capacity of 1.9 million, which is expected to increase to 2.5 million in the medium term,

Now, it is meaningless to think about an auto industry without having China in mind. The China-South Korea FTA would contribute greatly to the development of car industries in both countries Kim Tae-Nyen executive director Korea Automobile Manufacturers Association

With the FTA, South Korea would become the first car-producing country in the world, which would sign the free trade pact with China. Leading auto-producing nations, including the United States, Germany and Japan, had yet to ink the FTA with China.

Chinese automakers would increase sales of trucks and buses in South Korea as those products have much higher price competitiveness than South Korean models.

With the China-South Korea FTA excluding passenger cars from the dialogue table, Hyundai Motor has no choice but to strengthen expansion in China by producing, procuring and marketing more in the Chinese market, which the South Korea’s Number One carmaker entered in 2002.

Hyundai currently has three factories in Beijing, which have a production capacity of 1.05 million vehicles a year. It has pushed to build its fourth factory in Chongqing, southwest China, by late 2016 and the fifth factory in Cangzhou in Hebei province by early 2017.

When those are completed, Hyundai’s production capacity in China would increase to 1.65 million vehicles a year, the company said in a written interview.

Hyundai has increased its presence in China rapidly. The company’s auto sales in China topped 1 million in 2013, about a decade after its entry to the market in 2002. Hyundai’s 2014 car sales in China rose 9 percent from a year earlier to 1,120,048 units, a 21-fold expansion compared with 2003 when it sold 53,130 cars.

The 2014 auto sales in China surpassed Hyundai’s full production capacity of 1.05 million, leading the company to build additional factories.

Including its affiliate Kia Motors, Hyundai-Kia Automotive Group’s production capacity in China would surpass 2.5 million in about two years.

Xinhua

Sugar output seen dropping sharply in 2014/15 Chinese consumption is expected to surpass 15 million tonnes in the 2015 calendar year, according to an official forecast

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judiciary but leaves Beijing with ultimate authority.

Student-led pro-democracy protests shut down parts of the city for two and a half months last year as activists called for open nominations in the city’s next chief executive election in 2017.

Reuters

nalysts predict Chinese sugar production could drop by almost a fifth in 2014/15, with recent output data from the country’s top growing region plunging from the year before.

Production in the province of Guangxi, accounting for about two thirds of the country’s sugar output, had reached about 4.9 million tonnes by the end of February in the crop year that began in October, trade website Guangxi Sugar Network said this month.

That is down around 20 percent from the same period the year before, with analysts blaming the drop on adverse weather and reduced planting as the local government cut the amount mills must pay farmers for

sugarcane.

Sharply lower output would buoy domestic prices that have climbed about 15 percent since the start of the year, although they fell last week as international prices hit a six-year low.

The latest figures for Guangxi suggest the decrease in the province’s production over the whole of the marketing year will be steeper than earlier forecasts of a 16-percent decline to 7.2 million tonnes. The crushing season ends in about a month and production after that is typically tiny.

That has prompted analysts to reduce their outlook for nationwide output to around 11 million tonnes from the 12 million many expected previously. Production the year before

stood at 13.3 million tonnes.

“We have reduced our forecast again to 10.8 million tonnes,” said Zhan Xiao, analyst at Xinhu Futures.

Guangxi cut the price mills must pay for cane by 10 percent this season, likely reducing farmers’ willingness to fertilise, impacting yield, said Zhan.

Typhoons also damaged some of the region’s crop, reducing cane supplies and leading several mills to halt crushing early.

The firm estimates Chinese output at 11.1 million tonnes, down from its earlier forecast of 11.5 million.

But a trade source said tightened restrictions on imports would likely be a bigger factor than dwindling production in supporting local prices.

Reuters

10 | Business Daily

March 13, 2015

Greater China

Sri Lanka searches to re-negotiate Chinese deals Shihar Aneez and Sanjeev Miglani

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ri Lanka’s suspension of a project to build a glittering skyline on land reclaimed from the Indian Ocean has prompted China to defend its investment, in a test of Beijing’s ambitions to fund loans and major infrastructure ventures abroad.

Recently elected President Maithripala Sirisena has vowed to look again at deals between China and his predecessor Mahinda Rajapaksa, saying they were not transparent, while India has eyed China’s involvement in Sri Lanka with increasing alarm.

China’s new ambassador to Colombo, Yi Xianliang, said the port city project off Colombo that President Xi Jinping inaugurated last year would create 83,000 jobs.

“Such a port city ... will be of great significance for Sri Lanka’s economic development, attracting foreign investment and promoting local tourism,” he told a small group of reporters earlier this week.

His comments came days after Sri Lanka halted the US$1.4 billion port project, citing lack of government approvals and raising the risk of a diplomatic row with its biggest investor.

Yi also spoke in the week Colombo welcomes Narendra Modi, the first Indian prime minister to visit in 28 years as part of a drive to rebuild ties with smaller neighbours and counter China’s rising influence in the Indian Ocean.

Two Chinese officials, who were not authorised to speak to the press, said companies were unlikely to back down significantly if Sri Lanka demanded fresh terms.

“If the Chinese firm changes the commercial agreement here because

of government pressure, it will have to allow reviews of all its projects in other countries as well,” said one Chinese official familiar with the port city dispute.

Loans under scrutiny China has invested millions of dollars in Sri Lankan infrastructure since the end of a 26-year civil war in 2009, when Colombo was largely shunned by Western investors because of its human rights record.

As well as the port, Sirisena’s administration wants to renegotiate terms of an estimated US$5 billion in Chinese loans, a move that could embolden other countries where

China’s state-backed firms have invested heavily.

One of them related to the construction of Hambantota port in the south in which a US$306 million loan was secured from China’s ExIm Bank at a fixed interest rate of 6.3 percent.

Yi said loan terms for Sri Lanka were reasonable and in line with those China extended to other countries, adding that financing was made available against the backdrop of the 2008 financial crisis.

“At the request of the Sri Lankan government, China overcame the difficulties and increased financial support following the principle of mutual benefit.”

Golf course, hotels, marinas

KEY POINTS China seen unlikely to back down on terms for port project New ambassador to Sri Lanka defends investments Billions of dollars in loans also under scrutiny Test case for Beijing’s “soft power” push abroad

Recently elected President Maithripala Sirisena

Under the port plan, 108 hectares of land next to the main commercial port of Colombo would be taken over by China Communications Construction Co Ltd, including 20 hectares on an outright basis and the rest on a 99-year lease.

The development would include shopping malls, water sports, golf, hotels, apartments and marinas.

Construction began last year with scores of trucks dumping rocks each day into the ocean to create the landfill near the popular Galle Face Green.

Work has stopped since last Friday, with the government asking the Chinese firm to show approval documents including environmental clearance.

The company issued a statement saying it would provide the government with requested paperwork, and said separately it was losing hundreds of

Last week Sri Lanka government stopped works in progress at Colombo’s port city

thousands of dollars a day due to the suspension.

China hoped Sri Lanka would take a positive decision before the planned visit of Sirisena to Beijing later this month, one of the unnamed Chinese officials said.

“The decision is not only affecting the project. This also signals the attitude of the new government towards foreign direct investors,” said the official.

India, racing to catch up with China in infrastructure development on the Indian Ocean island, is worried about the security threat posed by Chinese ownership of land, aggravated by the docking of Chinese submarines in Colombo last year.

Sukh Deo Muni, former Indian ambassador to Laos and an expert on India’s neighbourhood policy, said he did not expect Sri Lanka to renege completely on Chinese deals.

“It may ... be recast taking out the 20 hectare freehold space to be given to the Chinese, and may be the loan terms could be eased,” he said.

New Delhi hopes a review of China’s involvement in Sri Lanka, which lies near vital shipping lanes, will help it retrieve lost ground in a country where it traditionally holds sway.

Modi will spend two days there, travelling to the Tamil-dominated north and the centre of the separatist war.

At the top of Modi’s agenda is a deal to construct a 500-megawatt thermal power plant near Trincomalee, a strategic port in eastern Sri Lanka that was cleared in 2012 but is stuck for lack of environmental approval.

Reuters

Business Daily | 11

March 13, 2015

Asia

Bank of Korea joins global policy easing

The institution has been facing mounting pressure to lower borrowing costs in the past few weeks

Christine Kim and Choonsik Yoo

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outh Korea’s central bank cut interest rates for the first time in five months yesterday in a surprise move, joining the ranks of other economies which have recently taken advantage of lower inflation to ease monetary policy to spur sluggish growth.

The Bank of Korea’s monetary policy committee cut its base rate by 25 basis points to a record low of 1.75 percent, a media official said without elaborating.

Most economists polled by Reuters had expected no rate change at this meeting, though many had still predicted a cut in coming months if the country’s economic recovery continued to struggle to gain traction.

“We think the two key drivers behind today’s decision are a weaker economic outlook and deflation pressures,” said Ronald Man, an economist at HSBC in Hong Kong.

“Our baseline scenario is for a further 25 basis point rate cut in Q3 2015, which will bring the policy rate down to 1.50 percent.”

The Bank of Thailand also cut its policy interest rate on Wednesday in a surprise move. India has cut rates twice already so far this year and China has eased policy two times, with more moves expected. Singapore, Australia and Indonesia have

Bank of Korea Governor Lee Ju-yeol bangs the gavel at the BOK headquarters in Seoul yesterday, to preside over a monthly policy board meeting

also eased.

The Bank of Korea has been facing mounting pressure to lower borrowing costs in the past few weeks as indicators have shown little evidence that Asia’s fourth-largest economy is on a rapid rebound.

January factory output declined at the fastest pace

since December 2008, while exports suffered their worst fall in two years in February.

Members from the central bank’s monetary policy committee also expressed concerns over the economic situation abroad, including the euro zone and China, in minutes from February’s rate

meeting released on Tuesday.

Some members highlighted poor exports at home and growing worries over possible deflation in the minutes.

Policymakers have taken a step back from positive talk earlier this year, with the finance minister recently noting the weakness in the

economy’s recovery and expressing concerns over persistently low inflation.

South Korea’s annual inflation slowed to a 16year low in February, though much of it was blamed on low commodity prices rather than weak consumption.

Reuters

Japanese firms’ mood worsens The loss of confidence comes as the Bank of Japan remains committed to its massive monetary easing programme Tetsushi Kajimoto

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onfidence at big Japanese manufacturers worsened in January-March and is seen turning negative in the second quarter as a slumping yen ramped up the costs of raw material imports, a survey showed, complicating Tokyo’s stimulus-driven campaign to revive the economy.

The quarterly poll by the Ministry of Finance and the Cabinet Office released yesterday suggests the drawbacks of a weak yen may be outweighing its benefits, which have not spread to broader sectors of the economy.

The loss of confidence comes as the Bank of Japan

remains committed to its massive monetary easing programme even as the U.S. Federal Reserve moves closer to raising interest rates, triggering a renewed slide in the yen.

The yen skidded to 8-year lows against the dollar to above 122 yen on Tuesday, on expectations the Fed may raise rates as early as in June, heightening worries that an unrelenting drop in the Japanese currency could prove more harmful in the long run.

“It could be worrisome if the yen depreciation accelerates under the current deflationary circumstances where companies are unable to pass on costs, causing a

profit-squeeze,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

The business survey index (BSI) of sentiment at large manufacturers stood at plus 2.4 in January-March, compared with plus 8.1 in the prior three months.

The sentiment index is seen deteriorating further to minus 0.9 in the second quarter.

“We hear from companies that they are facing rising raw materials costs on higher import prices, a labour shortage and increase in electricity bills,” said a finance ministry official.

Last month, major utilities raised electricity charges due

Japanese Ministry of Finance

to a weaker yen, but they are set to cut utility bills in April as they reflect tumbling oil and LNG prices with a lag.

Prime Minister Shinzo Abe is closely watching the yen’s weakening trend, which could damage companies that import materials and are unable to pass on costs, his key economic adviser Etsuro Honda told Reuters on Tuesday, adding the dollar around 120 yen is not problematic for the economy as a whole.

The survey also showed Japanese firms are expected

to raise capital spending in the current fiscal year to March, but they are seen cutting expenditure in the next fiscal year, adding to concerns about business investment following recent soft indicators.

However, the finance ministry official told reporters companies tend to show moderate capital spending plans for the next fiscal year at this time of year, and to revise up their investments when they firm up plans as the year progresses.

Reuters

12 | Business Daily

March 13, 2015

Asia

New Zealand stands pat Central bank holds interest rate as inflation remains lower Gyles Beckford

KEY POINTS Official cash rate held at 3.50 pct, as expected RBNZ expects to stay on hold for “some time” NZ dlr jumps a full US cent RBNZ lowers wholesale rate fcsts, suggesting rates low for longer RBNZ repeats NZ$ unjustified, unsustainable, needs to fall

Reserve Bank of New Zealand Governor Graeme Wheeler

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ew Zealand’s central bank held its benchmark rate steady yesterday, adopting a markedly neutral tone to signal it could be on hold for some time but also leaving the door open for a possible cut.

The Reserve Bank of New Zealand (RBNZ) said inflation was expected to remain lower for longer because of the sharp fall in oil prices, but while the economy was growing strongly there was no need to change rates.

“Our central projection is consistent

with a period of stability in the OCR,” RBNZ Governor Graeme Wheeler said in a statement, as the official cash rate (OCR) was kept at 3.50 percent for a fifth consecutive review.

The bank’s statement was similar to the January statement, repeating that: “Future interest rate adjustments, either up or down, will depend on the emerging flow of economic data.”

But the RBNZ’s forecast of wholesale 90 day bank bill rates , taken as a proxy for the OCR, was lowered from the December statement,

and indicated at 3.7 percent through to early 2017.

Economists said the central bank looks comfortable holding rates for a good deal longer.

“If anything, the RBNZ was even more firm that it does not intend to move the OCR in either direction for the foreseeable future,” said Westpac chief economist Dominick Stephens.

The New Zealand dollar bounded higher to settle around US$0.7300 from US$0.7193 before the statement with the RBNZ seen not as dovish as markets had positioned for.

Market pricing based on overnight interest rate swaps showed an 8 percent chance of a rate cut at the April review with 21 basis points of cuts indicated

Maruti set to challenge Tata’s dominance on trucks

over the next 12 months.

A Reuters poll after the statement reaffirmed expectations of the next move being a rise no earlier than the first quarter of next year.

Economic strength backs ‘on hold’ stance Wheeler said the strength of New Zealand’s economy, with growth projected above 3 percent over the next two years, was the key difference versus countries such as Australia and Canada, which have seen rates cuts this year.

Growth was being driven by strong construction activity, household incomes which have been lifted by the fall in fuel prices, low interest rates, and a housing market showing signs of picking up again.

On the downside, sharply lower dairy prices, drought in parts of the country, and a high exchange rate would weigh on growth.

However, inflation, which fell to 0.8 percent in the year to December, was expected to stay below 1 percent through 2015 and the outlook was more muted.

Wheeler said a 1-3 percent inflation band was still an appropriate policy framework and the target of reaching the midpoint was still “highly relevant”.

However, he said he was “less sure” that the neutral level for the bank’s cash rate was around 4.5 percent, against the current 3.5 percent.

He said inflation expectations and how they affected wage- and price- setting would be important. A significant reduction in expectations “would warrant more supportive monetary policy”.

“There is absolutely no reason to lower interest rates while the economy remains so robust and pressures remain on the housing market,” said BNZ head of research Stephen Toplis.

“There is absolutely no reason to raise rates when there is no inflation.”

Reuters

Light commercial vehicle sales will pick up as the hub-and-spoke logistics model gains prominence

Siddharth Philip

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aruti Suzuki India, the nation’s biggest carmaker by volume, plans to start selling small trucks to challenge Tata Motors Ltd.’s dominance in a segment that has shrunk in demand for two years. Maruti’s shares rose.

The local unit of Suzuki Motor Corp. will introduce in the next four months vehicles with a payload of about one ton and sell them through separate showrooms, Chairman R.C. Bhargava said in an interview in New Delhi on Wednesday.

The vehicles, to be initially sold in big cities, will come with gasoline, diesel and natural gas engine options, he said.

“We will start slow as it’s a totally new ball game for not just our dealers

We are focusing on our vehicles being reliable and economical as those are the most important factors for a customer R.C. Bhargava Maruti Suzuki India, chairman

but also our own people,” Bhargava said.

Maruti will be competing with Tata, which has about 84 percent of the market for trucks with a capacity to carry two tons or less. Commercial vehicle sales are poised to turn around after two years of decline as freight rates improve and the economy rebounds, according to a report this month by ICRA Ltd., the local unit of Moody’s Investors Service.

“Maruti will get an additional source of revenue by entering into the CV space,” said Bharat Gianani, an analyst at Angel Broking in Mumbai. “It won’t be easy but if they have a competent product they can do well, given that

Suzuki’s pickups are fairly well received in other markets.”

Light commercial vehicle sales will pick up as the hub-and-spoke logistics model gains prominence, and demand is expected to increase at an 11 percent to 13 percent compound annual rate over the longer-term, the ICRA report said.

Sales of vehicles in the segment declined 21 percent to 120,220 units in the eleven months ended February, as delinquencies on loans increased amid weak demand. Mahindra & Mahindra Ltd. had a 12 percent share of the segment, according to data from the Society of Indian Automobile Manufacturers.

Reuters

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Business Daily | 13

March 13, 2015

Asia Thai rate cut will help exports Looser monetary policy is good for exports as it helps hold the baht down, making exports more competitive, a deputy prime minister said yesterday, as the military government tries to revive the struggling economy. On Wednesday, the central bank’s monetary policy committee unexpectedly voted 4-3 to cut the policy interest rate by 25 basis points to 1.75 percent, its first rate change in a year to shore up confidence.

“Lower interest rates will help cap the baht’s rise, which is most wanted. A weaker baht will help exports,” Deputy Prime Minister Pridiyathorn Devakula told reporters.

Australian employment rises slightly

There are some signs the demand for labour is on the mend

Vietnam to hold expos in Cambodia, Myanmar Vietnam will hold trade, services and tourism exhibitions in Cambodia and Myanmar to boost its exports to the two and other countries in the ASEAN bloc, organizers said yesterday. Organized by the Ho Chi Minh (HCM) City Investment and Trade Promotion Center, the expo in Cambodia, scheduled to open on April 1-5 in Battambang, will feature 150 trade booths from 90 companies. The expo in Myanmar, the fourth of this kind ever held by HCM City, will be open on May 20 to May 24 in Yangon, with over 100 booths displaying products made by 80 companies.

LG plans record R&D investment South Korean conglomerate LG Group on Thursday said its companies plan to invest a record 6.3 trillion won (US$5.57 billion) in research and development in 2015 to secure future growth. LG Group, which has arms including appliances maker LG Electronics and LG Display, said in a statement that technologies like electric car batteries, next-generation displays and the socalled Internet of things were key areas for investment. An LG Group spokeswoman said the conglomerate spent a combined 5.9 trillion won on research and development last year.

Cambodians get online thanks phones About one-third of Cambodians are connected to the Internet, with the number of online subscriptions increasing by 31 percent in 2014, local media reported yesterday. Auk Dorany, member of the Telecommunications Regulator of Cambodia, said as of January this year, there were just over 5 million Internet subscriptions in the country, up from about 3.8 million at the end of December 2013, The Cambodia Daily reported. And Dorany said the overwhelming majority of Internet subscriptions were through mobile devices.

Korea to raise ceiling on lending facility South Korea’s central bank plans to expand its lending programme for small and medium-sized enterprises by about 3.5 trillion won (US$3.1 billion) to support their investments and operations, its chief told reporters yesterday. A media relations official at the Bank of Korea said Governor Lee Ju-yeol told a small group of reporters of the increase after a news conference.

He did not elaborate on details such as the timing of the increase. The ceiling is currently at 15 trillion won.

Australian Bureau of Statistics (headquarters pictured) showed employment rose 15,600 in February

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ustralian employment rose moderately in February while the jobless rate ticked down from a decade high, yet faster growth will be needed to stop the unemployment rate from rising further over time.

Yesterday’s figures from the Australian Bureau of Statistics showed employment rose 15,600 in February and the jobless rate dipped a tenth of a percentage point to 6.3 percent, on a rare occasion when the outcomes almost exactly matched market expectations.

One positive development was a solid 0.8 percent increase in hours worked, which could be a precursor of stronger demand for labour.

The RBA has already conceded that with economy growing at a subpar pace, the jobless rate would likely to rise a bit further and peak a bit later than earlier expected.

That in turn meant wages growth would stay sluggish - it is currently

at the lowest in over a decade - and help restrain inflation in the service sectors of the economy.

The trouble is not that there is widespread job shedding but that new hiring is being outpaced by growth

KEY POINTS Feb employment +15,600, matching forecasts of +15,0000 Unemployment rate 6.3 pct, vs 6.3 pct expected Jobs growth still not fast enough to stop unemployment rising

in the labour force, thus pushing the unemployment rate higher.

In all, 151,000 net new jobs were created in the year to February, but the workforce expanded by 203,500. In part that reflects a pace of population growth that far outstrips Australia’s rich world peers and is considered a positive for the economy overall.

Figures from ANZ out this week showed job advertisements in newspapers and on the Internet rose for the ninth straight month in February to their highest in at least two years.

Householders are also becoming less fearful of losing their jobs with the Westpac-Melbourne Institute survey of unemployment expectations showing on-going improvement in March.

“So far in 2015 households appear to be getting more positive about the labour market...the trend is moving in the right direction,” said Westpac senior economist Justin Smirk.

Reuters

Routine abuse in Cambodian garment factories Garment industry employs an estimated 700,000 people

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ambodia’s government and global clothing brands need to do more to protect garment workers from abuses such as forced overtime and discrimination, a rights group said.

Many factories unlawfully use short-term contracts to avoid paying benefits and indiscriminately fire workers, and verbal abuse and sexual harassment is common in the femaledominated industry, Human Rights Watch said yesterday in a report titled “Work Faster or Get Out.” Both the government and global producers need to commit to enforcing the law and ending abuse, the group said.

Surging wages and inflation in China in recent decades has led to a diaspora of low-cost garment production to countries such as Cambodia, Vietnam and Bangladesh, where labour regulations and safety standards are often poorly enforced.

Pressure on local manufacturers to accelerate production has also grown

as global brands such as Zara and H&M introduce styles as often as every two weeks to keep customers coming to their stores.

Cambodia’s garment industry, which employs an estimated 700,000 people and exported US$5.3 billion of apparel and shoes in 2013, was thrust into the spotlight in January 2014 when police and soldiers cracked down on workers protesting for a higher minimum wage, killing at least five people. The year before, a shoe factory collapsed, killing at least two workers.

The garment industry has been one of the key drivers of the Cambodian economy, which the World Bank forecasts will expand 7.5 percent this year, the fastest pace in all of East Asia.

The Human Rights Watch report, released in Phnom Penh, was based on more than 340 interviews with garment workers from 73 factories, union leaders, labour rights

activists, government officials and representatives of the local clothing industry and international brands.

Workers at 48 factories supplying international brands told researchers that overtime was forced instead of voluntary as mandated by law. Workers at 35 factories reported anti-union practices, including the intimidation or dismissal of labour leaders. Workers at 30 factories reported abuses specific to pregnant women, such as refusal to renew contracts.

Despite the legal minimum age for garment workers being set at 15, Human Rights Watch said it documented younger workers in 11 factories.

Human Rights Watch called on the government to hold factories accountable for abuse and to change its policies on inspection. It called on brands to publicly disclose their suppliers and to factor in the cost of safety, health and labour compliance into their contracts.

Bloomberg News

14 | Business Daily

March 13, 2015

International French consumer prices fall French consumer prices fell again yearon-year in February after registering their first decline in over five years in January, data showed yesterday, underlining the challenge the European Central Bank faces in meeting its inflation target. The annual fall of 0.3 percent came despite a 0.7 percent month-on-month rise which the INSEE statistics office said was largely due to seasonal increases in prices after the end of the winter sales. The data were largely in line with expectations. Economists polled

by Reuters had forecast an increase of 0.6 percent month-on-month and a negative rate of 0.4 percent year-on-year.

Britain to review telecoms regulation Britain said yesterday it would undertake the biggest review of the telecoms market for a decade to ensure it remains competitive for customers using more digital services than ever before. Regulator Ofcom said the review would identify whether there was scope for more deregulation, analyse the incentives for private sector investment in networks, and examine the level of competition in the market. Ofcom’s first major review of the market, which concluded in 2005, resulted in the fixed-line market leader BT opening its network to rivals such as Sky and TalkTalk.

U.S. exports at risk as bird flu confirmed

Euro zone factory output shows turn in sentiment in 2015 The data appears to back an emerging trend of improving morale among households

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utput at euro zone factories fell slightly in January, but yesterday’s data also showed evidence to support hopes that the bloc’s fragile economy may be recovering.

Industrial production in the 19 countries sharing the euro fell 0.1 percent from December, the EU’s statistics office Eurostat said, compared to the 0.2 percent rise forecast by economists polled by Reuters.

Still, on an annual basis, industrial production posted its best reading since July 2014, increasing 1.2 percent and outstripping economists’ expectations of a 0.1 percent rise.

That strong performance was helped by increases in France, Germany, Spain and Ireland as production of goods including televisions and computers rose 2.5

percent. Italy, which along with France and Germany makes up twothirds of industrial output, fell 2.2 percent however.

Overall, the data appears to back an emerging trend of improving morale among households who have suffered through the global financial crisis and the bloc’s ensuing debt crisis.

The euro zone crisis drove a vicious cycle of falling business consumer morale, repossessed homes and lengthening job queues that has sucked away demand for factorymade goods.

Now, a host of euro zone data, from retail sales to falling unemployment numbers, suggest that a weaker euro, cheaper oil, low interest rates and the European Central Bank’s moneyprinting programme are helping the bloc avoid the stagnation many

feared.

Industrial production was also revised up in December from November into positive territory, Eurostat said, meaning that on average, output has been growing since a decline in August.

Production of machinery used to make other goods, an indicator of future business, rose slightly in January from December. On an annual basis, capital goods production rose 1.4 percent in the first month of this year.

If production of those capital goods continues to increase, that should support business surveys and the view of the European Commission and the ECB that the euro zone will post modest growth in 2015 and an acceleration in 2016.

Reuters

Swedish minister laments low inflation and austerity Sweden exited from deflation in February for the first time in seven months as consumer prices rose an annual 0.1 pct Johan Carlstrom and Amanda Billner

S A case of bird flu in the heart of America’s poultry region is certain to mean more export restrictions, increasing U.S. supply and likely forcing the world’s biggest poultry companies to trim prices. The U.S. government announced the infection of highly pathogenic H5N2 avian flu in turkeys in Arkansas, home to Tyson Foods, the world’s biggest chicken company. The virus is unlikely to kill enough U.S. birds to offset the drop in overseas demand, however. There will be “more product on the domestic market and that will depress prices,” said Jessica Sampson, agricultural economist at Livestock Marketing Information Centre.

Panama’s regulator seizes lender branch Panama’s banking regulator said it had seized the local unit of Banca Privada D’Andorra (BPA), as the lender’s Andorra-based headquarters is being investigated by the United States government for possible money laundering. The action was taken to protect depositors, Panama’s banking superintendent SBP said in statement.

On Tuesday, the U.S Department of the Treasury named BPA as an institution of primary money laundering concern, alleging the bank processed proceeds of organized criminals in Russia and China, US$2 billion in laundered funds from Venezuelan state oil company PDVSA, and other criminal activity.

weden’s finance minister has one big concern: inflation, or more precisely, the lack thereof that’s now forcing the central bank to enact unprecedented stimulus in a full reversal on earlier tightening.

The biggest concern is “that we don’t get inflation up and that unemployment remains too high,” Magdalena Andersson said in an interview on the top floor of her ministry overlooking Stockholm’s City Hall.

The 48-year-old minister’s concern comes as Sweden has been criticized as a textbook case in how to go wrong in monetary policy. Riksbank officials, dubbed “sadomonetarists” by Nobel laureate economist Paul Krugman, are struggling to lift inflation as they are in full reversal on tightening made during 2010 and 2011.

While Andersson stressed it’s not her place to critique the politically independent Riksbank, she “noted” that the central bank has said it will need a more expansionary policy to meet the inflation goal.

The bank last month cut its repo rate to an unprecedented low of minus 0.1 percent and started buying government bonds as part of a plan to do whatever it takes to revive price growth. That mirrors a similar plan by the European Central Bank, which is also grappling with stagnant prices in the euro area.

Sweden exited from deflation in February for the first time in seven months as consumer prices rose an annual 0.1 percent, a report showed on Wednesday. That’s still far below the Riksbank’s 2 percent target and analysts at HSBC Bank Plc, Swedbank AB and other lenders say that policy

Sweden finance minister Magdalena Andersson in the presentation of the national budget

Andersson said she now sees the disadvantages of the euro that she worked for Sweden to join in 2003

makers will need to do more even as the price gain surpassed estimates.

Unemployment, seasonally adjusted, held at 7.9 percent in February, the statistics office said today.

What the government is now looking at is what effects the recordlow rates will have on the real economy, she said.

“What’s important to me is what can I do as a policy maker to make more of this,” she said. This is “also an opportunity for more investments.”

She reiterated that it’s worth examining whether the Riksbank would do better with a broader mandate. Such a change will need “broad” political consensus, she said.

Just returning from a meeting of finance ministers in Brussels, Andersson said she now sees the disadvantages of the euro that she worked for Sweden to join in 2003. The country, a member of the European Union, rejected joining the euro in a referendum that year.

While there are pros to the euro, the arguments from the no side have turned out to be “rather relevant,” she said.

Europe getting its house in order is a must for Sweden, she said.

Andersson, a graduate of the Stockholm School of Economics who also attended Harvard, earlier this month proposed looking into scrapping Sweden’s 1 percent budget surplus target for a balanced budget approach to free up money for investments.

The proposed switch will have little immediate effect since the government is already running deficits.

“It wouldn’t have any practical implications right now,” she said.

“But in the future, particularly for the next period, from 2018, it would make a huge difference if we had a balanced budget goal rather than a surplus goal.”

The minister also rejected calls by her allies in the Left Party to create a special investment budget and from labour unions to run even deeper deficits.

Bloomberg News

Business Daily | 15

March 13, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE STAR The (Malaysian) central bank has a stringent stress test in place to ensure any actions undertaken by companies in the country would not cause the banking system to collapse.

Governor Tan Sri Dr Zeti Akhtar Aziz said Bank Negara was transparent on how its conducts its stress test in detail ensured that banks minimum capital requirements were always be maintained. Speaking at a press conference after presenting the Bank Negara 2015 annual report, Zeti said the central bank had also a Financial Stability Committee and the Monetary Policy Committee to ensure adequate assessment of country’s financial system or economic dislocations.

THE JAPAN NEWS Major automakers and electronics makers are expected to agree to a pay-scale increase substantially higher than last year’s, The Yomiuri Shimbun said has learned. Toyota will likely to agree to a basic pay hike of ¥4,000 or more, which exceeds an increase of ¥2,700 last year. Meanwhile, Hitachi and Mitsubishi are expected to agree to an increase of ¥3,000, compared to ¥2,000 agreed in last year’s shunto wage negotiations. Labour unions of major automakers and electronics makers are making a uniform demand for a basic pay hike of ¥6,000 in this spring’s wage negotiations.

Why deflation is good news for Europe

THE PHNOM PENH POST The Kingdom’s telecom regulator announced this week that it would transfer telco operator revenues it traditionally receives to the Ministry of Posts and Telecommunications as part of government reforms on revenue collection. According to the Telecom Regulator of Cambodia announcement from March 10, money that the regulator used to collect from areas such as license fees and domain name system registration is to be received by the Ministry starting from January 2015.

TRC chairman Mao Chakrya declined to detail the financial figures this would amount to.

PHILSTAR Shell Philippines Exploration B.V. (SPEX), the upstream company leading the consortium that operates the Malampaya deep water gas-to-power project in offshore Palawan, has remitted US$900 million in royalties to the National Government in 2014, a top official said. In an interview, SPEX managing director Sebastian Quiniones said last year’s turnover amounted to US$900 million, bringing the total royalties remitted to the government since the project started in 2001 to US$8.5 billion.

He said last year’s payment was lower than the previous years’ remittances because of the decline in the prices of oil and gas.

Daniel Gros

Director of the Centre for European Policy Studies

I

n today’s global economy, there is no price as important as that of crude oil. More than 80 million barrels are produced (and consumed) daily, and a large part of that output is traded internationally. Thus, the sharp fall in the crude-oil price – from about US$110 last year to around US$60 today – is yielding hundreds of billions of dollars in savings for oil importers. For the European Union and the United States, the gain from that decline is worth about 2-3% of GDP. For Europe, the benefits of cheap oil might grow over time, because long-term gas-supply contracts are to a significant degree indexed to the oil price.

This represents another advantage for Europe, where prices for natural gas were, until recently, several times higher than in the US, which had been benefiting from lower-cost shale energy.

But many observers have argued that cheap oil also has a downside, because it exacerbates deflationary tendencies in the advanced countries, which already seem to be mired in a low-growth trap. The sharp fall in oil prices, according to this view, will make it even harder for these countries’ central banks to achieve the 2%

annual inflation rate that most have targeted in fulfilling their price-stability mandate.

The eurozone, in particular, seems to be in danger, as prices are now falling for the first time since 2009. This deflation is bad, it is argued, because it makes it harder for debtors, especially in the troubled economies of the eurozone’s periphery (Greece, Ireland, Italy, Portugal, and Spain), to pay what they owe.

What matters for debt-service capacity is the debtors’ income, not the general price level

But this fear is unfounded, because it is based on a misunderstanding. What matters for debt-service capacity is the debtors’ income, not the general price level.

As oil prices fall, households’ real (inflation-adjusted) income should rise, because they do not have to spend as much on fuel and heating. Lower oil prices make life easier, not harder, for highly indebted households in the US or the eurozone periphery. Falling consumer prices should thus be viewed as a good sign.

Most manufacturing enterprises will also benefit from lower energy costs, improving their ability to service their debts.

This, too, is particularly relevant in the eurozone periphery, where the non-financial sector accumulated too much debt during the credit boom that preceded the 2008 global financial crisis. Moreover, though most of the savings implied by lower energy costs might initially show up in higher profits, over time, competition will force companies to pass on some of these windfall gains in the form of lower prices or higher wages.

This is another important consequence of cheap oil: lower prices make it more difficult to

judge the point at which wage pressure becomes inflationary.

Because wages can increase to a greater extent without fuelling inflation, the US Federal Reserve Board might be inclined to delay hiking interest rates, which it is now widely expected to do this summer.

Public finances should also benefit from the deflation engendered by lower oil prices.

Government revenues depend on the value of domestic output, not only consumption.

Though lower oil prices depress consumer prices, they should boost production and overall GDP. Absent large price changes for raw materials, the consumer price index evolves along with the GDP deflator (the price deflator for the entire economy).

But that will not be true this year, because consumer prices are falling, whereas the GDP deflator (and nominal GDP) is still increasing. This should lead to solid government revenues, which is good news for highly indebted governments throughout the industrialized world, but particularly for the eurozone periphery.

The fall in (consumer) prices that the eurozone currently is experiencing should thus be seen as a positive development for all energy importers. The eurozone periphery, in particular, can look forward to an ideal combination of low interest rates, a favorable euro exchange rate, and a boost in real incomes as a result of cheap oil. In a deflationary environment, lower oil prices appear to make it more difficult for the European Central Bank to achieve its target of an inflation rate close to 2%. In reality, lower oil prices represent a boon for Europe – especially for its most beleaguered nations.

Project Syndicate

16 | Business Daily

March 13, 2015

Closing Deposit insurance to be implemented on H1 2015

China hopes yuan included in SDR basket in “near future”

The deposit insurance scheme will be implemented in the first half of this year, central bank governor Zhou Xiaochuan said yesterday. Public response to draft deposit insurance regulations was generally positive, Zhou said at a press conference on the side-lines of the country’s annual parliamentary session. In the end of November, the Legislative Affairs Office of the State Council published the draft regulations for public opinions. According to the draft, banks will pay insurance premiums and an agency will manage the money. The fund will pay maximum compensation of 500,000 yuan per depositor if a bank suffers insolvency.

One senior central banker said yesterday that China is “actively communicating” with the International Monetary Fund (IMF) on the possibility of including Chinese currency yuan, or RMB, in the basket of the Special Drawing Rights (SDRs). “We hope the IMF can fully take into account the progress of RMB internationalization, to include RMB into the basket underlining the SDR in foreseeable, near future,” said Yi Gang, vice governor of the People’s Bank of China. However, China keeps patience till conditions are ripe, Yi said at a press conference on the side-lines of the on-going annual parliamentary session.

Taiwan central bank chief opened to rate divergence with Fed Central bankers are scheduled to review borrowing costs next at a quarterly policy meeting in Taipei on March 26 Justina Lee

Taiwan’s central bank headquarters in Taipei

T

aiwan’s central bank Governor Perng Fai-nan said the island doesn’t have to follow U.S. monetary policy, sparking speculation interest-rate increases will be kept on hold after South Korea joined a global wave of monetary easing.

Central Bank of the Republic of China (Taiwan) doesn’t have to follow the Federal Reserve, which may raise

borrowing costs as early as June, Perng told lawmakers yesterday. The island’s benchmark interest rate will be increased this year for the first time since 2011, according to 11 of 20 economists surveyed by Bloomberg.

“Perng’s comments at the legislature were even more dovish than the Fed’s, plus he signaled Taiwan will seek stability,” said Tobby Lin, a

bond trader at Yuanta Securities Co. in Taipei. “I expect Taiwan’s policy to still follow the U.S. in terms of the broader direction, but it may not track the U.S. at each step.”

As Asian peers from China to India hop on the monetary-easing bandwagon, Taiwan is being put in a bind. While quickening economic growth allows room for tightening, such a move risks pushing up the local dollar, which has strengthened this year against the currencies of exports rivals Japan and South Korea.

The former continues to pursue an asset-buying policy while the latter unexpectedly lowered its benchmark interest rate to a record low yesterday.

Traders are waiting to see if the Fed will remove its pledge to be “patient” on raising rates at its March 17-18 meeting, even though Chair Janet Yellen cautioned lawmakers last month an imminent increase can’t be assumed even if the word was dropped.

Growth, inflation Taiwan’s economy expanded 3.51 percent in 2014, the fastest growth in three years, and the government forecast in February that gross domestic product would climb 3.78 percent in 2015.

The central bank has held its

benchmark rate at 1.875 percent since June 2011, a period in which inflation averaged 1.2 percent. Consumer prices fell from a year earlier in each of the last two months as oil costs tumbled, though Perng told lawmakers yesterday the island doesn’t face a deflation problem and could tolerate an inflation rate of 1 percent.

“Perng also played down speculation over deflation, which shows Taiwan may not cut rates,” Lin added.

Bank of America Corp. expects the monetary authority to hold rates for the rest of the year as “heightened market uncertainties press the CBC to act prudently,” Marcella Chow, an economist in Hong Kong, said in an e-mail. “We continue to see downside risks to rates, if inflation continues to grind lower while growth disappoints.”

Taiwan’s dollar has risen 0.2 versus the greenback this year to NT$31.670, one of only four emerging-market currencies tracked

by Bloomberg to gain ground against the dollar. South Korea’s won fell 3.2 percent and reached its weakest level in 20 months following an interestrate cut on Thursday. The exchange rate has a “far bigger” impact on Taiwan’s economy than interest rates, Perng said.

Bloomberg News

First online sales regulation to set reliable e-commerce

ECB says buys 9.8 bn euros in bonds in 3 days

Philippine budget deficit shrinks in 2014

C

T

T

onsumers who receive shoddy goods from online purchases can now hold trading platforms responsible, according to China’s first regional regulation on online sales issued yesterday.The Provisional Regulation on Online Sales Management gives consumers the right to ask e-commerce trading platforms to help settle their disputes with online businesses over unsatisfied purchases.E-commerce companies will be obliged to address to such applications within 7 days. Otherwise, they could face a fine between 1,000 yuan (US$159.7) and 10,000 yuan. The regulation was issued yesterday in Hangzhou, capital of east China’s Zhejiang Province, which is home to a number of China’s e-commerce heavyweights such as Alibaba. It will take effect May 1. E-commerce, especially the C2C-mode of Taobao.com, has made it easy for individual start-ups. However, complaints over shoddy commodities from online shopping were previously up to the consumer to resolve with the business. From May 1, all online businesses are required to make commercial registration at e-commerce trading platforms.

Xinhua

he ECB has bought 9.8 billion euros (US$10.4 billion) in eurozone bonds in the first three days of its programme to ward off deflation and stimulate growth, a senior official said yesterday.

“We have already bought 9.8 billion euros in bonds in three days” said Benoit Coeure, a member of the European Central Bank’s executive board said at a symposium in Paris.

He said the ECB was on “precisely the right path” to attain its objective of buying 60 billion euros of eurozone government and corporate bonds a month.

The ECB has embarked on a policy of socalled quantitative easing or QE, under which it plans to buy 1.14 trillion euros worth of bonds off banks and investors over the next 18 months. It hopes the money will be used to make new loans and investments, thus spurring growth and ensuring a dangerous cycle of falling prices does not set in.

AFP

he Philippine government’s budget deficit in 2014 was only 0.6 percent of the country’s gross domestic product (GDP), as the government missed its spending target for the entire year, according to data released yesterday.

The Department of Finance (DOF) said that relative to the size of the economy, the full year fiscal deficit was lower than both the two percent program and the 1.4 percent deficit-to-GDP ratio recorded in 2014. In nominal terms, the budget shortfall only amounted to 73.1 billion pesos (US$1.66 billion), 73 percent below the 266.2 billion pesos ceiling for the previous year.

According to DOF figures, the deficit shrank due to drastically reduced spending, with public expenditure amounting to 1.98 trillion pesos or 13 percent below target.

It was a minimal increase of five percent from the 2013 spending level of 1.88 trillion pesos.

The current government has been criticized for not spending enough since it began administration in 2010.

Xinhua