Macau business daily, Apr, 13, 2015

MOP 6.00 Year IV

Number 768 Monday April 13, 2015

Publisher: Paulo A. Azevedo

Closing editor: Luís Gonçalves

Second Hengqin-Mainland bridge operational by year-end Page 4

Eyes wide open

1,620 cameras watching 30.2 km2. The scope of the whole surveillance network in Macau when completed. The Unitary Police Service head said the fourth and final phase will add 800 cameras. With locations to be selected by October. In ‘quiet places’ and ‘places with safety hazards’, Ma Io Kun says. Authorities will take about 2.5 years to design and install the surveillance network. Which will be further expanded to add cameras to future reclamation land and the new Delta bridge border PAGE 5

Shun Tak buys Shanghai hotel for MOP900 mln

INTERVIEW

Times a’ changing

Page 4

It’s the rise of poker in a baccarat dominated market. With gaming revenues plunging, Poker King Club senses opportunity. Expecting its new location at The Venetian to increase revenues by 25 pct. Business Director Winfred Yu says big baccarat players are switching to high-stakes poker. Exposure to the mass market, more space and more tables are imperative, he says. As is the unique sense of control skills that poker demands. The Club also has its sights set on Korea, Vietnam and the Philippines

PAGES 6 & 7

Fly away

www.macaubusinessdaily.com

MGM Resorts to gain MOP3.2 bln from CityCenter

HSI - Movers April 10

Name

Page 3

There’s a definite chill in the air. Shenzhen authorities will soon restrict residents to one Hong Kong visit a week.

This, according to a Hong Kong member of the National People’s Congress. Almost 50 million Mainlanders visited HK last year. And have been blamed for pushing up shop rents, property prices, and stripping shops of daily necessities. Macau is also talking to Beijing about controlling Chinese visitor numbers

No rally for hotels

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Page 5

V Air is the latest low cost carrier to serve Macau. The unit of Taiwan’s TransAsia Airways began operating its new Taipei-Macau route last Friday. Making it the fifth company to fly the route here. V Air GM Eleni Lung says the airline hopes to co-operate with Macau’s gaming operators. And launch new products targeting the Macau market

Closing the door

Bauhaus enjoys 11 per cent sales growth in 2014

Page 9

Collateral damage

Up, up and away. Chinese stock markets are rocketing.

But the punters are sidestepping the hotel portfolios.

The over-expanded accommodation sector is flat or worse, while e-travel firms shine

It’s China’s anti-graft campaign. So says a Hong Kongbased jeweller pulling out of a local trade show next month. The company believes the sharp fall in VIPs will seriously affect attendance. The ‘European, Asian Watch, Jewellery and Antique Coins Show’ has invited 30 Hong Kong vendors to the event. But refunds will be necessary plus some serious rescheduling

Page 10

Page 2

Macau casino bonds slump as Xi preaches to Wynn on diversification Page 8

%Day

Ping An Insurance Gr

6.10

Belle International

4.55

Hong Kong Exchanges

3.92

Hang Lung Properties

3.21

Power Assets Holding

2.90

China Merchants Hold

-0.74

China Resources Land

-1.00

China Unicom Hong Ko

-2.01

Want Want China Hol

-2.18

China Mengniu Dairy

-4.09

Source: Bloomberg

I SSN 2226-8294

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2 | Business Daily

April 13, 2015

Macau

Jeweller axes trade show amid anti-graft fears A Hong Kong-based jeweller says Beijing’s anti-graft campaign is the reason for its cancellation of a trade show due to be held soon, as it expected a much diminished VIP client turnout Stephanie Lai

sw.lai@macaubusinessdaily.com

A

Hong Kong-based jeweller has blamed China’s anti-graft campaign as the reason for its cancellation of a trade show to be held at a Macau casino-hotel next month, as the company believes that the sharp fall in VIP clients could seriously affect attendance.

The inaugural trade show, titled ‘European, Asian Watch, Jewellery and Antique Coins Show’, was originally to be held at the city’s Grand Emperor Hotel from May 2-3 as the Hong Kong-based jeweller Imex Asia Ltd. would like to target the VIP clients that frequent the city’s casinohotels as its potential attendees.

The show, which was opened for registration and first promoted in February, has invited 30 Hong Kong vendors to the event; now, however, the organiser would have to refund them after announcing their axing of the show, event manager Vincci Tung told Business Daily.

“For Macau, where this type of jewellery trade show is still not held as frequently as Hong Kong, we still think the place has potential for the event with its tariff-free status,” said Ms. Tung, adding that her company

worse than what we expected, and that there is really a dramatic decrease in VIP customers visiting the casinos,” Ms. Tung said. “So, eventually we decided to call off the show for now and reschedule for another date.”

The event manager noted that the watch and jewellery trade show is likely to be held again at Grand Emperor Hotel as Macau is still its preferred destination for the event.

Weak sales

has held similar trade shows in Hong Kong before.

Restricted access A statement published on the trade show’s official website, which announced the cancellation of the event, said that the anti-graft drive of China has resulted in the ‘restricted access’ of certain Mainland officials.

“By that we are just spelling out what we expect for the turnout of the trade show, but not that we’ve already fixed appointments with this particular group of clients,” said Ms. Tung. Nevertheless, the event manager did confirm that the VIP clients that frequent the casino-hotels here are their target audience.

“We saw that the [retail] atmosphere in recent terms is really

The city’s retail sales of watches and jewellery last year amounted to MOP18 billion-worth (US$2.3 billion), a 11.4 per cent decrease compared to the previous year. This is also the first annual drop seen in the trade of watches and jewellery registered since 2003, data from the Statistics and Census Service reveals.

The year-on-year decline in sales of watches and jewellery began in the second quarter of last year, according to official data. During the final quarter of last year, the city’s retail sales of watches and jewellery slumped 21 per cent year-on-year to MOP4.4 billion.

UM joins Hengqin FTZ think tank The Guangdong Experimental Free Trade Zone Zhuhai Hengqin New Area Innovation Institute has been established, with the University of Macau joining the co-operation framework

T

he Hengqin New Area Managing Committee has signed an agreement for a strategic co-operation framework with four institutions; namely,

the Chinese Academy of International Trade and Economic Co-operation of the Chinese Ministry of Commerce, the Institute of the Free Trade Zone of

the Shanghai University of Finance and Economics, the Hong Kong, Macau and Mainland Collaborative Innovative Development Centre of Sun Yat-sen University, and the Centre for Macau Studies of the University of Macau.

The agreement seeks to facilitate the China Guangdong Experimental Free Trade Zone Zhuhai Hengqin New Area Innovative Institute. Five parties will co-operate in terms of policymaking consultation, scientific research, talent nurturing and training among many other fields, in order to provide theoretical guidance and applicable research

services for the building of the Hengqin New Area.

The signing ceremony took place last Thursday.

Vice rector of the Chinese Academy of International Trade and Economic Cooperation, Li Guanghui, said that the institutes that are involved in this agreement will combine the strategic positioning of Hengqin and its characteristics with the institutions’ own advantages, in order to provide intelligence support for the innovation of the Free Trade Zone system and policymaking. They aim to produce research results that are of high academic value as well as being practical, in order to

contribute to the development of the Guangdong Free Trade Zone.

Hengqin New Area Managing Committee Director, Niu Jing, said that the agreement means that every party has reached a consensus to collaboratively support the establishment of the Guangdong Experimental Free Trade Zone in Hengqin New Area, and contribute to the intelligence the free trade zone needs, adding it was a sign that a think tank of collative wisdom was to be founded by many professional research institutes.

Mr. Niu said that Hengqin Innovative Institute is organising a specialists committee and will be involved in decision-making regarding some significant policies. Much research will be conducted regarding the building of the Free Trade Zone as well as innovative policy and systems, in order to safeguard the advanced, efficient and innovative development of Hengqin.

Business Daily | 3

April 13, 2015

Macau

V Air launches Taipei-Macau route The service runs three times weekly - on Monday, Wednesday and Friday - but is expected to increase to a daily operation in early June Joanne Kuai

joannekuai@macaubusinessdaily.com

V

Air, a low cost carrier unit of Taiwan’s TransAsia Airways began operation of its new route from Taipei to Macau last Friday.

General Manger of V Air, Eleni Lung, said at the flight launch ceremony at Macau International Airport that currently the service runs three times a week - on Monday, Wednesday and Friday - but is expected to increase to a daily operation in early June, Chinese newspaper Macau Daily reports.

The Taiwan budget

airline’s general manager added that since the company had started operations last December they have been preparing the route to Macau and were recently granted the permit by Macau Civil Aviation Authorities.

Ms. Lung said that they usually have six weeks to prepare for sales before a route is initiated. This time, however, the company wanted to launch the route to Macau as soon as possible thus ticket sales began less than two weeks before the flight took off.

On the first flight, the load factor was around 70 per cent, and on the return flight to Taiwan around 30 per cent of seats were taken.

Ms. Lung added that although the preparation for sales was relatively short they hoped to step up efforts in promoting in the future and will launch different promotions for Macau and Taiwan customers.

Increasing competition The new open sky agreement, inked by both parties last year, allows more

airlines to fly the route carrying unlimited passengers and freight between Macau and Taiwan. At the end of last year, Taiwan low cost carrier Tigerair Taiwan started its route to Macau.

With V Air entering the market, in tandem with Macau’s flagship carrier Air Macau Co. Ltd., and Taiwan’s Eva Airways Corp., and Mandarin Airlines, five airlines now offer bilateral flights between Macau and Taiwan.

V Air’s general manger said that despite fiercer competition, based on their experience when launching routes to Thailand the companies offering those routes were not affected.

Instead, they saw an increase in the number of passengers and their frequency of travelling as there was more choice. Eleni Lung believes the same will happen in the Macau market.

Ms. Lung added that Macau offers a variety of attractions, such as different

types of hotel, shopping, and gaming facilities which are suitable for young travellers as well as families. She added that in future they hope to cooperate with Macau’s gaming operators and launch some new products targeting the Macau market.

For now, flight ZV 155 will depart Taipei Taoyuan International Airport at 2010 and arrive in Macau at 2155.

The return ZV156 flight will then take off from Macau at 2255 and arrive back in Taipei at 0045 the following morning.

The budget carrier said that it will use 194-seat A321 jets on the route for the time being, with an A320, expected to be delivered in mid-May, to join the operation later.

Macau is V Air’s third ‘international’ destination after Thailand’s Bangkok and Chiang Mai. It said it also plans to fly to Indonesia, Malaysia, Japan and South Korea in the future.

4 | Business Daily

April 13, 2015

Macau

Second HengqinMainland bridge operational by year-end

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he second Hengqin Bridge that connects the island to the rest of Zhuhai has already seen substantial parts completed and will be ready for traffic by the end of this year, Chinese-language media report, quoting the constructor.

The bridge, under construction for more than two years, is about 6.8 kilometres long and is a twoway, six-lane bridge that is part of the Jinding-Gaolan Port Highway, state-run news outlet China.org.cn and Macao Daily News report.

About 2.6 billion yuan (US$419 million) has been invested in this project, which is built by a Zhuhaibased joint venture formed by state-owned CCCC Second Harbour Engineering Co. Ltd. and CCCC Fourth Highway Engineering Co. Ltd. The project is also the first of its kind in Zhuhai that adopts a build-transfer format whereby the government will repurchase it within three years from the date of the commissioning of the bridge, according to reports.

Currently, only one bridge connects Hengqin island to the rest of Zhuhai. The deputy party

Pansy Ho

Shun Tak buys Shanghai US$419 hotel for MOP900 million

million

Amount invested in the two-way, sixlane bridge part of the Jinding-Gaolan Port Highway

secretary of Hengqin, Mr. Ye Zhen, told media in late February that the second bridge project was expected to be completed by National Day Holiday in October.

When this project is ready for traffic, people will have direct access to Zhongshan and Guangzhou in the north, the Jinwan area of Zhuhai in the west and Macau in the east.

S.L.

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hun Tak Holdings Ltd. said its indirect wholly-owned subsidiary Host Wine had entered into an agreement with a Shanghai real estate development company regarding the acquisition of a hotel property in Shanghai for 700 million yuan (MOP900 million), the company told Hong Kong Stock Exchange last week.

According to the filing by Shun Tak, the hotel property is located at Shanghai MixC, which is an integrated commercial development project being developed by the vendor. In addition, the property will be developed into an 8-storey hotel building, occupying a gross floor area of 29,000 square metres.

Shanghai MixC is located in Minhang District in the southwest

of Puxi, with a total gross floor area of around 530,000 square metres.

The integrated complex that the hotel property will be located in will also contain a high-end shopping mall, 11 office buildings and headquarters, a Metro Museum and a sky garden, the group said in the filing.

The vendor, with no official English name, is 50 per cent owned

by Chinese property developer China Resources Land Limited and Shanghai Shengtong Metro Assets Management Company Limited.

Meanwhile, the hotel property will be operated by another subsidiary of Shun Tak – hotel management company Artyzen Hospitality Group, to extend two hotel product offerings totaling 478 rooms.

K.L.

Bauhaus enjoys 11 per cent sales growth in 2014

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ong Kong-listed clothing retailer Bauhaus International (Holdings) Ltd. saw same stores sales rise by double digits in the two Special Administrative Regions during the fiscal year ended March 31.

In addition, its other major markets namely, Taiwan and Mainland China - also experienced growth in same store sales.

The retailer told Hong Kong Stock Exchange last week that its same store sales in Macau and Hong Kong had registered a year-on-year increase of 11 per cent. Meanwhile, for the fourth quarter ended March 31, same store sales of the company in the two cities also posted year-on-year growth of 6 per cent.

However, in the filing, the company did not disclose information in terms of financial results, such as revenues and profits.

In addition to the Hong Kong and Macau markets, Bauhaus’ same store sales in Taiwan also rose by 5 per cent in the fiscal year, or 6 per cent for the three months.

Same store sales in the Mainland China market, meanwhile, registered the strongest growth for the fourth quarter, up 8 per cent, compared to the same period of last year. Its annual sales also increased by four per cent year-on-year.

According to the filing of the retailer, it closed one store in Hong Kong and Macau as at March 2015 despite annual same store growth of the two cities rising.

Nevertheless, the number of stores of the company in Taiwan and Mainland China had increased by 8 and 5 stores, respectively, giving Bauhaus 209 stores in the Greater China region as at the end of March this year.

According to its interim report, published in November 2014, Bauhaus registered a net profit of HK$20.9 million during the six months, representing a sharp increase of 30.6 per cent, compared to HK$16 million during the same period of 2013.

K.L.

Business Daily | 5

April 13, 2015

Macau Wang Zhimin appointed SARs Affairs Office vice head The deputy director of the Liaison Office of the Central government in Hong Kong, Wang Zhimin, has been promoted as the deputy director of the Hong Kong and Macau Affairs Office of the State Council. The Council announced last week that the Chinese official is replacing the former deputy director of the sub-office of the Council, Xu Ze, who has retired. Mr. Wang, originally from Fujian Province, started to serve the Liaison Office in Hong Kong in 2006. Before that, he had served the Hong Kong branch of Xinhua News Agency for six years.

Security head: 1,620 surveillance cameras in place within three years Some 800 cameras – to be located in “secluded and quiet places”, and “places with potential safety hazards” - will be chosen by the end of October, according to police Joanne Kuai

joannekuai@macaubusinessdaily.com

C

ommissioner General of the Unitary Police Service, Ma Io Kun, says that they are studying the fourth phase of installing surveillance cameras around Macau, with 800 to be located in quiet places, and places with safety hazards.

Mr. Ma revealed that the task force has launched inspections in relevant locations and that they will finish choosing all 800 spots by the end of October. According to a preliminary calculation, it will then

take the authorities 996 days to design and install the surveillance network although the time can be shortened, according to the Commissioner General.

He added that completion of the fourth phase will also symbolise the completion of the whole surveillance network in Macau, which would then have 1,620 cameras. The Unitary Police Service head said that they will complement and improve the surveillance system, including adding

more cameras on future reclamation land as well as the border of the Hong Kong-Zhuhai-Macau Bridge.

Mr. Ma was speaking during the Policy Address of the security section; Secretary for Security Wong Sio Chak and his team answered questions from legislators at the Legislative Assembly last Friday. Mr.Wong said that the installation of the cameras is to help prevent crime and aid in traffic accident investigation.

Some legislators questioned the legitimacy as well as a detailed timetable of the surveillance network.

But neither budget, locations nor supervision system of the network was disclosed during the two-day session at the Assembly.

Secretary for Security Wong Sio Chak also said that tackling junk message stations - usually referred to as ‘fake base stations’ - is a difficult war, but “even if there is no effect, we have to do it anyway, because that’s what citizens need”.

During the Policy Address, Wong Sio Chak said that nowadays, when entering the Macau SAR through Gongbei Border Gate, a mobile

phone would receive at least six junk messages when it switches network.

Mr. Wong added that these fake base stations are usually located in residential units and that police cannot raid the units randomly but have to apply for a warrant from the courts. Some fake stations are even located in vehicles travelling in the vicinity of the border gate.

The security head of Macau says that tackling junk message stations requires co-operation with Zhuhai authorities. Mr. Wong pointed out that since November last year, four operations have been launched, with three cases involving cross-border crime.

He further indicated that their action has had a limited effect in preventing others from setting up junk message stations because the punishment is relatively light, usually involving imprisonment for less than one to three years. Also, if the offender is not local, he or she would be deported and banned from entering Macau but these people can still operate the stations in Mainland China.

MGM Resorts to gain MOP3.2 billion from CityCenter JV

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S gaming operator MGM Resorts International, parent company of local gaming corporation MGM China, announced last Friday that its joint venture CityCenter, a casino and entrainment complex in Las Vegas, had approved the release of a US$400 million (MOP3.2 billion) special dividend.

According to the press release of MGM Resorts, the US$400 special dividend will be paid at the end of this month and will be evenly divided

by MGM Resorts and its partner, global holding company Dubai World, representing their pro rata share.

“CityCenter is a rapidly appreciating asset and has demonstrated significant operating growth since opening,” said Jim Murren, Chairman and CEO of MGM Resorts International and

Chairman of CityCenter. “Both members believe that CityCenter’s strong financial position and future free cash flow profile firmly positions it to begin to return capital to its shareholders.”

In addition, MGM Resorts said its joint venture had also approved a dividend policy, which will make annual distributions of up to 35 per cent of excess cash from CityCenter.

Last Wednesday, MGM China announced that its credit facility had been increased to US$3 billion from the original US$1 billion. The chief executive of the local gaming operator, Grant Bowie, said the financing would be used for general corporate purposes and to provide financial flexibility for the company to develop its new casino project MGM Cotai.

K.L.

6 | Business Daily

April 13, 2015

Macau “Macau cannot only depend on baccarat players” Poker King Club moved last month to its permanent location at The Venetian and is expecting revenues to increase 25 per cent. However, Business Director Winfred Yu told Business Daily that the company is expanding to Korea, Vietnam and the Philippines. Mr. Yu adds that in the past five years several big baccarat players have switched to high-stakes poker João Santos Filipe

jsfilipe@macaubusinessdaily.com

After moving from StarWorld Hotel to The Venetian, Poker King Club moved last month to its permanent location at that resort. How important is this change for the company?

Poker is not a very profitable game compared to a lot of other casino games but moving to The Venetian gives us much more freedom to manage our space and tables.

While StarWorld has around 507 rooms and around 250 gaming tables, The Venetian has more than 800 gaming tables and the rooms, including Cotai Central, are around 8,000.

Now, if we want to organise a 500 or 800-person tournament the casino where the tournament is hosted will also want the players to stay at their property. To bring 500 people we will need around 200 rooms, and The Venetian can provide me with that. In this case, StarWorld wanted to support us and accommodate these people but they did not have the capacity.

Also, The Venetian gave us a permanent area and it is easier to expand. As we did at Chinese New Year or during tournament time, we can always expand cash game tables from 7 or 8 to 12 tables when it is needed.

Do you believe this move will attract more clients to King Poker Club and help boost the expansion of poker in Macau?

This move is great not only for our future but also for the future of poker and Macau. Especially when King Poker Club is right on the mass gaming floor and in the central area of The Venetian.

I believe that Venetian is the casino with the highest circulation of persons per day in the world.

They have about 88,000 travellers passing through everyday. This gives us a much better opportunity to absorb and promote this game in Asia, especially among people that may not have played poker or may not have the chance to get in touch with this game.

Also, The Venetian has a concert hall, and a convention area where a lot of events are hosted. Some people attending these events are already poker players. But not every casino in Macau has poker rooms so now it’s much easier for them when they’re finished with their job to go out and enjoy.

But how do you see exactly this room improving the promotion of poker in Macau?

At the moment, only three properties in Macau offer poker to their gamblers. However, now The Venetian has given us a very nice location and huge space and also the support. We have a permanent tournament area right next to the cash games, so we can prepare more tournaments and different varieties of poker games. We have the space for poker tournaments

that will bring players from all over Asia who in turn have the chance to come to Macau and try The Venetian.

This move will allow you to have more freedom in the management of the club.

How do you perceive the ideal atmosphere for a poker room, and how can it fit into the model of Macau casinos?

Poker is not a game in which people play two hands and leave, as happens with other games such as baccarat. When I play poker I go to a place where I feel at home.

It’s like a club atmosphere where I find my buddies and where I’m going to stay for three, four or five hours. I think as well that the trend from 20 or 15 years ago when everybody was coming here to play baccarat, baccarat and baccarat is also changing. The market needs to offer variety to the players. Still, the purpose of a poker room in a casino is not only giving variety for the players. Just to give an example: if I don’t play five hours of poker, my girlfriend won’t lose MOP10,000 in the slot machines while I’m playing poker (laughs). This is a business model that a lot of casinos in Las Vegas have understood over the years because they want to increase the number of people in casinos from different groups of clients and then transfer them to playing different games, too.

How much do you expect your revenue to increase with this new room at The Venetian?

I hope that within this year we can increase our revenues by 25 to 30 per cent. This is based on the fact that we can now access more gaming tables when we need them and because The Venetian has the luxury to provide them.

In the first day after the move, in the afternoon our poker room was operating almost at full capacity.

I hope that if this trend continues that I can ask for an increase in the number of tables and accommodate more poker players coming to Macau.

In these [high-stake] tournaments a lot of them have never seen half a million or 250,000 buy-in, unless a group of the called Chinese businessmen are over there

Besides this move, is Poker King Club planning to expand its operations to other countries?

We’re going to open a room in Manila at the Solaire Casino. One of the reasons is that SunCity is opening rooms there as well. So naturally they will provide us access, as they want to have a brand in the poker room. Poker King will be in Solaire by April 27. We’ve already made a deal with Resorts World in Jeju Island in Korea. Right now, they don’t have enough rooms and tables for us but as they expand they’ll have rooms available. Also, we’ll be in Royal Casino Hotel Halong Bay in Vietnam. That’s already confirmed. We expect to be there before the end of the summer.

Chinese gamblers are big fans of baccarat. Do you think people here are becoming more interested in poker?

Generally, in Asia and Macau there’s no doubt that baccarat is still the main game. But definitely over the past five years I’ve seen a lot of big baccarat players switching to high-stakes poker. In the international poker market a lot of high-roller tournaments are based on our Macau VIP base. And in these tournaments a lot of them have never seen half a million or 250,000 buy-in, unless a group of the called Chinese businessmen are over there. More and more local baccarat players are changing to poker. According to the Chinese

Business Daily | 7

April 13, 2015

Macau …if I were a casino owner, losing 30 per cent of my baccarat players and having empty rooms, I would turn my attention to poker players

are dropping they need poker more than before. I may be wrong but if I were a casino owner, losing 30 per cent of my baccarat players and having empty rooms, I would turn my attention to poker players.

Excluding VIP players, in terms of revenue for casinos there is a gap between baccarat and poker players. But poker players will come and at least they will consume food and beverages, they will book rooms and they will use the other services supporting the venues.

Casinos are now looking at numbers they have not looked at before.

How do you perceive gaming revenue trends? Do you believe it will continue to decline or do you expect it to change? mentality, skill games are one of their favourite.

Is the fact that poker is not only about luck but the skill of the player one of the main factors driving the choice of these gamblers moving from baccarat to this game?

Players do not consider poker only as a game of chance. It’s not like baccarat where if you get nine you win. In this game, the highest level is not about your cards but rather about what you make your opponents believe you have in your hands. That is the difference between poker and other casino games. In other casino games the outcome is already set. When the deck is put on the shuffle the outcome is already known. But in poker you don’t need to have the best hand to win and you can win with the worst hand of the table.

In this game you have more control over it and that’s why Chinese and other players are falling in love more and more with poker.

They think they have control over it. They can change the outcome and the result. Also, the successful players know how to maximise the amount of bets of other players when they have the winning hand and they know how to minimise their loses when they have a hand that they cannot get away with.

In poker, win and lose is about the right decisions. But, of course, if the cards on the table don’t go your way there’s nothing you can do.

What is the profile of the poker players in Macau? And what kind of client is Poker King Club targeting?

When I decided to come to Macau and get into the poker business I was definitely after the Chinese gamblers. But this decision is also related to a little bit of national pride. There are many known international brands related to poker from the United States or Europe. But poker in China is still at the middle level internationally, which of course is also a consequence of the fact that in Mainland China you don’t have a legal gambling environment.

This also limits the real number of poker players. However, I believe this market is bigger than any other in the world.

Gaming revenue has been declining for ten months now.

How has it affected King Poker Club?

Actually, I believe this is affecting us in a good way. As revenue goes down the market realises Macau cannot only depend on baccarat players. Now the majority of hotel rooms are reserved and occupied by baccarat players. But as revenues

I believe this is just a balancing period for the market. I’m not going to be too worried about Macau. Probably, it could decline more but slightly. I’m not an expert but I can see a coming back.

Not right away and not a massive recovery but I can see it ahead.

The new casinos and projects being built in Cotai are not only offering gaming elements but a lot of other facilities, shows, themed parks, shopping places. This will help bring much more people back to

Macau. But overall now we are still doing well.

In Macau, rental costs are one of the problems of running a business. How do you deal with this?

We always make different deals with different casinos. Not only in relation to rental. Let me give you this example. If you are a casino you want to have a coffee shop, you’re not going to hire people and

The trend from 20 or 15 years ago when everybody was coming to play baccarat is changing

train them to sell coffee. You just rent it to Starbucks. We provide the same service to casinos but concerning poker. They will need poker, they will look for a brand to bring to their casinos, and Poker King is a well established brand to provide this. We already have a big client base and because of the co-operation with our parent company – SunCity – we have a very advanced membership system.

Another of the difficulties faced by companies is related to the lack of human resources. Is this a problem for Poker King Club?

This is a problem for the whole of Macau. Also, for us it’s very hard to find good poker employees because first of all this game is new to Asia. I would also say that 80 to 90 per cent of Macau casino workers didn’t know this game five or six years ago. Basically, it’s all new training and also with such a low unemployment rate and as more casinos are being built workers don’t feel that they need to learn about poker in order to work in the industry. This is because they have so many jobs to choose from. That really gave us a hard time. But we have been doing a good job so far.

8 | Business Daily

April 13, 2015

Gaming

Macau casino bonds slump as Xi preaches to Wynn on diversification

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lumping Macau gaming revenues are catching up with casino bonds, as the government seeks to diversify the entertainment on offer in the world’s largest gambling hub.

The yield on Wynn Macau Ltd.’s US$1.35 billion 2021 notes has soared 126 basis points from last year’s low in July. While that on Melco Crown Entertainment Ltd.’s similarmaturity securities has jumped 135 basis points since July 10. The average rate in a Bank of America Merrill Lynch index of Asian high-yield notes has risen 56 basis points since July 1.

Melco Crown and Galaxy Entertainment Group Ltd. will open new hotels this year, followed by Wynn Macau, MGM China Holdings Ltd. and Sands China Ltd. in 2016, as developers say they are heeding calls to offer broader activities. Chinese President Xi Jinping’s crackdown on corruption, an anti-vice campaign and a slowing economy have driven

Macau casino bonds face high headline risk and high credit profile risk Arthur Lau, Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments

a 10-month slide in gross gaming revenues in the Macau SAR. “Macau casino bonds face high headline risk and high credit profile risk,” said Arthur Lau, the Hong Kong-based head of Asia exJapan fixed income at PineBridge Investments, which managed about US$72.9 billion worldwide at the end of 2014. “Anti-corruption isn’t going away any time soon and the Chinese economy continues to slow. Combined with structural reform in the sector, we expect the fundamentals to keep deteriorating.”

‘Preaching to choir’ Macau’s gross gaming revenues fell 37 per cent in the first quarter from a year earlier and the median forecast in a survey of 13 analysts

by Bloomberg is for a 21 per cent slump in 2015. Xi used a December visit to suggest the city diversify and “push for a healthy economic and social development.” Macau’s Chief Executive, Fernando Chui Sai On, last month pledged a five-year plan to make the territory less dependent upon casinos.

“When you hear that the central government and the Macau Government urge operators to diversify the attractions of their facilities, when they speak to us they’re preaching to the choir,” Stephen Wynn, chairman and founder of Wynn Resorts, said on a February 3 conference call, a transcript shows. “We have learned in the last 12 years the way to behave in China, and that is to listen very carefully to what the leadership says.”

Brokerages have cut earnings estimates for Macau’s casinos by an average of 40 per cent since the

We have learned in the last 12 years the way to behave in China, and that is to listen very carefully to what the leadership says Stephen Wynn, chairman and founder of Wynn Resorts

June peak, according to Bloomberg Intelligence analysts Tim Craighead and Margaret Huang. The consensus projection for Wynn Macau, which reports next month, is for a 26 per cent drop.

Expansion risk MGM China Holdings Ltd., chaired by the daughter of billionaire casino operator Stanley Ho, amended and extended a HK$12 billion (US$1.55 billion) loan this week, according to people familiar with the matter, who weren’t authorised to speak publicly and asked not to be identified.

“The whole sector is still spending for expansion at the moment, so free cash-flow could be negative in the near term,” said Victor Yip, a consumer cyclical analyst with UOB-Kay Hian Holdings Ltd. in Hong Kong. “But all the casinos are still making profits, so

I don’t expect any threat in their debt repayments unless there is significant deterioration in their revenues.”

Melco Crown’s 2014 revenue dropped 5.6 per cent to US$4.8 billion, its first decline since 2009, according to Bloomberg-compiled data. Earnings before interest, tax, depreciation and amortization, or Ebitda, dropped 15 per cent. That pushed its total debt to Ebitda leverage to four times, the highest since 2010.

VIP woes There’s also a risk that new developments may not be allocated the number of table permits they had originally planned for, according to Alex Bumazhny, a director for gaming, lodging and leisure at Fitch Ratings Ltd. in New York. There’s some evidence VIP business is moving to other jurisdictions with less Mainland government scrutiny, Bumazhny wrote in a March 30 e-mail.

VIP gamblers made up about 60 per cent of casino revenues in Macau last year, according Joe Poon, an associate director at Standard & Poor’s. Revenue from VIPs dropped 29 per cent in the fourth quarter last year, official data showed.

“As far as credit exposure, all six concession and sub-concession holders maintain solid credit profiles and for the most part have their Cotai projects fully funded,” Fitch’s Bumazhny said.

“However, certain parent companies have built their capital allocation policies around the assumption that Macau can produce large and stable dividends and these assumptions may have to re-evaluated.”

Bloomberg

Business Daily | 9

April 13, 2015

Hong Kong

China to curb visits to Hong Kong

by Shenzhen residents Shenzhen authorities will soon restrict residents to one Hong Kong visit a week, from an unlimited number of daily trips Hong Kong returned to Chinese rule in 1997 under a ‘one country, two systems’ formula that ensured it autonomy. Visitors from the Mainland need permission to visit.

Media said the curbs could come into effect as early as today. Shenzhen is just a short train ride from Hong Kong.

Blackout

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hina will limit visits by residents of the city of Shenzhen to neighbouring Hong Kong, a politician and media said on Sunday, following recent tension in the former British colony over growing numbers of Mainland visitors.

Hong Kong has seen a groundswell of discontent over the number of Mainland Chinese visiting the crowded city where frustration with what many residents see as attempts by Beijing to

restrict democracy erupted in protests last year.

Shenzhen authorities will soon restrict residents to one Hong Kong visit a week, from an unlimited number of daily trips, said Michael Tien, a Hong Kong member of China’s parliament, the National People’s Congress.

“It will definitely happen,” Tien told Reuters. “I’ve heard from very reliable government sources.”

On the website where residents of Shenzhen apply for Hong Kong visas, the option for multiple visits a year could not be selected yesterday.

There was no immediate response or confirmation from the Shenzhen Government.

The Hong Kong Government said any announcement would come from Mainland authorities. But it acknowledged, in a statement, that it had proposed concrete measures to adjust visas that allow Shenzhen residents multiple entries to Hong Kong. Some 47 million Mainland Chinese visitors streamed into Hong Kong last year, more than six times its population.

While the tide has powered growth with spending in luxury shops, restaurants and hotels, Mainland

visitors have been blamed for pushing up shop rents and property prices, and stripping shops of daily necessities such as baby formula and cosmetics.

Occupy effect Travel industry executives say political tension in Hong Kong including democracy demonstrations and protests against Mainland shoppers, in which some people have been harassed, have discouraged Mainland tourists.

The travel industry had spoken out against any curbs on visitors.

Hong Kong’s retail sales fell 2 per cent in the first two months of the year, stoking concern of a retail slowdown due to a drop in tourists.

“I can go shopping in the U.S., Japan and South Korea in future, where service is good and prices are cheap,” someone called ‘HiReaper’ wrote on Weibo, China’s answer to Twitter.

In 2003, Beijing opened the floodgates to Mainland tourists after Hong Kong’s tourism slumped because of an outbreak of severe acute respiratory syndrome.

Reuters

10 | Business Daily

April 13, 2015

Greater China China, Japan, South Korea joint tourism

Markets snub hotels amid rally As expansion plans exceed growth while e-reservations companies succeed

Japan, China and South Korea yesterday agreed to launch joint tourism event, the Visit East Asia Campaign, to make the three countries as a tourism combination to attract visitors beyond East Asia. According to a joint statement released after a meeting of chiefs in charge tourism in the three countries yesterday, they will enhance cooperation and information sharing among their branches in Europe and America to attract more tourists from the regions. They also agreed to make joint efforts to improve the interconnection and interworking system in the region.

Premier says economy faces growing downward pressure China’s economy faces increased downward pressure, the premier has said, as the country prepares to announce first-quarter economic growth. The government must “stand up to the downward pressure,” Premier Li Keqiang said, to avoid an impact on employment and incomes, according to a statement on the government’s website. “At this time, the national economy is running smoothly, but downward pressure continues to grow,” Li said. Li also called for speeding up reforms in the northeast, a centre of mining and heavy industry that has been lagging in growth.

A

s world-beating rallies in Shanghai and Hong Kong spill over to Chinese stocks traded New York, shares of hotel operators Homeinns Hotel Group and China Lodging Group Ltd. are getting left behind.

While much of the market is soaring amid speculation the government will manage to shore up a slumping economy, investors are concerned it may be too late for hotel operators that overestimated growth in travel

and aggressively expanded. Homeinns and smaller rival China Lodging have fallen at least 16 percent this year, as U.S.-traded Chinese stocks jumped 15 percent and the Shanghai Composite Index surged 25 percent.

Shanghai-based China Lodging boosted its hotel count by 40 percent last year to 1,995, while Homeinns increased its network by 20 percent to 2,609, according to the companies’ 2014 earnings statements. The expansion incurred a “significant”

“The hotel business model is affected by the current economic situation; if the economy slows down, it makes hotel expansion more expensive, and that weighs on the bottom line Jun Zhang, head of China Research at Rosenblatt Securities

More lock-up shares become tradable

Evergrande re-classifies debt to cut leverage

Lock-up shares worth around 72.5 billion yuan (US$11.89 billion) will become eligible for trade on China’s stock market in the coming week. Approximately 13.02 billion shares from 14 companies will become tradable on the Shanghai and Shenzhen stock exchanges from Monday to Friday, data compiled by Southwest Securities showed yesterday. BOE Technology Group Co., Ltd., a Beijing-based display device manufacturer, will see the unlocking Wednesday of non-tradable shares worth 50.23 billion yuan, the largest volume to be released next week.

The accounting treatments are legal and not uncommon, but they effectively mask the amount of debt a company actually holds

HKMA sells to keep dollar in trading band The Hong Kong Monetary Authority (HKMA) stepped into the currency market for a third time on Friday and sold HK$11.32 billion (US$1.5 billion) of Hong Kong dollars, it said, as the currency hit the strong end of its trading range. It was the fourth time the city’s de-facto central bank intervened in the market since August. The HKMA sold HK$3.1 billion on Thursday, and HK$6.2 billion, HK$6.975 billion and HK$11.32 billion on Friday. According to the HKMA, the latest intervention will lift the aggregate balance to HK$266.78 billion on April 14.

More AIIB founders approved Spain, the Republic of Korea, Turkey and Austria have been approved as prospective founding members of the Asian Infrastructure Investment Bank (AIIB), the Ministry of Finance said.

Founding members have the right to make rules for the bank. Countries that applied to join after March 31 will be ordinary members with voting rights only, and less say in the rule-making process. The AIIB is expected to be established by the end of this year.

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hina’s Evergrande Real Estate Group has cut leverage on its balance sheet over the past two years to a third by classifying some of it as equity, according to analysts’ calculations based on its public filings.

Evergrande, the most indebted developer among China’s top 10 property firms, is seeking additional funding to expand, and a lower proportion of debt to equity makes it easier and less costly for a company to borrow.

Evergrande lowered the proportion of debt on its balance sheet by issuing so-called perpetual debt instruments and classifying them as equity, corporate filings for 2013 and 2014 show. The developer also increased fair value gains on some of its properties, according to the filings.

The accounting treatments are legal and not uncommon. But they effectively mask the amount of debt a company actually holds and in Evergrande’s case, they may obscure how highly leveraged it is, analysts say.

Evergrande needs to rely on short-term loans such as bank and trust lending to refinance when the short-term debt matures.

This is risky capital management because banks loosen and tighten lending from time to time and it’s unpredictable Franco Leung, Moody’s Investors Service

Excessive leverage is not a problem as long as China’s No. 4 property developer manages debt payments and credit markets remain liquid, but analysts say it has a small margin of error if markets dry up or lose momentum or if it runs into liquidity issues.

Evergrande declined to comment for this article on its strategy for managing its debt.

It began issuing perpetuals in 2013, doubling the amount to 52.9 billion yuan (US$8.5 billion) as of endDecember, equivalent to nearly half of its equity, corporate filings show. It has the highest value of perpetual use among China’s 10 biggest developers by sales, according to a Reuters review of the companies’ 2014 balance sheets.

Evergrande executives have previously said it has issued perpetuals to finance projects. Asked whether it would issue more this year, Chief Financial Officer Tse Wai Wah told a March 30 earnings briefing: “It depends on market conditions... and market reaction,” he said.

Reuters

Business Daily | 11

April 13, 2015

Greater China amount of rental costs for China Lodging, driving up fourth-quarter operating costs by 20 percent from a year earlier, the company said in the statement.

Lower occupancy rates have dragged on revenue growth as the economy expands at the slowest pace in 24 years. Homeinns forecasts sales will grow this year at half the pace of 2014, while China Lodging projects revenue will rise just 10 percent, down from 19 percent last year.

Weaker economy Homeinns, also based in Shanghai, reported a 4.4 percentage-point drop in its fourth-quarter occupancy rate, while China Lodging’s fell by 3.5 percentage points. That compares with a nationwide decline of 0.8 percentage point, according to data from Londonbased research firm STR Global.

The decline is due in part to the weaker economy, China Lodging said in a release last month. Homeinns also attributed it to the economic slowdown.

Qunar, Ctrip The stock slumps stand in contrast to online trip-booking agencies including Qunar Cayman Islands Ltd., which has rallied 57 percent this year, more than any other company on the Bloomberg China-US Equity Index. Rival Ctrip.com International Ltd. has gained 39 percent.

The number of Chinese Internet users has grown to 649 million, greater

than the population of any other nation except India, and could exceed 850 million by 2015, government data show.

Ctrip, China’s biggest Internet travel website, said in its 2014 earnings statement that accommodation reservation volume climbed 63 percent while sales grew 45 percent last year. Qunar, which runs an online travel search platform, said revenue from hotel reservations rose 79 percent in 2014, as a 98 percent increase in booking volume more than offset a 9.7 percent drop in prices.

Long game Despite the market downturn, the expansion makes sense because of the long-term potential in China’s travel sector, according to Alistair Way at Standard Life Investments Ltd. Domestic travel and tourism spending is expected to double to about US$1.6 trillion by 2025, according to data compiled by the World Travel and Tourism Council.

China has 12 times more hotel rooms per capita than the U.S., according to Bloomberg Intelligence data.

Brick-and-mortar hotel operators traded in mainland China haven’t been immune to the country’s economic slowdown either. Shanghai Jinjiang International Hotels Development Co., which operated 968 economy hotels at the end of 2014, has climbed just 8.9 percent this year, versus 25 percent for the city’s benchmark gauge.

Blooberg News

Central bank injects loans to aid economy China is set to release its first-quarter gross domestic product data this week

P

eople’s Bank of China pumped 704.7 billion yuan (US$114 billion) worth of short-term loans into banks in the first three months of the year, in yet another attempt to cushion the nation from its worst economic cool-down in a quarter of a century.

The funds, aimed at keeping shortterm interest rates low, supported liquidity in the money market and stabilised market expectations, especially in the days around the Lunar New Year holiday, the People’s Bank of China said in an online statement.

Demand for money tends to spike in China during holidays as savers withdraw cash from banks, and a crunch could occur if it is left unmanaged, as it did in 2013, further pressuring the already stumbling economy.

Of the loans, the central bank said 370 billion yuan were issued on a net basis through the medium-term lending facility.

The three-month loans had

average interest rates of 3.5 percent, well below the benchmark rate of 5.35 percent for loans that are valid for less than a year.

The remaining loans were issued through the standard lending facility.

Details about the maturities or the cost of the loans were not given.

The two lending facilities, widely known as MLF and SLF in China, were created by the central bank in 2013 and 2014 to complement other monetary policy tools, such as open market operations, to manage liquidity.

The MLF usually involves threemonth loans, while SLF loans can vary between one and three months.

The loans are lent directly to banks and are seen to have a more limited impact on the economy compared to interest rates or reserve requirements.

Analysts expect economic growth to have slipped to 7 percent in the first three months of the year, which will likely prompt more policy easing measures from Beijing.

Reuters

March inflation keeps flat amid weak power pricing Data follows a surprise recovery in manufacturing activity for that month

KEY POINTS Worry on deflationary pressure will remain Many analysts see more easing moves ahead March CPI +1.4 pct y/y, vs +1.3 pct forecast PPI -4.6 pct y/y, vs forecast of -4.8 pct

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hina’s inflation data for March produced small positive surprises, but remained tepid, with little sign that Beijing’s easing measures to date have significantly cut worrisome deflationary pressure.

That has led many to predict more easing measures in the pipeline, including more cuts to reserve requirement ratios for banks, although there is debate over how effective those might be at juicing inflation.

In March, China’s annual consumer inflation rate (CPI) stayed flat at 1.4 percent, above a poll’s projected 1.3 percent. Producer prices (PPI) fell slightly less than

projected, contracting 4.6 percent rather than the forecasted repeat of February’s 4.8 percent pace.

PPI has now been in negative territory for three years, highlighting sustained pressure on profit margins at Chinese companies - in particular heavy industry - as Beijing struggles to stimulate again headline growth.

The higher-than-expected CPI was driven by a sudden rise in pork prices, which been a drag on CPI every month since December 2013.

But consumer inflation is still far short of Beijing’s official 3 percent target for 2015, and some economists see that goal at risk.

Producer prices were dragged down again by mining and raw materials components.

Friday’s data follows a surprise recovery in manufacturing activity for March, with the official Purchasing Managers’ Index (PMI) edging up to 50.1, in expansionary territory, from February’s 49.9.

Worried policymakers Policymakers have publicly expressed worry that the risk of deflation is rising for the world’s second-largest economy, as the drag from a property market downturn and widespread factory

overcapacity is compounded by an uncertain global outlook and soft commodity prices.

But while lower commodity prices have punished the extraction and power production sectors, the pain is not felt across the board, as some companies have taken advantage of lower input costs to maintain profit margins.

The People’s Bank of China (PBOC) has made multiple cuts to guidance lending rates, and one cut to reserve requirement ratios at banks. It also launched a long-awaited deposit insurance programme in April, but economists said

those moves have had little impact on real borrowing costs.

“The weak inflation profile suggests that further monetary policy easing is still needed in spite of recent retreats of onshore money market rates,” ANZ economists Zhou Hao and Liu Ligang wrote after Friday’s data release.

The central bank has guided benchmark shortterm money rates down sharply in recent weeks, and the interest rate yield curve has risen and steepened slightly as short term rates have fallen while longer term expectations have risen.

Reuters

12 | Business Daily

April 13, 2015

Asia

Singapore trading hubs under fire in tax probes

Australia’s tax office has said it is conducting audits of 15 marketing hubs in Singapore and Switzerland

Rachel Armstrong

T

he Singapore trading hubs of the world’s largest commodity companies are coming under scrutiny from the governments of some resource-producing countries who say they suspect they are using units in the Southeast Asian financial centre to avoid tax.

Some of the world’s largest oil, mining and soft commodity companies book billions of dollars of revenue in the tiny island state every year, where

tax rates can be very low, which is perfectly legal unless they deliberately under-price group transactions so as to shift profit there from units in other countries.

The companies deny any improper transfer pricing and say they are in Singapore to be closer to Asian clients, to local expertise and trade routes, as the region accounts for a growing share of their business.

The world’s two largest miners,

BHP Billiton and Rio Tinto, between them booked close to US$50 billion in revenue in Singapore in 2013, according to documents from the country’s corporate registry, and posted a combined net profit of more than US$2 billion.

They mostly conduct trading operations there, a high-volume, low-margin business that involves buying up commodities from their global operations and selling them

on to clients. They also look after logistics and risk management.

The companies say their Singaporean operations were not set up to cut tax but to serve their clients better.

Australia and Indonesia’s tax authorities say they are investigating whether arrangements like these simply shift profits away from where the commodities are extracted.

Most jurisdictions require such

Japan, South Korea ease flight bans on Thai airlines Nearly 150,000 passengers are expected to be affected after Japan and South Korea imposed bans last month Manunphattr Dhanananphorn

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apan and South Korea authorities have eased flight bans on Thai airlines by allowing two long-haul, low cost carriers to fly charter flights for two months to reduce the impact on passengers, Thai officials said.

The two are NokScoot and Thai Air AsiaX, Somchai Piputwat, director general of Thailand’s Department of Civil Aviation, told Reuters.

NokScoot, a joint venture between Thailand’s Nok Airlines and a Singapore Airlines subsidiary, will fly empty planes from Singapore to pick up passengers in Bangkok before flying to Japan in April and May, Somchai said.

NokScoot chairman Patee Sarasin told Reuters he expected to receive formal permission from

South Korean authorities in the next few days.

Thai AirAsiaX, part of Malaysia’s AirAsiaX, will do the same but fly from Malaysia instead, Somchai said, adding the airlines need to get permission from three countries involved.

Nearly 150,000 passengers are expected to be affected after Japan and South Korea imposed bans last month on charter and new scheduled flights by Thai-registered airlines over safety concerns highlighted by an international audit.

Japan’s aviation agency also allowed Thai charter flight carrier Asia Atlantic Airlines to fly in April and May after Thai authorities sent a new licence re-evaluation report to Japan’s Civil Aviation Bureau, Somchai said.

Bangkok airport

Asia Atlantic, a joint venture between Thailand’s Baiyoke Group and Japan’s HIS Group, operates eight flights to Japan during Thai new year holidays in mid April, but it is still banned from flying to South Korea, said an airline executive, who declined to be named.

China, which previously banned some flights from Thai airlines, will not impose any restrictions on Thailand-registered airlines, Somchai said after Thai authorities visited China this week.

“Thai airlines can fly to China as normal,” he said, saying the previous ban was mainly because China wanted to reduce congestion among foreign tourists in the country and not related to security concerns.

Reuters

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Business Daily | 13

April 13, 2015

Asia

arrangements to have a commercial purpose beyond saving tax, and the group transactions should be conducted at arms-length pricing.

Australia and Indonesia both rely heavily on mining exports and count global miners among their biggest taxpayers.

Australia’s tax office has said it is conducting audits of 15 marketing hubs in Singapore and Switzerland that it says it expects will raise an extra US$1 billion. It has not identified the companies involved, although BHP and Rio told an Australian Senate hearing on Friday that their Singapore units were being audited.

“Quite clearly, we are in dispute with a number of taxpayers,” Australian Taxation Office Commissioner Chris Jordan told a Senate hearing on Wednesday.

Indonesia’s tax office head, Sigit Priadi Pramudito, told Reuters recently that the transfer pricing arrangements

of commodity companies were a particular concern, but he did not identify specific companies.

“Say a company sells with a cheap price to Singapore, and then sells from Singapore to the world, where would the profit be? In Singapore, right? And where’s the money? In Singapore, right? What does Indonesia get?

Nothing,” he said.

Resource-producing countries do typically raise taxes on resource extraction through royalties, said Harvey Koenig, tax partner at KPMG in Singapore. But he added “there are still various concerns from producer countries that a major part of the profits is not being retained in those countries,” without commenting on any specific company or investigation.

Trading places Singapore has long been a global hub for oil trading, complementing its big refining industry and operational centres for a number of oil majors, but in recent years, miners and other commodity firms have also moved to the Southeast Asian island.

In 2012, BHP shut its marketing office in the Netherlands and consolidated all its metal trading operations in Singapore. It says it employs around 400 people there.

It operates much of its marketing operations in Singapore through the branch of an entity set up in the Swiss town of Baar - BHP Billiton Marketing AG. In the 2013-14 financial year, the branch had revenue of US$38.6 billion, a profit of US$1 billion and a tax rate of zero, according to accounts filed in Singapore. The accounts of

the branch’s Swiss parent are not publicly available.

BHP said it pays income tax in Australia on a “substantial portion of the revenue” that the hub earns.

“BHP Billiton is the largest taxpayer in Australia and takes its tax obligations very seriously,” it said.

Rio told a Senate hearing in Australia on Friday that the work it undertakes in Singapore could not be sensibly undertaken elsewhere.

“Singapore is seen as a neutral location between buyer and seller,” Rio’s Australia managing director Phil Edmands told the Senate panel.

The companies benefit from being located near a growing community of commodity traders, with the likes of Trafigura, Gunvor, Cargill and Vitol all basing trading hubs there.

Under Singapore’s Global Trader Programme, companies can get a concessionary tax rate as low as 5 percent if they conduct a substantial enough volume of business, base high-ranking staff on the island and make use of the country’s financial services sector.

Larger companies can privately negotiate an even lower rate.

Rio said it receives a 5 percent tax rate in Singapore, while BHP declined to say what incentives it receives.

Singapore’s Ministry of Finance said there were many business reasons for commodity companies to operate in Singapore, including its “developed network of shipping and logistics players, financiers and legal practitioners”, while “tax incentives are given to companies with substantive economic activities that will significantly add value to our economy”.

Reuters

Japan state-backed fund conditions aid to Sharp A Japan government-backed fund won’t invest in Sharp Corp’s smartphone display unit without a majority stake that would allow it to merge the struggling business with rival Japan Display, people with knowledge of the matter said.Sharp’s refusal to be part of any deal with arch-rival Japan Display means an injection of funds from taxpayer-funded Innovation Network Corporation of Japan (INCJ) into Sharp’s display business is not imminent, the people told Reuters. Sharp is considering asking the fund to invest in the unit in return for a minority stake, the sources said.

Myanmar okays loan plan Parliament has approved a plan to borrow a loan of US$400 million from the World Bank for the country’s people-centred projects, state media reported. The loan will be used in implementation of similar projects in some eleven townships in the country, said the Global New Light of Myanmar. In the fiscal year 2013-14, people-centred projects were implemented in townships of Chin and Shan states as well as Taninthayi Region while the projects in Rakhine State and Sagaing, Yangon and Ayeyawady Regions as well as in Nay Pyi Taw Council in the fiscal year 2014-15.

Australia’s top land owner to sell cattle business

India to wait another two years for French Rafale jets Both countries have negotiated for Rafale fighters for three years Rajesh Kumar Singh

I

ndia will not receive its first Rafale fighter jet from France’s Dassault Aviation for up to two and a half years and tricky issues including pricing must still be worked out, India’s defence minister said on Saturday.

Manohar Parrikar’s comments came a day after India ordered 36 ready-to-fly Rafale fighters to modernise an ageing fleet apace with neighbours China and arch-rival Pakistan, which are fast upgrading military hardware.

While the order is meant to be delivered as soon as possible, terms and conditions of the deal - estimated at about 4 billion euros (US$4.25 billion) - have yet to be worked out, the minister said.

“It may take two to two-and-ahalf years to get the first plane,” Parrikar told reporters. “Fly-away means not tomorrow, it has to be designed as per India’s need, plus there is a requirement of working out the price.”

India and France have negotiated for Rafale fighters for three years.

A 2012 agreement to buy 126 jets stalled over cost and a dispute over the assembly of 108 aircraft in India.

A French Defence Ministry source said on Friday the new deal announced

by Prime Minister Narendra Modi in Paris was separate from the original negotiations.

Indian military officials have warned their air force risks falling behind without new foreign warplanes

or if local contractors cannot meet the military’s needs in a timely manner.

The reliance on a disparate fleet of Russian-made MiG and French Mirage fighters, along with modern Russian Sukhoi Su-30s, has made it vulnerable. Half of India’s fighters are due to retire by 2024.

The Indian air force has 34 operational squadrons, down from 39 earlier this decade and below the approved strength of 42, a parliamentary committee said in December.

The Rafale fighters are expected to replace some of the MiGs and Mirage jets.

Even as India waits for the planes, a prominent member of Modi’s party threatened to block the deal in the Supreme Court.

Subramanian Swamy, who has a reputation as a maverick, said the Rafale jet was weaker than its rivals, without giving evidence for his assertions.

“The Rafale performance of Libya and Egypt turned out to be worst of all the aircrafts which were deployed,” he said.

“If the prime minister for some other compulsion anyway decides to go ahead with the deal, then I will have no option but to approach the court.”

Reuters

Australia’s largest private land owner will sell its cattle operations, including the world’s largest ranch and an area equivalent in size to South Korea, to raise cash for other businesses and investments. S. Kidman & Co said it will sell its privately owned 11 cattle stations and a feedlot, complete with more than 200,000 head of cattle and more than 100,000 sq km of land spread across Western Australia, the Northern Territory, Queensland and South Australia. The announcement of the sale comes a month after the government said it would clamp down on foreign ownership of agricultural land.

Thailand tightens security after car bomb Authorities have beefed up security nationwide after a car bomb explosion that slightly injured seven people in the resort island of Samui late Friday night.

Prime Minister Prayut Chan-o-cha has ordered security authorities to maximize security measures, deputy government spokesman Sansern Kaewkamnerd said. At about 11:30 p.m. Friday night, a bomb in a pickup exploded in the car park of a shopping mall in Samui of southern Surat Thani province, causing minor injuries to seven people, including an Italian girl. They have already been discharged from hospital.

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April 13, 2015

International Peru miners striking in May Largest mining union on Friday approved an indefinite strike beginning on May 18 to demand better working conditions for workers, a union boss said. Ricardo Juarez, president of the national mining workers federation, said some 70 unions representing 20,000 miners backed the strike, which would be the first nationwide walkout to hit the industry in the world’s No. 3 copper producer this year. “The miners are tired of abuse. We want better conditions,” Juarez said, adding that the unions’ demands included lifting a cap on the workers’ share of company profits.

New U.S. offshore oil drilling rule planned The United States is planning to impose a major new regulation on offshore oil and gas drilling to try to prevent the kind of explosions that caused the catastrophic BP Plc oil spill in the Gulf of Mexico, the New York Times reported on Friday, citing Obama administration officials. The Interior Department could make the announcement as early as today, the paper said. It is timed to coincide with the fiveyear anniversary of the BP disaster, which killed 11 men and sent millions of barrels of oil spewing into the gulf.

Bombardier to raise cash from rail business Bombardier Inc is exploring a possible sale of all or part of its railway business, which bankers value at up to US$5 billion, among options to pay for huge cost overruns in its aircraft business, sources familiar with the matter said. The Canadian company is working with banks on strategic options for its transportation arm, including a possible initial public offering either in Germany, where the business is based, or in Britain, three sources said on Friday. They declined to be identified since the matter is private.

German minister plays down EU-US trade deal Economy minister warned against overblowing expectations for an economic boost from a trade deal between the United States and European Union but said the pact was needed to set high common standards for consumers. The European Commission is trying to finalise a deal on the Transatlantic Trade and Investment Partnership (TTIP), which some experts say could generate US$100 billion a year in additional economic output on both sides of the Atlantic. It would eliminate all tariff barriers between the United States and EU members, which together account for almost half the global economy.

Monte Paschi says Nomura exposure more than one third Italian bank Monte dei Paschi di Siena said on Friday it had overstepped regulatory limits with regards to its financial exposure to Japanese bank Nomura, in a surprise disclosure that could raise questions about whether the Italian lender’s plans to raise capital and seek a buyer are on track. Monte dei Paschi di Siena, Italy’s third largest bank, said in a statement that it was looking at all possible measures to cut the exposure, or potential risk related to loans to Nomura, which it said equalled more than one third of its core capital at the end of last year.

ECB policymakers set to meet after QE success Since the start of the year, the single currency has lost 11 percent of its value

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he European Central Bank’s decision makers meet Wednesday buoyed by the successful debut of a mass bondbuying spree designed to kick-start growth and will likely quash talk of it wrapping up early.

Analysts say ECB chief Mario Draghi is expected to give short shrift to any suggestion of a premature end to the quantitative easing (QE) programme, the long-awaited and controversial gambit launched by the central bank last month.

Amid on-going uncertainty about cash-strapped Greece, the first volley of the ECB’s 1.1-trillion-euro (US$1.2 trillion) scheme offered some good news, getting off to a solid start by meeting its target.

That has fed speculation that the anti-deflationary policy of buying around 60 billion euros of public and private bonds each month could be stopped before its planned September 2016 end date.

Launched on March 9, the strategy behind the ECB’s QE programme is akin to those of the US Federal Reserve and the Bank of England to pump money into the eurozone with massive purchases of debt to bring down borrowing costs and in turn foster easier credit.

Still sorely needed Jennifer McKeown, analyst at Capital Economics, said she believed that a “premature tapering”, or phaseout of the bond-buying programme, was not the way to go.

“We still think that the policy is sorely needed,” she said, voicing expectations that Draghi would stress this week that most of the ECB’s

ECB chief Mario Draghi

governing council members still wanted to apply it in full.

A measure of its success has been a decline in government borrowing rates, with the biggest drop for France and Germany whose costs were already relatively low, while Belgium, Portugal and Ireland in particular have also benefited.

The fall in the euro’s value against the dollar, also a consequence of QE, sits well with the ECB’s goals.

Some have begun to fear however that the euro’s weakness could propel inflation higher than 2.0 percent, or slightly beyond the ECB’s target.

More, not less QE? “When does the exit begin?” asked Germany’s Handelsblatt business daily on Thursday.

ECB executive board member Yves Mersch addressed the issue of a possible “overdosing” on QE this week.

He insisted that if inflation expectations grew above the ECB’s current forecast of 1.8 percent in 2017, “it would, of course, be appropriate to consider whether we need to adjust our plan”.

The latest data, however, shows that risk is still far off.

Prices in the 19-nation single

In short, the ECB still has a lot more work to do Jonathan Loynes, Capital Economics

currency bloc were down 0.1 percent in March, less than the drop in January and February but still a long way from the ECB’s target of just under 2 percent annual inflation.

And Berenberg bank economist Christian Schulz said it was up to eurozone governments “to underpin the upswing with further structural reforms”, a message Draghi is likely to reiterate at Wednesday’s meeting.

The meeting is being held a day earlier than normal to enable central bankers to attend an IMF gathering in Washington starting Friday.

Reuters

Istanbul’s goal hampered by lightweight market Years of solid growth have turned Turkey into a major emerging economy, but its equity market has not kept up

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urkish President Tayyip Erdogan dreams of transforming Istanbul into a financial hub that can rival Dubai or Singapore, but first he needs to win over would-be investors.

Market participants say interest from small investors is on the wane, thanks to higher fees and as new flotation fail to spark interest.

That’s bad news for an exchange that relies on retail investors for much of its liquidity. It also raises questions about the viability of the government’s drive to make Istanbul a global top-10 financial hub.

The government has already introduced some regulatory changes to make Istanbul more attractive for foreign capital, including an ambitious plan to build a US$2.6 billion “International Finance Centre”.

But investors say more needs to be done, especially given flagging growth

and nagging political worries ahead of June parliamentary elections.

Ankara needs to encourage more public listings, more equity issuance and more “truly public” companies, analysts say, especially since many listed firms are still controlled by the government or their founding families.

Erdogan has hardly helped investor sentiment, fulminating against high interest rates in comments which have raised concerns about the independence of the central bank.

Market size At around US$220 billion, Istanbul’s stock market is the world’s 29th largest, well behind some emerging market rivals. The Johannesburg market is worth more than four times that, even though South Africa’s economy is less than half the size of Turkey’s.

Trade is concentrated on just a handful of companies, with just ten stocks accounting for 70 percent of transactions. Many smaller companies aren’t liquid enough to draw investors.

Retail investors account for 80 percent of the trade on Borsa Istanbul, but their numbers have thinned after the bourse - which plans to list by next year - hiked its fees. Brokerages are also charging more to offset new capital requirements.

Istanbul is also hobbled by a buyside industry that is small, even by emerging market standards.

There have been some positive signs, such as recent government incentives for retirement savings, which have boosted demand for private pension funds. But the government still needs to do more to encourage savings.

Reuters

Business Daily | 15

April 13, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

China’s slow-growth opportunity

TAIPEI TIMES The Chinese Nationalist Party (KMT) and Chinese Communist Party (CCP) forum is entirely different from a possible meeting between KMT Chairman Eric Chu and Chinese President Xi Jinping, and there are many possibilities in the air, KMT Secretary-General Lee Shu-chuan said. Lee’s remarks came in light of heightened chances of Chu leading the KMT delegation to attend the forum after both sides of the Taiwan Strait announced the timing and location for the forum on Saturday. The parties have held meetings at least once per year since 2006.

THE KOREA HERALD South Korea’s financial watchdog said yesterday that it will do its best to root out all kinds of financial scams, including voice phishing, as part of its efforts to beef up consumer protection and restore public trust in the financial industry. The Financial Supervisory Service said it will suspend transactions of unused and borrowed-name bank accounts, or bogus accounts that are widely used for financial frauds, from the latter half of this year. It will also introduce a reward system of up to 1 million won (US$915) for reporting such phony accounts.

VIETNAM NEWS The Viet Nam National Oil and Gas Group or PetroVietnam failed to meet its financial targets in the first quarter of this year. The failure has been blamed on the fall in global oil prices. PetroVietnam reported a first quarter revenue of just VND64.5 billion (almost US$3 billion), equivalent to 72 per cent of the quarterly target and only 18 per cent of the whole year’s plan. Its after-tax profit was VND9.4 trillion (US$435.2 million), equivalent to 77 per cent of the first-quarter target and 23 per cent of the yearly goal.

PHILSTAR The toll ways arm of infrastructure giant Metro Pacific Investments Corp. (MPIC) is ready to start the construction of the P5-billion road that would further extend the North Luzon Expressway (NLEx) Harbour Link from Circumferential Road (C3) in Caloocan City all the way to Road 10 (R10) in Tondo, Manila. The NLEx Harbour Link is divided into two phases. The first phase worth P1.59 billion involves the construction of the 2.42-km Segment 9 linking the 86.7-kilometer NLEx to the MacArthur Highway in Valenzuela City to be completed next month.

Yu Yongding

Former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences

A

fter four disappointing years, Chinese economists have realized that slowing GDP growth – from a post-crisis peak of 12.8% in 2010 to about 7% today – is mainly structural, rather than cyclical. In other words, China’s potential growth rate has settled onto a significantly lower plateau. While the country should be able to avoid a hard landing, it can expect annual growth to remain at 6-7% over the next decade. But this may not necessarily be bad news.

One might question why GDP in China, where per capita income recently surpassed US$7,000, is set to grow so much more slowly than Japan’s did from 1956 to 1970, when the Japanese economy, with per capita income starting from about US$7,000, averaged 9.7% annual growth. The answer lies in potential growth.

Whereas, according to Japan’s central bank, Japanese labour productivity grew by more than 10% annually, on average, from 1960 to 1973, Chinese productivity has been declining steadily in recent years, from 11.8% in 2001-2008 to 8.8% in 2008-2012, and to 7.4% in 2011-2012. Japan’s labour supply (measured in labour hours) was also growing during that period, by more than 3% annually. By contrast, China’s working-age population has been shrinking, by more than three million annually, since 2012 – a trend that will, with a 4-6-year lag, cause labour-supply growth to decline, and even turn negative.

Given the difficulty of reversing these trends, it is difficult to imagine how China could maintain a growth rate anywhere close to 10% for another decade, despite its low per capita income. But there is more.

As the Japanese economist Ryuichiro Tachi has pointed out, Japan also benefited from a high savings rate and a low capital coefficient (the ratio of capital to output) of less than 1.

Though a precise comparison is difficult, there is no doubt that China’s capital coefficient is much higher, implying a larger gap between the growth rate of capital intensity (the total amount of capital needed per dollar of revenue) and that of labour productivity.

At times, a high investment rate can offset a high capital coefficient’s negative impact on growth. But China’s investment rate is already too high, accounting for almost half of GDP. With capital intensity increasing significantly faster than labour productivity in China, the inefficiency of investment is clear. In this context, increased investment would only exacerbate the problem.

Making matters worse, China’s corporate debt is already the

China’s leaders (pictured at the last National People’s Congress) must accept the reality of lower growth and adjust their priorities accordingly

With all major indicators suggesting a significant decline in China’s growth potential, China’s leaders must accept the reality of lower growth and adjust their priorities accordingly

highest in the world, both in absolute terms and relative to GDP. In this context, increasing investment would not only reduce capital efficiency further; it would also heighten the risk implied by companies’ high leverage ratios.

With all major indicators suggesting a significant decline in China’s growth potential, China’s leaders must accept the reality of lower growth and adjust their priorities accordingly.

Succumbing to the temptation of massive monetary and fiscal stimulus, such as that pursued in the wake of the global economic crisis, would not only fail to boost growth in a sustainable way; it would actually undermine growth and stability in the medium to long term. A better approach would focus on making economic growth more sustainable.

On this issue, Japan has some useful lessons to offer. In the 1970s, recognizing the inevitability of a slowdown, Japan shelved its ambitious plan to “remodel” the Japanese archipelago. Policymakers shut down energy-inten-

sive factories in the heavy chemical industry, promoted innovation, and took steps to address air and water pollution. As a result, the quality of Japan’s economic growth improved considerably, even as its rate fell by nearly half in the decade after the oil shock in 1973.

The good news is that China’s leaders seem intent on adopting a similar approach, including avoidance of monetary and fiscal expansion, unless growth seems set to collapse. Indeed, at the recently concluded National People’s Congress, Prime Minister Li Keqiang affirmed the authorities’ 7% target for GDP growth this year, while reiterating the importance of deepening reform and carrying out structural adjustments.

For China, accepting lower growth provides a crucial opportunity to support stable and sustainable development. If China’s leaders stay the course of reform and rebalancing, the entire global economy will be better off.

Project Syndicate

16 | Business Daily

April 13, 2015

Closing Protests on Guangdong power plant

China bans online medical diagnoses

Thousands of people took to the streets in Heyuan City of south China’s Guangdong Province yesterday in protest at the expansion of a local coal-fired power plant. There has been a strong police presence, though no reports of violence. The Heyuan Power Plant is a joint venture between Shenzhen Energy Group and a Hong Kong firm.

The first phase of the plant has been operating since 2008, and the National Development and Reform Commission has recently approved a second phase. Protestors complained of severe smog since the plant began operation.

Hospitals offering medical advice online should not provide diagnoses via these services, ruled China’s health regulator yesterday. In an Internet era, Chinese patients are accustomed to seeking medical advice on the Internet. Some private hospitals have launched Internet services offering online diagnosis. Song Shuli, spokeswoman for the National Health and Family Planning Commission, said these services may be provided by people who are unqualified in medicine, unlike face-to-face diagnosis. Song only referred to services provided to individuals. Consultations between hospitals and doctors are not banned.

IMF official sees China on the right path Official said China has made a lot of progress in economic reforms in the past year but “more work needs to be done”

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espite concerns about a slowdown in China’s economic growth, a senior official at the International Monetary Fund (IMF) has expressed optimism about the world’s second-largest economy, saying it could still bring great benefits to China and the global economy.

“We should welcome, not fear, a slowdown in China” because the economy is moving to a “slower, but safer and more sustainable growth path,” Steven Barnett, a division chief in the Asia and Pacific Department of the IMF, said at a panel discussion on economic growth in Asia organized by the Center for Strategic and International Studies.

Since the global financial crisis in 2008, “the pattern of growth in China has been unsustainable” and has resulted in rising vulnerabilities, including the surging credit, rapid rise in investment, strong growth in shadow banking and real estate market, Barnett said.

Acknowledging the unsustainable growth pattern, Chinese government has taken measures to address those vulnerabilities, and a

slowdown is a natural result of this process, Barnett said.

“We have slower credit growth, especially a reduction in shadow banking, less investment, especially because of adjustment in the real estate market, and strengthening management and oversight of local government financing.

All those things point to slower growth, but also safer growth,” said the former IMF resident representative to China.

Barnett said China’s economic growth rate is expected to slow further to around 6.75 percent this year from 7.4 percent in 2014, its weakest expansion since 1990, but noting that China has “considerable buffers” to manage this process of slowing

growth.

China has outlined a comprehensive reform agenda at the third plenum of the 18th Communist Party of China Central Committee in late 2013, which will help transform the economy to a “more sustainable, more inclusive and more environment-friendly” growth model, he said.

Barnett said China has made a lot of progress in economic reforms in the past year, but “more work needs to be done,” citing further reforms in the financial sector and state-owned enterprises (SOE) as two priorities.

On the financial front, China needs to finish interest rate liberalization, introduce

Citigroup sees Persian Gulf banks borrowing more

China approves reform of three policy banks

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itigroup Inc. sees debt sales by Persian Gulf financial institutions increasing as the slump in crude prices prompts banks to make up for falling government deposits.

“We expect debt capital market and syndicated loan activity to be better this year given lower oil prices,” Atiq Ur Rehman, the New York-based bank’s chief executive officer for the Middle East and North Africa, said in an interview in Dubai.

Banks in the oil-rich region are raising cash through bonds and loans as liquidity falls and governments park less cash. Governments, related entities and national oil companies are among the largest depositors in the region’s lenders, providing between 10 percent and 35 percent of non-equity bank funding, according to a report last month from Moody’s Investors Service.

Banks in the Gulf Cooperation Council have raised US$5.3 billion through bond sales this year, up from US$4.4 billion a year earlier, while overall sales were little changed at about US$8.1 billion, according to data compiled by Bloomberg.

Share sales in the region stalled in the second half of 2014.

Bloomberg News

a policy interest rate, and break the implicit guarantees between savers, intermediaries and borrowers, he said, noting that removing implicit guarantees is very critical for improving allocation of credit and resources.

In terms of SOE reforms, Barnett said China should “level the playing field to ensure there is room for the dynamic private sector firms to compete, grow and create jobs, especially in service sectors.”

Looking back, Barnett said China’s economic success reflects China’s willingness to undertake bold reforms at critical junctures, citing the examples of SOE reforms in 1990s and joining WTO in

Slower growth in China today, as part of moving to a more sustainable growth path, means much higher income in the future Steven Barnett, division chief, Asia and Pacific Department, IMF

2001, which paved the way for China’s strong growth in the early and mid-2000s.

Given China’s size in the global economy, Barnett said the whole world will also benefit from a more balanced and sustainable growth in China and a expanding Chinese market.

Xinhua

Super-rice grower harvests failure

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he State Council has approved plans to reform three Chinese policy banks, a statement on the government’s website said yesterday.

The banks are the China Development Bank (CDB), the Export-Import Bank of China (also known as the China Exim Bank) and the Agricultural Development Bank of China (ADBC).

The CDB must stick to its positioning as a “development financial institution,” while the China Exim Bank must build itself into a “policy bank with sustainable development capacities” and the ADBC must become an “agriculture policy bank with sustainable development capacities,” said three separate statements.

The CDB must adapt to the market and internationalization to improve developmentoriented financial operation models and play its key role in stabilizing economic growth and restructuring, a statement said.

Set up in 1994, the CDB has been primarily responsible for raising funding for large infrastructure projects.

The China Exim Bank must play its role in stabilizing growth, restructuring, boosting exports and implementing the “going-out” strategy, another statement said.

hina’s super-rice grower, Yuan Longping High-Tech Agriculture Co Ltd, blamed abnormal weather and disease for large crop failures in the rice growing province of Anhui last year.

Rice blast fungus caused a reduction in yields or no harvests in many areas in the province, said an executive with the company founded by Yuan Longping, an agricultural scientist who is sometimes referred to by Chinese media as “the father of hybrid rice”.

“Last year, because of the abnormal weather, the areas which normally have a low outbreak of rice blast were unexpectedly hit with frequent outbreaks, causing big losses for farmers,” said Peng Guangjian, the company’s president.

Chinese media recently reported that the superrice strain, Super hybrid rice accounts for about 30 percent of the country’s total rice area and average yield was 590.8 kg per mu (0.07 hectare), the official People’s Daily reported yesterday.

China, the world’s top rice grower and consumer, harvested 206.43 million tonnes of rice in 2014, 1.4 percent more than in the previous year.

Xinhua

Reuters