Macau business daily, 2015 July 6th

MOP 6.00

Junket association maintains pressure for smoking lounges

Closing editor: Luís Gonçalves

City University of Macau pays MOP163,000/month for UM residential area

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Macau International Airport passengers increase 6.6 per cent in 1H

September 3 a mandatory holiday Page 3

Year IV

Number 828 Monday July 6, 2015

Publisher: Paulo A. Azevedo

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Smoke Signals

There’s little doubt. Odds are the Legislative Assembly will legislate a full smoking ban in casinos. Likely effective New Year’s Day. Deutsche Bank calculates the industry will drop US$3.4 billion (MOP27.1 billion) in revenues in 2016. Instead of an increase of 2.2 pct originally penciled in, gaming take could fall 5.6 pct if smoking is universally prohibited in casinos.

The junket sector, in particular, is fighting a public battle to be allowed VIP smoking lounges

Finally approved Finally, the green light. The Legislative Assembly has passed the city’s very first minimum wage bill.

Although some legislators perceive it to be unfair. By setting different amounts for hourly and daily-based wages. And only benefiting some 4,650 workers. The current bill applies only to cleaning and security workers. But will likely serve as a basis for other jobs

Entrepreneurial spirit

The gov’t is investing in young entrepreneurs. The Young Entrepreneurs Aid Scheme granted MOP109.7 million (US$877.6) to 457 local SMEs as of June 30. Retail, food & beverage and wholesales businesses were at the head of the queue

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Softly, softly China’s stock markets.

Could be a make-orbreak week. This, after officials rolled out an unprecedented series of steps from different actors at the weekend to prevent a fullblown stock market crash.

Threatening the world’s second-largest economy

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Expanding possibilities

HSI - Movers July 3

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More innovation from Macau Pass. Local shops and restaurants installed with Macau Pass card reading terminals can now apply to

upgrade them. To accept payments made by Alipay Wallet mobile app and UnionPay QuickPass cards

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Interview www.macaubusinessdaily.com

Page

%Day

Link REIT/The

+1.10

Industrial & Commerci

+0.98

CLP Holdings Ltd

+0.84

CNOOC Ltd

+0.73

Sands China Ltd

+0.68

Lenovo Group Ltd

-2.84

Ping An Insurance Gro

-2.85

Hong Kong Exchanges

-3.28

Tingyi Cayman Islands

-3.30

China Resources Land

-4.02

Source: Bloomberg

Catching up

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Automation is Macau’s future. According to local IT company TechNet founder PC Wong. Tying up with Hitachi is a step-by-step process, he tells Business Daily. Bringing automation technology first to Macau’s banking industry. Macau is facing critical IT challenges, he says. And lagging far behind its peers in the region thus the only way forward is automation

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2 | Business Daily

July 6, 2015

Macau Over 3,000 taxi violations recorded in H1 The Public Security Police Force (PSP) has announced that a total of 3,037 taxi violations were recorded during the first half of the year, of which 54 per cent were due to taxi drivers overcharging passengers or rejecting to passengers, accounting for 730 cases and 919 cases of the total. In addition, the police said they had continued combating unlicensed vehicles engaged in the business of carrying passengers for hire or reward during the period, issuing 186 fines to drivers conducting illegal car hire services.

Shops and restaurants go digital payment With the co-operation of Chinese online payment giant Alipay, Macau Pass says local shops can now apply to upgrade their terminals to accept payments from Alipay Wallet and UnionPay QuickPass cards Stephanie Lai

sw.lai@macaubusinessdaily.com

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ocal shops and restaurants installed with Macau Pass card reading terminals can now apply to upgrade them so that they can also accept payments made

by Alipay Wallet mobile application and UnionPay QuickPass cards, the stored-value card issuer announced on Friday at Macau International Electronics & Global Audiovisual Expo 2015.

“This new service mainly targets the city’s souvenir shops, supermarkets, convenience stores, bakeries and restaurants...It is a service that basically targets smallamount transactions,” Macau Pass’s managing director George Zhang told media after signing a strategic co-operation agreement with China online payment giant Alipay.

“More and more tourists have Alipay Wallet installed in their mobile phones,” Mr. Zhang said on Friday.

“Starting from today, they can use their Alipay Wallet to shop at local souvenir shops and good restaurants.”

He added that currently a “few dozen” local shops are applying to upgrade their Macau Pass card reading terminals.

But the co-operation between Macau Pass and Alipay covers not only an upgrading of payment terminals.

As the stored-value card issuer announced in late March, Macau Pass plans to launch a mobile payment service that allows stored-value card users to shop on major Chinese online shopping portal Taobao.com.

“It’s very possible in this year residents here can use Macau Pass to pay for other services of Alipay but now there are still some technical and clearance issues to be resolved,” Mr. Zhang said, referring to the company’s planned mobile payment service.

Expanding

In December, Macau Pass launched a new mobile phone application for users with smartphones running on Android systems and near field communication (NFC) function, which allows them to top up their value, read the remaining balance of their card as well as transaction records.

Talking to media on Friday, Mr. Zhang said that this free mobile phone application has now been downloaded about 30,000 times, a response by

users here that he deemed “very positive”.

“Shortly, we’ll have a third bank that supports the top-up value function of the mobile phone application,” Zhang said. “Within this year, we expect that four to five banks in all will be supporting this service.”

At present, the top-up value

function via the smartphone application is only applicable to those that have bought Macau Pass chip cards, to which they can add value via payment off their credit card account.

This function is available for holders of credit cards issued by OCBC Wing Hang Ltd (Macau) and Bank of China Credit Card (International) Ltd.

Jetstar Pacific Airlines launching Ho ChiMinh route in August Macau International Airport (MIA) handled over 2.78 million passengers in the first half of the year, a 6.6 per cent increase compared to the same period in 2014

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hilst preparing for the holiday season, Macau International Airport (MIA) said that in order to provide more holiday destination options for travellers, some airlines will increase scheduled flight frequency during the summer, as well as putting on charter flights to Okinawa in Japan.

The company also revealed that Jetstar Pacific Airlines plans to launch a service linking Ho Chi Minh in Vietnam and Macau in August, with some other new routes under preparation.

Macau International

Airport also released figures of passenger volume for the first half of this year. The Airport handled over 2.78 million passengers, an increase of 6.6 per cent compared to the same period last year. Aircraft movements topped 27,000, an increase of 6.9 per cent.

While Taiwan routes recorded a slower growth of 0.6 per cent, Mainland China routes recorded a slight drop of 1.3 per cent in passenger volume.

The company said that overall passenger markets in the first half of 2015 maintained positive growth.

Despite the Korean market recording a decline due to the outbreak of Middle East Respiratory Syndrome (MERS) passenger numbers for South and North East Asia grew 18.8 per cent.

In June 2015, the average daily passenger traffic at the Airport reached 15,000, climbing 3.9 per cent compared to the same period in 2014. Over 4,400 aircraft movements were recorded, increasing 4.8 per cent compared to June 2014.

J.K.

Business Daily | 3

July 6, 2015

Macau

Controversial minimum wage bill passed The city’s very first minimum wage bill has passed although some legislators perceive the bill is unfair – by setting different amounts for hourly and daily-based salary, and only benefiting some 4,650 workers Kam Leong

kamleong@macaubusinessdaily.com

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he Legislative Assembly (AL) passed the final reading of the minimum wage bill for cleaning and security workers last Friday, mandating that these workers will earn no less than MOP30 per hour, MOP240 per day or MOP6,240 per month from January 1 next year – although the bill is perceived to be ‘unfair’ as workers on a monthly basis will receive less than those on an hourly or daily basis.

During the discussion of the bill last week, pandemocracy legislator Au Kam San and unionist legislator Kwan Tsui Hang argued that the amounts set for hourly salary and monthly salary are not equivalent, indicating that the hourly amount of the MOP6,240 monthly salary totals only MOP26, assuming workers work for eight hours and 30 days a month.

“Why can’t we also institute a formula for calculating the minimum wage and compensation for overtime if we are making the law for the issue?

Which of the current laws is prohibiting us from doing so? Or it is just that the government doesn’t want to work on this?” Ms. Kwan asked, as well as complaining that the government does

314 cases of employers not paying imported workers in H1 DSAL said it had opened 314 case files related to employers not paying imported labour, involving 1,499 workers. The Bureau found that 43 per cent of the 150 cases that it had handled are tenable and that the employers do indeed owe workers’ salaries. However, the Labour Bureau has not yet penalised these employers.

Last year, DSAL found 53 per cent of 463 back-pay cases were proven, fining a total of 6 involved employers in the amount of MOP135,000.

not have a full timeframe for amending the current Labour Relations Law.

Improvements ahead?

Secretary for Economy and Finance Lionel Leong Vai Tac explained that he understood the concerns of the legislator, noting that the government can make improvements to

the bill when it carries out the universal minimum wage bill for all industries three years after the implementation of the bill, meaning in 2019.

However, the legislator eventually abstained from voting on the bill despite her unionist colleagues from the Federation of Trade Union, Ella Lei Cheng I and Lam

Heong San, voting in the affirmative.

The implementation of the bill will benefit some 4,650 cleaning and security workers working in residential buildings although some 13,200 workers in the city will still receive a salary of less than the new standard set by the bill.

September 3 a mandatory holiday

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he city’s Standing Committee for the Co-ordination of Social Affairs has agreed to mark the date of September 3 (Thursday) as a mandatory holiday, a decision that is now left for the Legislative Assembly to deliberate upon.

The decision to mark September 3 as a holiday by both the Macau and Hong Kong government follows Beijing’s decision, announced in May, when the State Council of China set September 3 as a national holiday to mark the ‘70th Anniversary of the Chinese People’s Anti-Japanese War and World Anti-Fascist War Victory Commemoration Day’.

Following a meeting with the committee on Friday, Labour Affairs

Bureau director Wong Chi Hong told media that both the employer and employee side of the committee had agreed to commemorate the date as a mandatory holiday.

The decision will soon be passed to the Legislative Assembly to deliberate upon and approve, Mr. Wong said.

The local authority has yet to confirm whether the date will become a permanent mandatory holiday, as this will depend on the decision of central authorities, the Labour Affairs Bureau chief added.

When finally approved, Macau will have 11 mandatory days of holiday this year.

S.L.

The director of the Labour Affairs Bureau (DSAL), Wong Chi Hong, said the government will initiate preparation works for the universal minimum wage bill during the fourth quarter of this year. He estimates that the text of the bill can be sent to the Standing Committee for the Co-ordination of Social Affairs for discussion, and passed for legislation during the second quarter of 2017.

4 | Business Daily

July 6, 2015

Macau

Young entrepreneurs fund grants of nearly MOP110 mln as of June Young Entrepreneurs Aid Scheme granted to 457 local businesses . Retail, food & beverage and wholesales businesses dominated

Junket association maintains pressure for smoking lounges

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he government’s Young Entrepreneurs Aid Scheme granted MOP109.7 million (US$877.6) to 457 local businesses established by young entrepreneurs as of June 30 this year, according to the director of Macau Economic Services Bureau (DSE), Sou Tim Peng.

The DSE head indicated that the government had received 774 applications from local youths since the establishment of the scheme in August 2013 up to June 30, of which 550 applications had already been handled by the Bureau.

Of these applicants, most were engaged in the retail, food & beverage and wholesales businesses, Mr.

Sou said, noting the Bureau had also granted subsidies to 37 cultural and creative businesses, five businesses related to Traditional Chinese Medicine and three companies engaged in MICE events – new industries supported by the government.

The average age of the applicants of the aid scheme was 29 years old, the DSE head said.

A total of 24 companies shut down their businesses after receiving the financial aid from the government, accounting for 5.25 per cent of total beneficiaries. Mr. Sou perceives, however, that the average survival rate of these businesses benefiting from the aid scheme is ideal.

On the other hand, the

DSE director indicated that the Incubation Centre for Young Entrepreneurs had received 74 enquiries following its establishment on June 18.

Most of these enquiries sought information on business matching, procedures for using the Centre, and whether the ‘Venture Valley’ in Hengqin will open for applications again.

Meanwhile, the government received 14 applications for using temporary offices provided by the Centre.

According to Mr. Sou, these applicants were engaged in businesses related to retail, wholesale, trade, as well as wedding planning, dating consultancy, and design, etc.

K.L.

local junket union - the Association of Gaming and Entertainment Promoters of Macau - continues to urge the government to allow casinos to establish smoking lounges despite the future implementation of a universal smoking ban by taking out a full-page advertising ‘opinion piece’ in Chinese-language newspaper Macao Daily last Friday.

The Association warned at the beginning of the piece that the full-smoking ban will worsen the overall economy and livelihood of the city by pulling down the gaming industry, affecting the employment of gaming workers and dragging down the businesses of supporting industries.

Last Tuesday, Macau’s Executive Council announced the bill for an amended smoking control policy, proposing a universal smoking ban for gaming floors including VIP rooms, and the elimination of smoking lounges on mass gaming floors.

In its ‘opinion piece’, the Association claimed that the government had not conducted a full and objective study before proposing the smoking-control policy.

‘The government had not interviewed the workers in the casinos and the VIP rooms, as well as gamblers in the mass market and high rollers…In addition, it had not consulted the junket industry which generates 60 per cent of the city’s gaming revenues,’ the Association wrote.

Core members of the Association include major junket operators Suncity Group, Tak Chun, Jimei International Entertainment Group, the Cali Group and Macau Golden Group.

Meanwhile, the Association argued that an air-tight smoking lounge with independent ventilation system will effectively prevent the damage of passive smoking.

‘If the government has to measure everything by an absolute standard, then it should also ban all food additives, as well as prohibiting vehicles from emitting waste gas so that the health of residents can be effectively protected! Hence, establishing smoking lounges is not impossible,’ it stated, claiming the junket industry just asks to be given room for survival.

K.L.

Corporate

Wynn Macau supports Macau Holy House of Mercy’s Welfare Shop Wynn Macau has donated MOP300,000 to Macau Holy House of Mercy’s (SCMM) Welfare Shop Project to finance the distribution of food hampers to 340 underprivileged families.

Mr. Ian Michael Coughlan, President of Wynn Macau, presented the cheque to Mr. António José de Freitas, President of SCMM. Also present at the ceremony were Ms. Ng Sio Lai, President of the General Union of the Neighbourhood Associations of Macau, Mr. Chiang Chong Sek, President of the Macau Federation

of Trade Unions, Ms. Katharine Liu, Vice President of Communications of Wynn Macau and Mr. Thomas Lau, Director of Human Resources of Wynn Macau.

The SCMM Welfare Shop project was launched in 2013 with the aim of assisting underprivileged families by providing them with basic food and daily necessities to alleviate the burden caused by inflation and increased cost of living. Wynn Macau has donated a total of MOP800,000 over three years in support of this project.

CTM exhibit advance network technology at COMMUNIC MACAU EXPO 2015 The COMMUNIC MACAU EXPO 2015 took place at The Venetian Macao Cotai Expo Hall E between 3 and 5 July. CTM has been showing continuous support to this annual IT event and was entrusted by the organizer as Wi-Fi service sponsor for the fifth consecutive year by offering free WiFi access to all exhibitors and visitors during the exhibition. In the 3-day exhibition,

residents enjoyed various exclusive offers of telecom services and products at CTM Booth located at C-A02, where subscribers of smart phone plans were eligible to enjoy MOP300 discount on handset prices, as well as double data usage up to 10GB for extra MOP68, or to redeem one set of ‘HK GO GO GO’ round trip ferry tickets + 1 Day of Unlimited Usage Data for MOP68.

Business Daily | 5

July 6, 2015

Macau Gov’t to confirm plan for fourth passageway this year The acting vice director of Land, Public Works and Transport Bureau (DSSOPT), Cheong Ion Man, said on Saturday that the government will confirm the construction plan and timeframe for building the fourth passageway connecting the Peninsula and Taipa within this year. The intention of the project was originally suggested by the government in 2005 but the DSSPOT deputy head has suddenly announced that the construction plan for the passageway – whether bridge or tunnel – will require public consultation. The new passageway is expected to connect reclamation Zone A and Taipa.

Universal smoking ban predicted to slash casino revenues by US$3.4 bln Deutsche Bank predicts that a full smoking ban will cause the industry to lose US$3.4 billion (MOP27.1 billion) in 2016, as Sterne Agee CRT says the measure will come into effect on January 1 João Santos Filipe

jsfilipe@macaubusinessdaily.com

billion (MOP110.2 billion), an increase of 18 per cent year-on-year.

Law effective January

Our 2016 forecast is -5.6 per cent and is down from +2.2 per cent as we now assume the smoking band extends to VIP gaming areas at the start of the year

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he government’s proposal to extend the smoking ban to all casino areas will slash revenues by US$3.4 billion (MOP27.1 billion) in 2016, according to the latest research note from Deutsche Bank. The investment bank posits that the universal smoking ban alone will be enough to transform the prediction of a positive 2.2 per cent growth for the full year of 2016 to a decrease of 5.6 per cent.

“Our 2016 forecast is -5.6 per cent and is down from +2.2 per cent as we now assume the smoking

band extends to VIP gaming areas at the start of the year”, analyst Carlo Santarelli wrote.

The German bank now expects Macau casinos to rake in US$28.7 billion (MOP229.2 billion) while in the previous prediction the expectation was for gaming venues to generate US$32.1 billion (MOP256.3 billion) during the year.

Considering that the VIP sector is the main sector to be affected by the universal smoking ban the new forecast expects casinos to generate VIP gaming revenue of around

Carlo Santarelli, Deutsche Bank gaming analyst

US$12.8 billion (MOP102.2 billion), a year-on-year decline of 24.5 per cent. Previously, the VIP sector was predicted to yield US$18.3 billion (MOP146.1 billion).

The report updated mass market revenue for 2016 to US$15.9 billion (MOP127 billion) from US$13.8

The amendments to the smoking law, which will force smoking lounges in casinos to shut, were sent last week by the government for Legislative Assembly (AL) approval. The Deutsche Bank report does not include the effects of the recent changes introduced to the transit visa scheme permitting Mainland visitors in transit to stay in the territory for seven days and to apply for reentrance every 60 days, while in the past they had to wait 90 days.

The Sterne Agee CRT Research report also stresses the effects of the full smoking ban. While not providing detailed information on the revenue expected, the research company says the new legislation can affect results in 2016 by as much as 10 per cent.

Quoting sources in the Legislative Assembly the Sterne Agee CRT report claims that the new legislation should not be approved before September and that it may come into effect on January 1, 2016. While it is not guaranteed that this proposal will be approved, it is worth noting that since the handover no government proposal has been rejected by the members of the AL.

City University of Macau pays MOP163,000 per month for residential area

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ity University of Macau is paying a monthly rental of MOP163,000 for the use of the former residential area of the University of Macau in Taipa, the Macau Economic Service said on Friday.

The Government clarified that City University of Macau is at this moment using part of the educational facilities of the former campus of the University of Macau - which moved to its new campus in Hengqin – and the former residential building.

‘Taking into account the large importance attributed by the government of the

Special Administrative Region of Macau to the development of the higher education system and the implementation of the policy ‘Construction of prosperity through education’, part of the facilities of the former campus of the University of Macau were conceded to City University of Macau for free’, the DSE explained.

‘Concerning the residential units, the rental value is MOP34.5 per square metre. As the total area of the residences occupies 4.732 square metres, the monthly rental amounts to MOP163.000’.

6 | Business Daily

July 6, 2015

Macau

“Automation will be the key solution” Hosting 2015 Macau Banking Automation Day, local IT company TechNet teamed up with Hitachi in a bid to introduce automation technology to Macau’s banking industry. PC Wong, head of TechNet, said Macau is facing critical challenges such as the human resources shortage, strict labour import policy and sky-rocketing rentals, the solution to which, he believes, is automation Joanne Kuai

joannekuai@macaubusiessdaily.com Photos: Cheong Kam Ka

What’s the purpose of hosting Banking Automation Day?

The 2015 Macau Banking Automation Day is hosted by TechNet Technology, which is a local company established more than 10 years ago. We’re facing a lot of the challenges of our customers, such as the human resources shortage. The situation of the small and medium enterprises (SMEs) is very critical, due to the high operational cost, including the human resources and the rental of commercial buildings, and you know Macau has a very strict labour importation policy.

Therefore, even if you have the global resources in other places in the world, you cannot just put them in Macau and utilise them.

We believe Macau has a very good foundation for the automation technology to grow and automation will be one of the opportunities to resolving the challenges of Macau’s industries.

And banking is your starting point?

Definitely. We selected banking as our starting point because banking is one of the automationapplied industries of the world, such as our daily use of ATMs, and in Hong Kong and the US they’ve already been using what we call virtual teller machines but at this moment Macau’s finance and banking sector is still very traditional. That’s why we teamed up with Hitachi, one of the

leaders of automation technology in the world. By leveraging the automation technology application from Hitachi, we will benefit most of Macau’s industries, which is why we wanted to host this event.

What’s TechNet’s role in this partnership with Hitachi?

We started the partnership with Hitachi two years ago. Firstly, we began with their technology but not automation. And now we are announcing to the Macau market that we’re moving forward from the technology side to automation.

Of course, we have our ultimate target, which is having robotic technology in the future. We also want to educate and promote local Macau people, to train up their skill-set, to apply the technology and try to improve the general quality of Macau citizens. We hope we can make some contribution to Macau society.

What do you expect from this partnership?

We believe this programme will be very significant in the coming two years. The reason is that automation can help the banking industry to lower their costs.

We’ve conducted research showing that when you’re conducting a transaction by human, it will cost a few US dollars. But when you’re conducting a transaction

by ATM machine it will only cost less than US$1. And if you do

There’s definitely a big gap. What I can tell you is that in the finance and banking industry, we are far, far behind Hong Kong, Singapore, and even Mainland China

Macau’s supply cannot fulfil the future job demand. With the banks continuing to open branches in each casino resort what would happen is that they will be facing a tremendous challenge in hiring people; and they would have to pay a considerable amount of rental for the space; thirdly, it would be very critical for them to maintain their businesses. That’s the reason why automation may be the solution to help banking provide a stable, quality service in the future to adapt to the future business environment in Macau.

That’s also why I think we should and could achieve full automation.

How is Macau doing so far in terms of automation compared to neighbouring regions? the transaction through Internet banking it will only cost a few cents. However, for the banking transaction, if you’re handling cash, you have to use the ATM machine at least. We believe the Macau market is growing. For example, Studio City is opening this year. The new Galaxy property has just opened. Next year, we’re expecting a few other properties, such as Louis XIII, MGM, Parisian and many more. All the openings will require a lot of human resources.

Isn’t there a risk of excessive job demand?

There’s definitely a big gap.

What I can tell you is that in the finance and banking industry we are far, far behind Hong Kong, Singapore, and even Mainland China. There’s a huge gap for us to catch up. However, we have limitations to [closing] this gap.

We don’t have enough high quality and knowledgeable people. We even cannot find enough IT talent in Macau. The people graduating with IT majors here in Macau have been dropping every year but the demand for IT professionals is growing. We also lack computer/ mechanical professionals in Macau.

When you don’t have this kind of people, how can you achieve the goal? Anyway, our business

Business Daily | 7

July 6, 2015

Macau goal and our revenue goal is not stopping. We understand that gaming revenues are dropping but the non-gaming business is growing. That’s why it’s a very good timing for transformation.

Why good timing?

On the one hand, the business is growing, the property market is growing, and the banking business is required to grow together. On the other hand, there’s a shortage of human resources – you cannot find enough people in the local Macau market. And the policies of labour importation limited the growth of local SMEs. Therefore, if you want to solve the critical problem of Macau’s current situation, you cannot just depend on human [resources]. We need to apply technology. We need to apply automation.

What will be the biggest challenge in applying full automation?

I don’t see it as a big challenge.

Most Macau citizens that often go to Hong Kong and Mainland China have already seen the banking systems and the automation technologies applied there. They see that the banking service is completely different from Macau, as well. They’ve been asking how come Macau’s banking service is so behind Hong Kong and other places. That’s why from the consumer market point of view, we believe they have the expectations.

What’s lacking is someone to introduce global resources to Macau. At the same time, we only have 600,000 population in Macau, but how many tourists do we have each year? We have a huge number of tourists each year. When these tourists come over from Mainland China and other places of the world, they also need to access their finance through banks. They need to get cash through the ATM. They need to spend the money through their credit card, etc. we believe that banking automation will not only benefit local residents but also Macau tourism. We need to adapt to the global trend. And we need to close the gap in order to develop our tourism sector as well.

Why did you choose banking as the starting point for automation?

Banking has already applied automation since the ATM machine. Banking also has a very big impact, from Internet banking to mobile banking widely used in Hong Kong, Mainland China and the US. Banking is one of the industries that has already well accepted automation technology.

Macau is missing some motivated organisation to apply that.

We cannot find enough resources to provide the solutions for Macau enterprises. But we have the power and ability to leverage global resources

We believe banking is the easy way in and it’s the most conceptually acceptable for now. We’re currently just introducing the automation for ATM machines, to introduce the smart and intelligent system based on ATM. We’re not inventing something completely new here, otherwise there will be fear, which we understand. For the first step, we may do some smart system based on the ATM system. For the second step, we will introduce a virtual teller machine that can totally work as a teller at a bank. These technologies are very common in Hong Kong, Mainland China and the US, but not in Macau. Macau should seriously catch up.

Where do you see TechNet in the Macau market?

We see ourselves as an innovative system integrator. We cannot invent a robot for Macau. We cannot find enough resources to provide the solution for Macau enterprises. But we have the power and ability to leverage global resources. We can help to set up a solution or build a system to assist Macau’s local banking and finance industry.

Why didn’t you enter the IT field in Macau more than a decade ago?

We found a very big room for Macau to improve in terms of information technology. Macau has been growing very fast and we also understand that much of the infrastructure, conceptual new products or solutions cannot be applied in Macau because no-one’s doing that. We also see good solutions from elsewhere all around the world. But most of the international big brands feel Macau is too small. There’s the truth. Sometimes these big international brands can’t justify setting up offices, research centre or even a sales office in Macau.

And that’s exactly why Macau always lags behind in a lot of areas and service solution or something like that. Macau cannot attract these big names to come to Macau and they also find it difficult to employ people in Macau. Even when they want to come they find it is very difficult even just to maintain the operation of a small office – it’s hard to find people; employee turnover is very high,

The situation of the small and medium enterprises (SMEs) is very critical, due to high operational costs, including human resources and the rental of commercial buildings; and Macau has a very strict labour importation policy

rental cost is much higher than Mainland China, even Hong Kong.

That’s why we want to go out. We believe we can be the integrator.

That’s our position and where our value lies.

What experience would you like to share after more than a decade of operation?

The company has around 40 employees right now, with the majority technicians, such as IT. Currently, our main job is conducting high-level IT infrastructure support for the major casinos – SJM, Melco Crown, and Wynn. And the banking industry - the major banks here in Macau like Bank of China Macau, Tai Fung Bank, ICBC (Industrial and Commercial Bank of China Macau) and Luso International Bank . We’re very focused on IT and automation.

This is the direction we’re serving at this moment. To be honest, we are benefiting from the growth of Macau.

But you also have some concerns…

Our concern is that without the people, without qualified personnel, we cannot survive in

the future. How we can distinguish ourselves from the other companies is to train up our staff’s unique skill-sets. We have to select a good product and good solution, which helps our customers to either increase their profit, or lower their costs, or provide a stable workforce. Without these three key points, our products and services would not be accepted by the Macau market. That’s what we’ve learned throughout the years.

How do you solve that?

To maintain and survive as an SME, our organisation has to be a learning organisation. We don’t have the product but our people can learn fast. We don’t have the knowledgeable people but we can leverage global professional people to learn from.

We need international resources but global companies also need us as local mediators to extend their arm to provide service to Macau customers. We see our value is that when we can bridge the international companies to Macau customers, we are essential. However, we would not limit ourselves as a platform. We will train up the Macau team to become the extension of the global big brands and help them deploy, maintain and even decide their future product in Macau.

How about yourself?

Personally, I’m a local Macau resident, growing up in Macau up to high school when I moved to Australia to study. After that I also studied in Hong Kong. And then I worked in IBM for almost ten years and one of the largest system integrated companies for another 8 years. Then I established my own IT company. I had almost 20 years of employment experience before starting my own business.

Where do you see the company in, say, five years…

I will concentrate on automation solution development for Macau.

That will be my future. Because I believe if I don’t concentrate on making it the best I can never be successful in other areas. I would say that before I successfully achieve automation in Macau, I shouldn’t waste my energy on other [targets]. I will focus on one development direction before moving on to others.

8 | Business Daily

July 6, 2015

Greater China

Authorities deploy measures against mark China curbs IPOs, enlists brokers in all-out bid to end market rout Michael Martina and Samuel Shen

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hina froze share offers and set up a market-stabilisation fund on Saturday, the Wall Street Journal said, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world’s secondlargest economy.

Beijing’s reported suspension of initial public offers (IPOs) came a few hours after extraordinary announcements by major brokers and fund managers, which collectively pledged to invest at least US$19 billion of their own money into stocks.

China’s government, regulators and financial institutions are now waging a concerted campaign to prop up the nation’s two main share markets, amid fears that a meltdown would rock the financial system and inflict heavy losses across an economy where annual growth is already running at a 24-year low.

Almost US$3 trillion in market value - more than the entire economic output of Brazil - has been wiped out since markets went into reverse last month, posing a bigger headache for many global investors than even the Greek debt crisis.

The main Shanghai Composite Index has lost around 30 percent of its value in three weeks, a dramatic end to an equally breath-taking rally that saw it more than double

in just seven months, fuelled by official interest-rate cuts.

The sell-off is especially worrying because the bull market had been built on a mountain of speculative loans. Some analysts suggest total margin lending, both formal and informal, could add up to around 4 trillion yuan (US$645 billion).

The stock markets are dominated by retail investors.

China’s top brokerages said on Saturday they would collectively buy at least 120 billion yuan (US$19.3 billion) of shares - a pledge that, according to the Wall Street Journal, would form part of Beijing’s new stabilisation fund.

Separately on Saturday, 25 Chinese mutual funds announced they too would put their own capital into stocks.

The fund managers did not give a figure but said they would invest into their own funds, alongside their customers.

Policy confusion

Later, 28 Chinese firms announced in individual statements they would suspend their own IPO plans due to market volatility. They did not mention any central decision to halt IPOs. The securities regulator had already said on Friday it would reduce the number of IPOs and other capital-raisings.

The freezing of IPOs can lend support to a falling market because large amounts of money are frozen when subscriptions are taken, drying up liquidity in the market. Large IPOs have been cited as a reason for triggering the recent plunge.

Beijing has unleashed a barrage of official policy moves over the past week, including an interest rate cut, a relaxation of margin-lending rules and additional bank liquidity.

But these efforts have so far failed to convince investors.

Hong Hao, strategist at BOCOM International, doubted the move by brokers alone would be enough to stabilise share prices, unless even more leverage was added to the market.

“Around 120 billion yuan is not enough, but if leverage (more borrowing) is used, it could expand to over 500 billion yuan and that may have some effect,” he said.

In a statement, the Securities Association of China expressed “full confidence” in the development of China’s capital markets and said the brokerages would jointly invest 15 percent of net assets as of end-June, “or no less than 120 billion yuan”, in blue-chip exchange traded funds.

The brokerages would not sell as long as the Shanghai composite remained below 4,500 points. The index fell 5.8 percent on Friday to end at 3,684 points.

KEY POINTS China halts IPOs to support stock markets - WSJ Brokers, fund managers vow to invest at least $19 bln in shares 28 Chinese firms suspend IPO plans Main share indexes have fallen 30 pct in 3 weeks Threatens fresh blow to already slowing economy

Listed securities companies among the 21 brokerages also pledged to buy back shares, along with their major shareholders.

The Asset Management Association of China promised to hold their additional stock investments for at least a year and to also speed up the application and issuance of equity funds.

Hong Kong exchange to introduce volatility controls Volatility in HKEx during the closing period can be as much as six times greater than in other developed markets

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he operator of Hong Kong’s stock exchange said it will introduce new controls to rein-in volatility, in a long-awaited announcement that comes as Chinese shares see wild price swings, fuelling fears of a mainland market collapse.

Hong Kong Exchanges & Clearing (HKEx) said on Friday that it will proceed with a proposal, unveiled in January, to introduce a socalled closing auction and other volatility curbs that would bring it in line with international peers in New York and Europe.

HKEx said it will give the market a year to prepare for a phased implementation of the new controls, with the roll-out beginning from mid-2016.

The exchange had held off on reintroducing a recalibrated closing auction for several years amid opposition from influential local retail brokers who claimed the mechanism could give rise to market manipulation.

On Friday, however, the HKEx finally bowed to overwhelming pressure from international investors who

HKEx plans to introduce controls that will restrict a stock to a trading price band

say the measures are critical to Hong Kong’s status as an international financial centre.

The HKEx has come under intense scrutiny in recent weeks following a series of jaw-dropping moves that saw stocks such as Hanergy Thin Film Power Group and Goldin Financial Holdings lose up to 50 percent of their value in less than two hours.

Chinese shares listed in Hong Kong had surged earlier this year along with a sizzling

speculative rally in mainland markets, which more than doubled over the last year.

But mainland shares have plummeted some 30 percent in recent weeks, pulling down Hong Kong’s China Enterprises Index by more than 10 percent.

All major stock exchanges use an auction at the end of the trading day to reduce volatility when calculating closing prices. Buy and sell orders are pooled during a

five- or 10 minute period and are then matched at the best available price.

In Hong Kong, the closing price is based on continuous trading, whereby orders are matched immediately.

According to research by State Street Global Advisors published in 2012, volatility in Hong Kong during the closing period can be as much as six times greater than in other developed markets.

The HKEx launched a

closing auction in May 2008 but scrapped it 10 months later after design flaws actually exacerbated price swings.

“We are pleased that the majority of respondents from the various market segments supported the implementation of the two market microstructure reforms, which will put us on par with other leading exchanges,” said Roger Lee, HKEx’s head of market operations, in a statement.

Many major exchanges, including the New York and London bourses, try to mitigate such swings through so-called circuit-breakers that temporarily suspend trading in a stock if it behaves erratically. The HKEx plans to introduce similar controls that will restrict a stock to a trading price band.

In a statement, Sally Wong, chief executive of the Hong Kong Investment Funds Association, which represents global institutional investors, said she “warmly welcomed” the move, which she said also would help lower overall transaction costs for investors.

Reuters

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Greater China

kets negative trend

Wanda leads investment in travel service The entertainment arm of Chinese property conglomerate Dalian Wanda Group said on Friday it would lead an almost 6 billion yuan (US$967 million) investment into one of China’s biggest travel websites, its first foray into online tourism. Wanda Culture Industry Group Co said it would pay 3.58 billion yuan for an unspecified stake in LY.com. The remaining investment would come from Tencent Industrial Capital, a unit of Tencent Holdings Ltd, CITIC Capital Holdings, a unit of brokerage CITIC Ltd, as well as other institutions, it added.

Qingdao to sell yuan of muni bonds China’s Qingdao municipality will sell 15.3 billion yuan (US$2.5 billion) of general obligation bonds on July 10, according to a notice on the website of a major bond clearing house on Friday. The current quota for new fundraising in China’s fledgling municipal bond market stands at 600 billion yuan in 2015. The Ministry of Finance announced earlier that local governments would be allowed to swap up to 2 trillion yuan of high-interest, maturing debt for official lower interest provincial or municipal debt.

Just a few months ago, state media had been encouraging the market’s giddy rise, saying China’s bull market had just begun and denying that it was in a bubble. Investors big and small took that as a government signal to buy.

Now, Beijing is struggling to restore confidence before too much economic damage is done.

Weighed down by a property downturn, factory overcapacity and high levels of local government debt,

economic growth had already been expected to slow to around 7 percent in 2015, robust by global standards but its weakest annual expansion in a quarter of a century.

Reuters

Services activity slows to 5-month low Economists and market participants expect the central bank to ease policy further to support growth

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ctivity in China’s services sector slowed to its lowest in five months in June, a private survey showed on Friday, suggesting the economy still needs further policy support despite some signs of steadying.

Beijing has rolled out a suite of measures since last year, including interest rate cuts, to prop up growth, but economists worry that persistent weakness in exports and the property sector combined with high local government debt will keep the world’s second-largest economy under pressure.

The headline HSBC/Markit Purchasing Managers’ Index (PMI) for June fell to 51.8 from 53.5 in May, hitting its lowest since January but still indicating expansion for the 11th straight month.

The new business sub-component fell to 52.2, an 11-month low, from 54.4 in May, while the employment sub-index fell to its lowest in three months and indicated jobs were being shed.

Growth in China’s services companies has been more resilient than at its ailing factories, but the sector had shown signs of succumbing to the broader economic cool down in recent months.

The services sector has accounted for the bigger part of China’s economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent

State-owned margin lender to quadruple capital base China Securities Finance Corp, China’s official margin lender for brokerages, will boost its capital base to 100 billion yuan (US$16.12 billion) from 24 billion yuan, a spokesman for the country’s securities regulator said on Friday. The Corporation would further raise capital from various channels to expand business and stabilise markets, said Zhang Xiaojun, spokesman for the China Securities Regulatory Commission. China’s main equity bourses have fallen nearly 30 percent in the past three weeks. Many analysts suggest high levels of margin borrowing have exacerbated the falls as investors have been forced to sell assets to meet margin collateral requirements.

Ant Financial completes private placement of shares

KEY POINTS June services PMI at 51.8, lowest since January Employment sub-index weakest in 3 months Weak manufacturing, slowing services seen prompting stimulus

contribution from manufacturing and construction.

Last monath, China’s central bank cut lending rates for the fourth time since November and trimmed the amount of cash that some banks must hold as reserves, but economists remain wary about the outlook given erratic global demand for China’s exports and fears of a collapse in its volatile stock market.

The government is due to release second-quarter gross domestic product data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.

Reuters

Ant Financial Services Group, the finance arm of Alibaba Group Holding Ltd, said on Friday it had completed a private placement of shares that state media had said was seeking to raise up to US$4 billion.

It was the first major private placement for Ant Financial, which gave no financial details of the deal. The round was led

by China’s state-owned National Social Security Fund, “with participation of major Chinese insurance corporations and other strategic investors”, Ant Financial said in a press release.

Airbus to help China enter plane seat market Airbus is to help China set up production of aircraft seats and galleys in a move to ease shortages and delays that have threatened disruption to global aircraft production. Planemakers including Airbus, Boeing and Embraer have been wrestling for more than a year with delayed deliveries of aircraft seats or galleys from suppliers including France’s Zodiac Aerospace. Its main rival, B/E Aerospace of the United States, has also been reported by U.S. media to have suffered some supply delays.

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“Shadow lenders” line pockets even as bourses bomb Grey financing network involves a loose association of commercial banks, including the largest five state-owned lenders, smaller commercial banks, trust companies and an endless variety of self-styled stock matching endowment firms

Int’l investors add national markets to watch lists The U.S. Treasuries rallied strongly a week ago, with yields falling to one-week lows

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reece’s full-blown debt crisis and Puerto Rico’s unfolding one have dominated headlines all week, but some of the biggest U.S. investors have China at the top of their worry lists.

Jeffrey Gundlach, Bill Gross, Dan Ivascyn, and Mohamed El-Erian are among the money managers keeping close watch of China where markets have been under severe selling pressure despite moves by regulators to restore confidence.

Chinese markets, which had risen as much as 110 percent from November to a peak in June, have tumbled close to than 30 percent since June 12 in jaw-dropping volatility as money surges in and out of the market.

“We discuss China in detail at every strategy meeting and we continue to consider it one of several risks we need to keep an eye on,” Dan Ivascyn, Group Chief Investment Officer at Pimco, one of the world’s largest bond fund managers with US$1.59 trillion in assets under management as of March 31, told Reuters.

For his part, Gundlach, who oversees US$73 billion in assets at DoubleLine Capital, said he bought “tons” of Treasuries and Ginnie Maes last Friday, partly

because the Shanghai Stock Exchange Composite Index was “signalling trouble by collapsing after blowing off to the upside a la the Nasdaq back in 1999/2000.”

In fact, the U.S. Treasuries rallied strongly a week ago, with yields falling to one-week lows, with new developments and concerns about Greece and Puerto Rico.

In past years, Gundlach

has said the Shanghai Composite was a leading indicator of U.S. stocks.

“Like I’ve said, Shanghai 2014-15 is like the NASDAQ 1999-00,” Gundlach said on Thursday.

Gross, the legendary investor who has been long referred to as the ‘Bond King,’ raised warning flags again this week about the risks in China.

In his Investment Outlook report on Tuesday, Gross said China was one of several events that could precipitate a run on the “new” U.S. shadow banking system, which includes mutual funds, hedge funds and ETFs which are modern banks that are not required to maintain reserves

The country is undergoing a huge deleveraging at a time of lousy demographics and an ambitious rebalancing of the economy David Rosenberg, chief economist and strategist, asset’s manager firm Gluskin Sheff

or even emergency levels of cash.

“China - a riddle wrapped in a mystery, inside an enigma,” Gross said. “It is the ‘mystery meat’ of economic sandwiches - you never know what’s in there. Credit has expanded more rapidly in recent years than any major economy in history, a sure warning sign.”

For years, prominent short sellers like Jim Chanos of Kynikos Associates, have warned about a property, debt and investment bubble bursting in China only to see government officials engineer an economic soft landing.

Yet Gross said investors should still hold an appropriate amount of cash “so that panic selling for you is off the table.”

El-Erian, the chief economic adviser at Allianz, said he continues to recommend a “barbell” approach, where investors should stay mostly in cash on one end of a portfolio and illiquid assets such as infrastructure, a portfolio of selective tech start-ups and certain private market opportunities in emerging countries on the other. “The stock market volatility is certainly notable in China,” El-Erian said.

Reuters

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Greater China

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hina’s vast network of “grey market” lenders have reaped big profits from lending money to individuals and companies to buy stocks, but as markets slump their customers face heavy losses after borrowing up to 10 times their starting capital.

Global investors are increasingly worried about the scale of leverage in China’s stock market, fearing the impact of a crash on the ordinary retail investors who dominate it could destabilize the world’s second biggest economy just as growth is slowing.

The risks have been magnified by the grey or shadow market - a network of state-owned commercial banks, trust companies, fund managers, and loosely regulated grassroots finance firms.

This financing, which can carry annualised interest rates of up to 17 percent, was the financial rocket fuel that powered a 110 percent gain in Shanghai stocks between November and early June, by allowing borrowers to substantially leverage their capital.

Riskier clients go to trust companies because they can’t get loans from banks Edmond Law, banks analyst, UOB Kay Hian

These firms continue to benefit from interest payments and fees, even as more than US$2.5 trillion has been wiped from China’s market capitalization over the last four weeks.

Excessive leverage can be lethal in stock markets, because as overextended borrowers sell shares to meet “margin calls” they drive prices down further, creating a vicious cycle.

Light regulation of shadow lending underscores Beijing’s quandary as it looks to both protect the army of mom and pop investors, who comprise 80 percent of the stock market, while supporting a rally that has helped raise more than US$63 billion from primary and secondary equity sales in China and Hong Kong this year alone.

Grey network

China’s grey financing network involves a loose association of commercial banks, including the largest five stateowned lenders, smaller commercial banks, trust companies and an endless variety of self-styled stock matching endowment firms.

These finance firms, many of which were founded in the last year, often have backing from government enterprises but operate outside the remit of China’s securities or banking regulators.

Calculating the size of the market is tricky, bankers say, due to its loose regulation. Total margin debt at brokerages stood at 2.2 trillion yuan in late June, but the amount of grey market leverage may exceed that amount.

For China’s trust companies alone, stock assets increased by 225 billion yuan (US$36 billion) from the previous quarter in the first three months this year, reaching 777 billion

yuan by March 31, according to China Trust Association data.

That helped drive a 33 percent year-on-year gain in total profit for China’s 68 trust firms in the first quarter of 2015.

Typically, banks cooperate with trust firms and stock matching endowment companies to raise cash by issuing wealth management products (WMPs) that are sold to banking clients.

These products generate funds that are then used to finance individual and corporate stock market investors at ratios of up to 1:10, according to executives familiar with the businesses.

The arrangement highlights a persistent fault line running through China’s financial system, despite Beijing’s efforts to regulate the shadow system - people buying WMPs through mainstream banks may be, knowingly or not, left highly exposed to the vagaries of the stock market.

Trust companies have also used such products to back real estate loans, corporate junk bonds and short-term over-the-counter debt instruments.

The financing firms limit their own risk by requiring investors to add cash or sell shares once their accounts lose anywhere from 50 to 70 percent of their original investment value, executives said.

Two large and two smaller trust firms told Reuters that large state-owned banks such as Bank of China Ltd (BoC) and Bank of Communications Co (BoCom) Ltd, as well many smaller lenders, indirectly channel money into the stock market this way.

Reuters

Hong Kong’s real estate at record high Mainland Chinese accounted for 37 percent of new sales of luxury homes priced above HK$50 mln in the first quarter

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ew home sales jumped to a record high in the first half of the year, driven in part by the return of Chinese investors seeking to park money in milliondollar mansions, underscoring the challenges the government faces in curbing property prices.

Despite a series of tightening measures to cool the market, sales jumped 42 percent from a year earlier to HK$89.6 billion (US$11.56 billion and prices rose another 7 percent to an all-time peak), real estate company Centaline Property Agency said.

Analysts said low interest rates in China and abroad would continue to drive cash-rich Chinese investors to the city’s high-end home sector amid hopes for higher returns in one of the world’s most expensive property markets.

Mainland Chinese accounted for 37 percent of new sales of luxury homes priced above HK$50 million in the first quarter, according to Midland Realty.

That was the highest since the end of 2013, but still below the peak of more than 80 percent at the end of 2012 before a 15 percent tax on foreign buyers that many industry watchers say was targeted at mainland Chinese.

Developers and analysts are expecting a further 5 to 10 percent rise in Hong Kong home prices in the second half of this year, shrugging off concerns over an expected mild interest rate hike from the U.S. Federal Reserve later this year.

Xi’an Shaangu acquires turbine manufacturer The engineering company based in north-western Shaanxi province, paid 318 million yuan (US$51 million) for a 75 percent stake of Brno Ekol, a leading Czech turbine manufacturer.

According to an agreement signed by the two companies in January, the acquisition will take place in two steps, with delivery of the remaining stake completed in the years to come. It is the biggest amount paid by China into Czech’s manufacturing industry over the recent years, accounting for about 17 percent of China’s total investment into the European country.

CIC sovereign fund ready to work with AIIB China’s sovereign wealth fund China Investment Corp (CIC) is ready to work with the new Chinese-led Asian Infrastructure Investment Bank (AIIB) to invest in projects in the region, a senior official said on Friday. With a focus on investing in the infrastructure and high-tech sectors this year, among others, Liu Fangyu, the head of the public relations and international cooperation department at CIC, said the fund was ready to support the AIIB where possible. The fund posted a 41 percent fall in its overseas investment returns in 2014 of 5.5 percent.

CNOOC’s new output to lift oil production China’s crude oil output looks set to rise this year from a record in 2014 as new production from third largest producer CNOOC helps to counter reductions from its two bigger rivals.

Output growth from China would add to a global glut even as exporters such as the Organization of the Petroleum Exporting Countries (OPEC) and Russia produce at near record highs and U.S. shale producers keep ramping up output. With the global oversupply as much as 2.6 million barrels per day (bpd), international crude prices have been nearly cut in half over the past year.

Mega-ships operation ban lift China said it will allow 400,000-deadweight tonne ships to dock at its ports, officially ending a more than three-year ban that had effectively shut out Brazilian miner Vale SA’s giant vessels.

Four domestic ports - Qingdao, Dalian, Tangshan Caofeidian and Ningbo - will be allowed to receive the carriers after they meet technical standards, China’s state planner, the National Development & Reform Commission, said in a joint statement with the Ministry of Transport. Vale’s Valexmax mega-ships, which were designed to cut the costs of transporting iron ore to China, were banned on safety concerns.

The relentless rise in home prices has prompted renewed concerns that the government may place more property tightening measures such as stricter mortgage restrictions in order to puncture the trend.

The city’s de facto central bank in February cut the amount of money home buyers can borrow and lowered the debt servicing ratio for secondhome buyers.

With a supply of up to 10,000 new units coming to the market in the second half from developers such as Sun Hung Kai Properties and Cheung Kong Property Holdings, Centaline expected full-year new home sales to

swell to more than HK$200 billion (US$25.80 billion) this year, easily beating last year’s existing record of HK$178 billion.

Hong Kong’s home prices have jumped more than 170 percent since 2008 due to low interest rates and a supply shortage, shrugging off a series of cooling measures and posing policy challenges to the government of embattled leader Leung Chun-ying.

The city’s real estate share subindex has risen more than 16 percent so far this year, outperforming a 11 percent rise in the benchmark Hang Seng Index.

Reuters

Ningbo municipality issues muni bonds China’s Ningbo municipality will sell 20.53 billion yuan (US$3.31 billion) of general obligation and special purpose municipal bonds on July 10, according to a notice on the website of a major bond clearing house on Friday. The issue includes 14.7 billion yuan of general bonds and 5.83 billion yuan of special purpose bonds, the statement said. The current quota for new fundraising in China’s fledgling municipal bond market stands at 600 billion yuan in 2015.

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Asia

Toshiba accounting errors may be over US$800 million The company has not been able to close its books for the year that ended in March

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apan's Toshiba Corp may need to mark down past earnings by over 100 billion yen (US$814 million), more than double earlier estimates, after an investigation into

past accounting practices found more irregularities, a source familiar with the matter said on Saturday.

The Nikkei business daily reported earlier on Saturday the

newly discovered errors, related to computer parts procurement, could see an earnings mark down of around 150 billion yen at the industrial conglomerate.

In a statement, Toshiba said it had no information to disclose now, citing the on-going investigation.

KEY POINTS Toshiba says it has nothing to disclose now Nikkei says earnings mark-down could be around 150 bln yen Third-party probe due to be completed in mid-July

The company has not been able to close its books for the year that ended in March while a thirdparty committee reviews its past bookkeeping practices in a probe prompted by regulators. It has also skipped its year-end dividend to shareholders.

The investigation had previously found inappropriate bookkeeping in areas such as highway electronic toll collection systems, power meters and semiconductors likely led to profits being overstated by nearly 55 billion yen in recent years.

The company has said irregularities found so far included not booking appropriate losses and expenses, as well as underestimating material costs.

The investigation is expected to conclude in mid-July.

Shares of Toshiba, whose businesses range from laptop computers to nuclear power plants, have fallen 17 percent since the company disclosed the internal investigation in early April.

The current accounting investigation is Toshiba's second in less then two years. In October 2013, it announced that it found its medical subsidiary, Toshiba Medical information Systems, had overstated results for several years.

Previous accounting investigations in Japan have included camera and medical equipment maker Olympus Corp's 13-year cover-up of US$1.7 billion in losses.

Reuters

Philippines may sell US$750 mln global bonds in 2016 In 2016, local debt sales may increase by 9 percent to 643 billion pesos, compared with 590 billion pesos this year Cecilia Yap

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he Philippines may offer about US$750 million of global bonds in 2016 while seeking to keep domestic funding elevated.

The Asian nation plans to borrow 747 billion pesos (US$16.6 billion) next year, and will probably sell 33 billion pesos of global bonds, Treasurer Roberto Tan said in a July 4 interview at the Clark economic zone in Pampanga, a province north of Manila.

About 643 billion pesos, or 86 percent, will be raised locally as the market remains very liquid, Tan said.

The Philippines has increased reliance on the local market to fund its budget as money supply almost doubled in the five years under President Benigno Aquino. A steady flow of remittance by overseas workers and revenue from the outsourcing industry boosted

in 2016, 71 billion pesos will probably come from official development loans, Tan said, citing preliminary data pending approval from the economic team.

Changing environment

The Philippines has increased reliance on the local market to fund its budget as money supply almost doubled in the five years under President Benigno Aquino

liquidity to 7.6 trillion pesos in May, compared with about 4 trillion pesos at end-2009.

“The government has cut foreign debt component to 34 percent of the total, reducing our vulnerability

to fluctuations in the foreign currency,” Tan said in a speech at an event by the National Association of Securities Broker Salesmen Inc. Of the 104 billion pesos the nation plans to raise internationally

In 2016, local debt sales may increase by 9 percent to 643 billion pesos, compared with 590 billion pesos this year, while external borrowing may drop by 6 percent from 111 billion pesos, according to Tan. The Philippines sold US$2 billion worth of 25-year notes in January at a record-low coupon for the country’s similar-dated overseas debt, using US$1.5 billion to finance the purchase of shorter-dated securities to extend maturity. The nation is looking out for the possibility of a similar debt exchange, as well as opportunities for

selling overseas debt earlier than its typical schedule at the start of the year, Tan said.

The government wants to hold a peso-denominated debt exchange this quarter, probably offering longerdated bonds including a 25year tenor in exchange for shorter, illiquid debt, Tan said. It also wants to start an interbank Specials Repo program this year that will allow more efficient pricing for government securities.

The Philippines is keeping a close watch on the developments in Greece, as well as the actions of the U.S. Federal Reserve, Tan said.

“We have to really monitor how market conditions pan out and see if there are opportunities for us,” including liability management, the treasurer said.

Bloomberg News

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Asia

Malaysia probes link of funds to Prime Minister The investigation may threaten Prime Minister’s ability to implement more economic reforms Shamim Adam

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Malaysian task force is investigating a money trail that allegedly showed funds ending up in Prime Minister Najib Razak’s bank accounts, a claim he says is political sabotage as some cabinet members voiced support.

The Attorney-General said on Saturday the task force obtained documents related to the apparent transfer of funds in its probe of a state investment company and during raids on three companies. Home Minister Ahmad Zahid Hamidi said attempts to undermine the government could be a threat to national security while Defence Minister Hishammuddin Hussein said it’s reckless to criticize Najib as the truth has not been determined.

“Following a review and analysis made on documents obtained as a result of the raids, I have given guidance to the Special Task Force to follow up,” Attorney-General Abdul Gani Patail said without providing details. “The investigation will focus on every aspect raised.”

About US$700 million of funds may have moved through government agencies, banks and companies linked to state investment company 1Malaysia Development Bhd. before apparently appearing in Najib’s accounts, the Wall Street Journal reported Friday, citing documents from a government probe. The Prime Minister’s Office said Friday the claims were part of a “political sabotage” campaign by some individuals seeking to remove Najib from office.

The scandal surrounding the alleged funds is the biggest crisis so far to engulf Najib, 61, since he came to power in 2009. It may threaten his ability to implement more economic reforms such as a new consumption tax and fuel subsidy cuts that Fitch Ratings cited when it left Malaysia’s sovereign rating unchanged on June 30 and revised its outlook to stable.

Allegations, insinuations

The Sarawak Report, a news website set up by British investigative journalist Clare Rewcastle-Brown in 2010, reported Thursday on a similar money trail involving the companies raided by the task force as well as

Malaysian lender AMMB Holdings Bhd., where there were allegedly accounts bearing Najib’s name.

An AMMB spokesman said Friday it’s unable to comment as the lender is guided by the Financial Services Act which governs client confidentiality.

“Allegations and insinuations are being made against a serving Malaysian prime minister,” Home Minister Ahmad Zahid said in a statement Sunday. “The Ministry of Home Affairs and the Royal Malaysian Police will not hesitate to use the full force of the law against those who attempt to harm Malaysia’s economy and our democratic process.”

Deputy Premier

Deputy Prime Minister Muhyiddin Yassin called on authorities Saturday to investigate the allegations against Najib. Members of the special task force, which comprises of the Malaysian Anti-Corruption Commission, the central bank and police, conducted raids Friday on the premises of three companies linked to the funds, Attorney-General Abdul Gani said.

Hishammuddin said the task force should be given space to perform the investigations, which he believed will be done “promptly, fairly and impartially.”

1MDB on Friday denied it had funnelled funds to Najib, rejecting reports saying investigators believed they had found such a money trail. The prime minister said late Friday he had never taken funds for personal gain and documents on which the Wall Street Journal report is based were doctored.

‘Very Concerned’

“I am very concerned with the recent expose by the Wall Street Journal,” Muhyiddin said in a Facebook posting. “This accusation is very serious because it can undermine the credibility and integrity of Najib as prime minister and head of government.”

Najib should give a convincing explanation or denial, Muhyiddin said, adding he welcomed the fact that Najib had refuted the allegations.

Investor confidence in Malaysia has been dented by growing scrutiny

over Najib’s management of debtridden 1MDB, whose advisory board he chairs. In a period of less than five years since it was set up, the company accumulated debt of 41.9 billion ringgit (US$11.1 billion).

Najib has resisted calls from former premier Mahathir Mohamad to step down as the country’s leader over the matter. He said he has a mandate to govern and will remain leader as long as he has the support of his United Malays National Organisation party and citizens.

Najib’s approval rating fell to 44 percent in January from 48 percent in October, according to a survey conducted by the Merdeka Centre for Opinion Research that month. Rising living costs and concern ahead of the introduction of a new consumption tax in April contributed to the decline.

Mahathir has said that Najib has lost the trust of Malaysians, and their party UMNO would lose the next general election if he stays as leader.

His predecessor Abdullah Ahmad Badawi stepped down in 2009 after Mahathir led calls for his resignation.

Najib’s ruling Barisan Nasional coalition lost the popular vote in the 2013 general elections even as it kept a parliamentary majority. The next elections must be held by 2018.

Bloomberg News

Myanmar allows 9 more investments Myanmar’s Investment Commission has allowed a total of nine more domestic and foreign firms to make investment in the country so far this month, an official report said yesterday. In the form of locally owned, wholly-foreign owned or joint venture, the approved businesses including satellite pay TV operator building in Yangon, a hotel in Ngpali beach, western Rakhine state, facilities for clothing manufacturing, wood processing, value-added agricultural products processing and exportation, tri-motorcycle assembling and fire brick production in Yangon and Bago regions.

Japan pledges US$6 bln to Mekong nations Japan said on Saturday it would extend around US$6 billion in development aid to Mekong region countries, as China prepares to launch a new institutional lender seen as encroaching on the regional clout of Tokyo and ally Washington. Cambodia, Laos, Myanmar, Thailand and Vietnam all have strong economic growth potential, and are promising destinations for Japanese exporters of railway systems, power plants and other infrastructure. Tokyo’s planned assistance of about 750 billion yen over the next three years follows a pledged aid of 600 billion yen to the five nations in the preceding three-year period.

Indian business activity contracts India’s dominant services industry contracted for a second month in June as new business again declined, suggesting Asia’s third-largest economy is struggling to maintain growth, a survey showed on Friday. Any weakness in the economy, alongside subdued inflation, will likely add to expectations the Reserve Bank of India will ease monetary policy sooner rather than later. The Nikkei Services Purchasing Managers’ Index, compiled by Markit, dropped to a 15-month low of 47.7 in June from May’s 49.6, well below the 50-level that separates growth from contraction.

This accusation is very serious because it can undermine the credibility and integrity of Najib as Indonesia appeals prime minister and head against Bakrie Telecom Communications ministry has appealed to of government Muhyiddin Yassin, Malaysia’s Deputy Prime Minister

the country’s Supreme Court against PT Bakrie Telecom Tbk’s debt restructuring, a minister told Reuters. Bakrie Telecom, part of the heavily indebted Bakrie Group, held a creditors’ vote last year on its restructuring proposal, which was then validated by a Jakarta court. The company said that 94.5 percent of its creditors had approved its proposal, but some of its bondholders said they were excluded from the process and were receiving a tiny fraction of their money as a result of the vote.

Japan regulator urges banks to reduce cross-shareholdings

Malaysian Prime Minister Najib Razak

Financial regulator urged the country’s biggest banks to reduce their cross-shareholdings, warning that their heavy exposure to the equity markets poses risks to their capital. The cross-shareholdings of Japan’s three largest banks are equivalent to nearly 50 percent of their core capital, the Financial Services Agency said, far exceeding their peers in the United States and Europe where the figure is less than 10 percent. “The impact on their capital at times when the stock market falls cannot be ignored,” the agency said in an annual report on its financial supervision, published on Friday.

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July 6, 2015

International Global business growth at five-month low Global business growth was at its weakest since the start of the year in June as firms hiked prices at the fastest rate in nine months, a survey showed on Friday. JPMorgan’s Global All-Industry Output Index, produced with Markit, fell to a five-month low of 53.1 in June from May’s 53.6. It has been above the 50 mark that divides growth from contraction since October 2012. The sub-index measuring output prices rose to 51.3, its highest reading since September. A global PMI covering the service industry also fell to a five-month low.

Tanzania resumes debate on energy bill Parliament resumed debate on a contentious and long-delayed petroleum bill, after the speaker suspended around 40 opposition lawmakers for disrupting an earlier session. The government says the legislation will create a legal and regulatory framework to manage discoveries of gas - Tanzania’s reserves are estimated at 55 trillion cubic feet - and possible future discoveries of oil.

A copy of the draft legislation seen by Reuters sets out royalties and other payments that energy companies will have to pay to the government.

Venezuela’s unofficial exchange rate weakens Unofficial exchange rate broke through 500 bolivars per US dollar on Friday, according to a widely used website, as the socialist-run country’s currency control system struggles to meet keen demand for greenbacks. The rate weakened to 501.21 bolivars per dollar on Friday, clocking a 65 percent tumble this year, according to DolarToday, which says it publishes the figure based on currency trades along the Colombian border. A severe recession and a fall in oil prices have slammed the OPEC nation’s ability to provide dollars through a complex three-tiered currency control system.

Suez CEO says market trends more favourable Suez Environnement, the world’s second largest waste and water company, said market trends were slightly more favourable in the second quarter of the year after a flat first quarter. In April, the French group reported a 5.5 percent increase in first quarter sales, boosted by the euro’s weakness. It also confirmed its 2015 outlook for organic revenue growth of at least three percent and positive organic EBITDA (earnings before interest, tax, depreciation and amortisation) growth. He declined to say whether he was more confident about the rest of the year.

Puerto Rico to boost cash flow A key bill that will boost Puerto Rico’s cash flow was signed into law Friday, the governor’s office said, allowing the commonwealth to raise US$400 million in Tax & Revenue Anticipation Notes (TRANs) from three public insurance corporations.

Puerto Rico’s governor dropped a bombshell on creditors earlier last week by saying the island needed to restructure debts to solve its fiscal problems. “This measure is necessary due to the absence of the commonwealth’s usual liquidity sources, and will help keep Treasury’s cash flow,” the government statement said of the TRANS notes.

Soccer body beset by tax scandal amid U.S. criminal probe Authorities allege current and former South American soccer officials took more than US$100 million in bribes from a marketing company in exchange for television and sponsorship rights Tariq Panja

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he head of South American soccer, who skipped most of the region’s top competition, said he was forced to stay away from the Copa America to deal with the fallout from turmoil in the sport’s global governing body.

Juan Angel Napout, in his first English-language interview since the FIFA scandal broke May 27, said Conmebol, the South American soccer body, faces a financial crisis after the U.S. Department of Justice charged 14 officials with more than two decades of criminal activity, including racketeering, money laundering and tax evasion.

“It’s a big problem,” said Napout, who arrived in Santiago hours before Saturday night’s Copa America final between hosts Chile and favourite Argentina. “We still haven’t reached the solution to all our financial problems, but in these last three weeks we’ve been paying health programs that had never been paid in 30 years, we paid taxes that were never paid.”

Conmebol is among the worstaffected bodies following the raid on FIFA executives by Swiss authorities acting on behalf of the U.S. Several officials, including Napout, who was elected president in March, stayed away from the three-week regional competition. Venezuelan soccer head Rafael Esquivel remains under arrest in Switzerland, where he’s fighting extradition. And former Conmebol head

Nicolas Leoz is under house arrest in Paraguay following the U.S. charges.

Probe’s centre

The Copa America, soccer’s oldest regional competition, is at the centre of the U.S. probe. Authorities there allege current and former South American soccer officials took more than US$100 million in bribes from a marketing company in exchange for television and sponsorship rights. The future of a special centenary tournament, slated to be held in the U.S. in 2016, remains in doubt.

“That’s on the lawyer side,” Napout said of the 2016 event. “I don’t want to be quoted on that. Everything is being studied by lawyers.”

Renzi claimed that even if Greece voted “No” in the plebiscite it would not leave the eurozone and there was much yet to renegotiate

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Dignitaries absent

Conmebol, which only has US$10 million in cash reserves, has had to pay US$2.8 million in unpaid employee health costs and a further US$1 million in taxes over the past few weeks, he said.

The soccer body hasn’t yet approached FIFA for financial assistance although it has asked its lenders for support, Napout said.

South American soccer officials aren’t the only ones to have stayed away from the tournament. FIFA President Sepp Blatter, who was at the final in 2011, has also been absent.

The lack of dignitaries meant Gianni Infantino, general secretary of UEFA, European soccer’s governing body, had to assist in handing out medals after Friday’s third-place playoff between Peru and Paraguay.

The current tournament also faces a cash shortfall of more than US$30 million, which has put at risk the payment of millions of dollars in promised prize money. Napout has vowed to find a solution. “We’re going to comply with everything,” said Napout.

Bloomberg News

There was a generalized lack of FIFA’s authorities at Copa America final in Chile

Italian PM says Europe must restart talks after Greek vote

hatever the outcome of Greece’s knife-edge referendum, Europeans must “start talking to each other again”, Italian Prime Minister Matteo Renzi told a newspaper yesterday.

“When you see a pensioner crying in front of a bank,” he said referring to a striking picture taken Saturday

by AFP of 77-year-old Giorgos Chatzifotiadis in Greece’s second

Napout, who said he’ll present the Copa America winner’s trophy on Saturday, said Conmebol had hired two auditing firms to “try and clean everything.”

The audit comes after decades of impunity for the soccer group, which operated under a type of diplomatic immunity granted to its headquarters by Paraguay’s government. That immunity was cancelled following the FIFA crisis.

“We don’t want that, we want Conmebol to be open,” Napout said.

city Thessaloniki, “you realise that a country as important for the world and its culture as Greece cannot end up like this,” he told the Il Messaggero daily.

He said as soon as yesterday’s vote was over “we must start talking to each other again -- no one knows that more than (German Chancellor) Angela Merkel.”

Berlin has taken a particularly hard line on Greece, accusing

Athens’ government of walking out on negotiations by calling the referendum.

Renzi, who has tried to steer a middle course between Athens and its creditors, added, “Of course it is impossible to save Greece without the engagement of the Greek government and pension reforms, cracking down on tax evasion and a new labour market.”

He insisted that Italy was not likely to be affected by fallout from any eventual Greek implosion. “We are not saying that everything is going to be fine, we only say that the work that has been done in the last few months puts Italy in a (better) condition than it was in the past. We are no longer in the dock, we are no longer spoken of in the same breath as our unfortunate Greek friends.”

Renzi has recently been at pains to point out that the Italian economy is in a much healthier state and is not likely to be hit by contagion.

“Italy is already out of the line of fire,” he said when he was asked if he was worried about the market ramifications of a Greek meltdown on Spain, Portugal and Italy.

AFP

Business Daily | 15

July 6, 2015

Opinion Business

wires

The end of work as we know it

Leading reports from Asia’s best business newspapers

Jean Pisani-Ferry

Professor at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General for Policy Planning for the French government

THE KOREA HERALD South Korean banks saw their mortgage lending jump by more than 9 trillion won (US$8.01 billion) in June from the previous month, data showed yesterday, due to sharply increased housing transactions.

As of end-June, the nation’s seven major banks, including Kookmin, Shinhan, Woori and Hana, held 321.04 trillion won in outstanding mortgage loans, down from 330.9 trillion won a month earlier, according to the data by the lenders.

The actual amount, however, jumped by 9.3 trillion won last month, given the 19.2 trillion won worth of loans that were transferred to the state housing agency.

PHILSTAR The Aquino administration’s under spending is seen to be a major threat to the country’s growth, the Australia and New Zealand Banking Group Ltd. said. “Unless public spending fires up, risks to Philippine full-year economic growth outlook skew to sub six percent for the full-year 2015,” ANZ said. While still tagging the Philippines as the “strong man of Asia,” the ANZ expressed concern that GDP growth could weaken if public under spending especially in the infrastructure side would continue. The government expects the local economy to grow by six to seven percent this year.

TAIPEI TIMES Pro-localization groups urged the newly founded Taiwan Independence Action Party (TIAP) to drop its plan to nominate candidates for next year’s legislative elections, citing concern the move could divide pan-green voters and hurt the camp’s prospects of securing a majority in the legislature. Northern Taiwan Society chairman Chang Yehsen called on TIAP cofounder Chin Heng-wei, a senior political commentator, to instead assume the role of the Democratic Progressive Party’s (DPP) watchdog if the DPP wins a majority in the Legislative Yuan.

BANGKOK POST Committee representatives have assured business leaders that reform is proceeding in accordance with the roadmap set by the National Council for Peace and Order. The Integrity Pact, modelled on international practices, has been set up to allow third-party monitoring of bidding procedures for government projects, Pramon Sutivong, who chairs the anti-corruption committee of the National Reform Council (NRC), told a seminar entitled “Meeting the Reformers: Thailand Going Forward”. The Licensing and Facilitation Act is currently being formulated to provide a level playing field for foreign companies involved in bidding on government projects.

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n 1983, the American economist and Nobel laureate Wassily Leontief made what was then a startling prediction.

Machines, he said, are likely to replace human labour much in the same way that the tractor replaced the horse. Today, with some 200 million people worldwide out of work – 30 million more than in 2008 – Leontief’s words no longer seem as outlandish as they once did. Indeed, there can be little doubt that technology is in the process of completely transforming the global labour market.

To be sure, predictions like Leontief’s leave many economists sceptical, and for good reason. Historically, increases in productivity have rarely destroyed jobs. Each time that machines yielded gains in efficiency (including when tractors took over from horses), old jobs disappeared, but new jobs were created.

Furthermore, economists are number crunchers, and recent data show a slowdown – rather than an acceleration – in productivity gains. When it comes to the actual number of jobs available, there are reasons to question the doomsayers’ dire predictions. Yet there are also reasons to think that the nature of work is changing.

To begin with, as noted by the MIT economist David Autor, advances in the automation of labour transform some jobs more than others. Workers carrying out routine tasks like data processing are increasingly likely to be replaced by machines; but those pursuing more creative endeavours are more likely to experience increases in productivity.

Meanwhile, workers providing in-person services might not see their jobs change much at all.

In other words, robots might

As changes in the job market break down the middle class, a new era of class rivalry could be unleashed (if it has not been already)

put an accountant out of work, boost a surgeon’s productivity, and leave a hairdresser’s job unaltered.

The resulting upheavals in the structure of the workforce can be at least as important as the actual number of jobs that are affected. Economists call the most likely outcome of this phenomenon “the polarization of employment.” Automation creates service jobs at the bottom end of the wage scale and raises the quantity and profitability of jobs at its top end.

But the middle of the labour market becomes hollowed out.

This type of polarization has been going on in the United States for decades, and it is taking place in Europe too – with important consequences for society. Since the end of World War II, the middle class has provided the backbone of democracy, civil engagement, and stability; those who did not belong to the middle class could

realistically aspire to join it, or even believe that they were part of it, when that was not the case. As changes in the job market break down the middle class, a new era of class rivalry could be unleashed (if it has not been already).

In addition to the changes being wrought by automation, the job market is being transformed by digital platforms like Uber that facilitate exchanges between consumers and individual suppliers of services.

A customer calling an Uber driver is purchasing not one service, but two: one from the company (the connection to a driver whose quality is assured through customer ratings) and the other from the driver (transport from one location to another).

Uber and other digital platforms are redefining the interaction among consumers, workers, and employers. They are also making the celebrated firm of the industrial age – an essential institution, which allowed for specialization and saved on transactions costs – redundant.

Unlike at a firm, Uber’s relationship with its drivers does not rely on a traditional employment contract. Instead, the company’s software acts as a mediator between the driver and the consumer, in exchange for a fee. This seemingly small change could have far-reaching consequences. Rather than being regulated by a contract, the value of labour is being subjected to the same market forces buffeting any other commodity, as services vary in price depending on supply and demand. Labour becomes marked to market.

Other, less disruptive changes, such as the rise of human capital, could also be mentioned. An increasing number of young graduates

shun seemingly attractive jobs in major companies, preferring to earn much less working for start-ups or creative industries.

While this can be explained partly by the appeal of the corresponding lifestyle, it may also be a way to increase their overall lifetime income. Instead of renting their set of skills and competences for a pre-set price, these young graduates prefer to maximize the lifetime income stream they may derive from their human capital. Again, such behaviour undermines the employment contract as a basic social institution and makes a number of its associated features, such as annual income taxation, suboptimal.

Whatever we think of the new arrangements, we are unlikely to be able to stop them. Some might be tempted to resist – witness the recent clashes between taxi and Uber drivers in Paris and the lawsuits against the company in many countries.

Uber’s arrangement may be fraudulent according to the existing legal framework, but that framework will eventually change. The transformative impacts of technology will ultimately make themselves felt.

Rather than try to stop the unstoppable, we should think about how to put this new reality at the service of our values and welfare. In addition to rethinking institutions and practices predicated on traditional employment contracts – such as social security contributions – we will need to begin to invent new institutions that harness this technologydriven transformation for our collective benefit. The backbone of tomorrow’s societies, after all, will be built not by robots or digital platforms, but by their citizens.

Project Syndicate

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July 6, 2015

Closing Copyright society says film and TV theft frequent

China’s 330 mln e-buyers good base for industry 4.0

Plagiarism, unauthorized broadcasting, among other copyright theft cases, frequently take place in China’s film and TV industry, the Copyright Society of China said yesterday citing a recent seminar.

Weak copyright protection has resulted in little incentive for screenwriters, shoddy quality of films and TV series, and copycat products, a statement from the society said. This has become a bottleneck to development for China’s film and TV industry, as the country is now the world’s largest TV series producer and consumer, third largest film producer and second largest consumer. Legal experts blamed insufficient legislation

China’s large population of online shoppers, about 330 million, has created a good foundation for developing industry 4.0, said Gao Hongbing, vice president of e-commerce giant Alibaba, in an exclusive interview with Xinhua yesterday. Gao said e-shoppers will help fuel development of Internet Plus, which will restructure China’s industry as a global manufacturer, after the country unveiled a national “Internet Plus” action plan on Saturday. The plan aims to integrate the Internet with traditional industries, and fuel economic growth. “The application of the Internet will give rise to the restructuring and upgrading of more traditional industries,” Gao said.

Rubbing along with robots tackles Abe’s double dilemma Capital expenditure rose 11 percent in January-March from the previous quarter

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actory worker Satomi Iwata has new coworkers, a troupe of humanoid automata that are helping to address two of Japan’s most pressing concerns - a shortage of labour and a need for growth.

The 19 robots, which cost her employer Glory Ltd about 7.4 million yen (US$60,000) each, have eye-like sensors and two arms that assemble made-to-order change dispensers alongside their human colleagues in a factory employing 370.

“They aren’t human, but

it’s as if I’m working with colleagues who do their work very well,” said Iwata, who has worked at the factory for four years.

Glory is in the vanguard as Japanese firms ramp up spending on robotics and automation, responding at last to premier Shinzo Abe’s efforts to stimulate the economy and end two decades of stagnation and deflation.

Cowed by weak demand in a country of aging consumers, risk-averse companies had largely turned their noses up at ultra-low borrowing costs

Ufa summit to boost BRICS cooperation

delivered by years of loose money policies from the Bank of Japan, but times appear to be changing.

Capital expenditure rose 11 percent in January-March from the previous quarter.

If that pace is sustained, it would exceed Abe’s target of 70 trillion yen this year for the first time since the collapse of Lehman Brothers in 2008.

Companies who make the automation equipment are already gearing up for the extra business.

Industrial robot maker Fanuc Corp will spend about

130 billion yen to build a new plant to produce computer control system equipment, and Sony Corp plans to spend about 210 billion yen this fiscal year to boost production capacity for imaging sensors.

Critical juncture Yukitoshi Funo, the BOJ’s new board member who presided at auto giant Toyota Motor Corp for four decades, says Japanese companies tend to spend more time deciding on new investment then their U.S. rivals, but current spending seemed to mark an inflection point.

Investment to streamline operations accounted for 14.4 percent of total domestic capital spending in the fiscal year that ended in March, up from 10 percent the previous year, a trade ministry survey showed.

The change in corporate behaviour is also a response to Japan’s stretched labour market. Unemployment is at an 18-year low of 3.3 percent, which the BOJ regards as near full employment, while

World Bank removes critical section from China report

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unfilled jobs are at a twodecade high as the economy recovers.

Labour shortages have became serious enough for food maker Ajinomoto Co to overhaul its 40-year-old assembly lines to streamline packaging of soup stock and sports drinks.

With the investment, Ajinomoto hopes to operate the lines in Kawasaki, a city 20 kilometres from Tokyo, with three-quarters of its current staff numbers.

It also plans to deploy robots like those at Glory’s factory in Saitama, eastern Japan.

Abe’s growth strategy doesn’t just talk up the advantages of artificial intelligence and robotics to boost productivity.

It offers subsidies, too, setting aside 2.2 billion yen for small and midsize companies to introduce robots to streamline operations.

So far, 85 cases have been approved, including Glory’s plan to deploy more robots, and a chain store restaurant’s plan to automate production of Chinese dumplings.

Reuters

French minister warns on Versailles-style treaty in Greece crisis

eaders from the BRICS countries are expected to discuss long-term goals of the bloc and measures to promote cooperation at their summit in Ufa, Russia, according to Russian State Duma Speaker Sergei Naryshkin.

Leaders of the world’s five leading emerging economies of Brazil, Russia, India, China and South Africa will meet to formulate future development strategies for the thriving cooperation mechanism.

“I hope that a thorough discussion of the current international situation and challenges will be conducted,” Naryshkin told Xinhua in a recent interview.

Russia, which is holding the rotating presidency of the bloc this year, is dedicated to expanding the scope of cooperation among BRICS members, he said.

While noting that the emergence of the BRICS has been “an unwelcome challenge” for proponents of a unipolar world, Naryshkin said that the bloc has been getting stronger, acquiring new friends and supporters, and expanding collaboration among its members.

The existence of BRICS as a matter of fact has curbed Western ambition to dominate the world, Naryshkin said.

he World Bank has removed a sharply critical portion from a recently released report on China’s economy that called for reform of its financial system, saying the section had not been adequately reviewed and that its wording was inappropriate.

On Wednesday, the Washington-based institution released its China Economic Update report in Beijing, which included a section urging the country to accelerate reform of its statedominated financial sector.

In blunt language, the World Bank warned that failure to address the issue could end “three decades of stellar performance” for the world’s second-largest economy.

“Wasteful investment, overindebtedness, and a weakly regulated shadow-banking system,” had to be addressed for China’s broader reform agenda to succeed, it said.

The organisation, however, said in an update to the report posted on its website on Friday that the section had been removed as it had not undergone proper vetting procedures.

Contacted by AFP in Beijing for further comment on Sunday, the World Bank provided a statement by Bert Hofman, its country director for China.

rench Economy Minister Emmanuel Macron yesterday cautioned European governments against handing out punishment to Greece similar to that imposed on Germany after World War I. Since Prime Minister Alexis Tsipras announced the vote June 26, Greece’s banks have shut, commerce has ground to a halt and his government has become isolated in the 19-nation currency bloc.

“Let’s not re-enact the Treaty of Versailles,” Macron said at a conference in Aix- en-Provence, France.

The Treaty of Versailles, signed in June 1919, imposed reparations on Germany that economists including John Maynard Keynes deemed counterproductive and overly punitive because of their size. Within two decades, Germany and the allied powers plunged into conflict for a second time.

Macron’s remarks broke a virtual silence by French policy makers and executives at the threeday Rencontres Economiques conference in Aixen-Provence, France. He urged fellow ministers in the euro zone not to hide behind European Central Bank concerns and technical issues stemming from Greece’s crisis, saying that what happens next will be a measure of Europe’s ambition for the future.

Xinhua

AFP

Bloomberg News

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