Macau Business Daily August 20, 2015

MOP 6.00

HK court to hear alleged violation of Joseph Lau’s privacy case in October

Closing editor: Joanne Kuai

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Foreign investment in China comes of age thanks to M&A Page 8

Publisher: Paulo A. Azevedo Number 861 Thursday August 20, 2015 Year IV

Tianjin blast waves rattle global economy

Grant Bowie: MGM Cotai project on schedule to open in Q4 2016 Page 6

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Austerity Begins At Home

A galaxy of challenges to overcome. But Macau’s gaming revenue slump has “almost hit bottom”, asserts Galaxy Chairman Lui Che Woo. With high expectations for the second half. Right now, cost control is high on the agenda. Galaxy Entertainment Group profit declined 66.2 pct y-o-y during the first half of the year to HK$2.02 billion from HK$5.98 billion. While 2Q earnings plunged 46 pct to HK$1.9 billion Page

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Cyber security again Universally unpopular. Chinese regulations for domestic banking information systems are back again following a brief respite. Foreign IT companies will need to provide sensitive information linked to their core intellectual property

Shortchanged Interns Another petition. This time to Melco Crown today.

Gaming labour union Forefront of Macau Gaming and alliance say they are representing some 1,000 high-duty dealers. Who claim that they have been underpaid whilst fulfilling supervisors’ duties

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Brought to you by

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HSI - Movers August 19

Name

Taxing Times

Under the microscope. The Financial Services Bureau says only 13 pct of the city’s 263,712 registered properties are declared ‘leased units’.

Property owners have tax obligations, says the DSF

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www.macaubusinessdaily.com

Society

Fewer Vacancies

Urban Renewal

Fewer positions open. The gaming slump is biting. With only 507 job vacancies in 2Q. A plunge of 66.8 pct vs. a year ago. Vacancies for dealers dropped 78.7 pct y-o-y to 107. Average earnings of full-time employees in the industry rose 6.5 pct y-o-y to MOP21,480

Urban renewal. Lots of talk, and for a long time. Secretary for Transport and Public Works Raimundo Rosário now says it need not necessarily apply exclusively to buildings over 30 years old. Newer buildings can also apply for renovation or reconstruction. The city has a ‘sufficient supply’ of residential units, he says.

Despite the dearth of public housing

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%Day

Lenovo Group Ltd

+4.26

Li & Fung Ltd

+2.88

Sino Land Co Ltd

+1.41

China Overseas Land &

+0.44

Tencent Holdings Ltd

+0.14

Ping An Insurance Gro

-2.89

Sands China Ltd

-3.36

China Mengniu Dairy C

-3.74

Galaxy Entertainment

-4.43

Cathay Pacific Airways

-7.68

Source: Bloomberg

I SSN 2226-8294

2015-8-20

2015-8-21

2015-8-22

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2 | Business Daily

August 20, 2015

Macau Official: Gaming slump doesn’t change optimistic outlook for employment Despite the gross domestic product (GDP) decline of the first quarter against the backdrop of the city’s continuing gaming slump, Macau is still optimistic with regard to employment with the unemployment rate remaining low at only 1.8 per cent, Labour Affairs Bureau (DSAL) director Wong Chi Hong said in a response to legislator Ella Lei Cheng I’s enquiry.

The Bureau director cited the employment law noting that the hiring permission for non-resident workers in some “particular sectors” may be revoked for significant causes of the public interest in response to economic changes.

IPIM launches WeChat account Macao Trade and Investment Promotion Institute (IPIM) has officially launched a WeChat account to provide local and overseas enterprises with the latest news on trade, conventions and exhibitions as well as business promotions. By browsing IPIM’s WeChat account, users will receive information about IPIM’s work and local conventions and exhibitions, thus facilitating keeping track of the development of IPIM and the local MICE industry. In addition, supporting measures for SMEs provided by IPIM such as the financial incentives for participation in exhibitions and e-commerce activities are also provided. The account can be followed by searching ‘IPIM-Macau’ on WeChat.

UM’s BSc in Computer Science programme recognised by Seoul Accord signatories The Bachelor of Science in Computer Science (full-time) programme offered by the University of Macau’s (UM) Faculty of Science and Technology has gained official recognition by all the signatories to the Seoul Accord at the Seoul Accord General Meeting. In 2013, the programme was accredited by the Hong Kong Institution of Engineers. The Seoul Accord is a mutual recognition agreement which pertains to computing and IT-related programmes accredited by its signatories within their jurisdictions since 2008. Currently, there are eight signatories to the Seoul Accord, namely the United States, the UK, Canada, Australia, Hong Kong, Chinese Taipei, Japan, and South Korea.

WHO collaborating on traditional medicine centre, inauguration in Macau An international forum and a World Health Organization (WHO) collaborating centre on traditional medicines was inaugurated in Macau this week.

The international forum, themed ‘Implementation of the World Health Organization Traditional Medicine Strategy,’ was attended by more than 300 officials and scholars from 27 countries and regions. The WHO centre is dedicated to co-operation in personnel training, quality and safety of traditional medicines, while helping WHO members integrate traditional and complementary medicine into their healthcare system.

Rosario: Urban renewal policy not restricted to redeveloping old residences The urban renewal policy will cover a wider scope for the redevelopment of residences in Macau, as the government replaces the failed old neighbourhood rejuvenation bill Stephanie Lai

sw.lai@macaubusinessdaily.com

S

ecretary for Transport and Public Works Raimundo Arrais do Rosário said that the city’s ‘urban renewal policy’, yet to be drafted as a bill, will not be one that targets only the terms allowing renovation or reconstruction of old residential buildings of 30 years of age or more.

The Secretary revealed the news when attending the programme ‘Macau Forum’ on public broadcaster TDM Radio’s Chinese channel yesterday.

“Our past policy [of old neighbourhood rejuvenation] has centred on the concerns about the old buildings here, involving questions about whether residences aged 30 years or more should be rebuilt or not,” he said.

“But our new concept is that with the urban renewal policy it will not only look at old buildings,” the Secretary added, “but at buildings that are five or ten years old; if the owners agree, a renovation or a reconstruction should be fine.”

The Secretary did not offer further information about the urban renewal policy.

Currently, the Civil Code requires all flat owners in a residential building to agree to any redevelopment, even if grave structural problems make redevelopment imperative.

Upcoming bill

Following the dismissal of the city’s advisory body for old neighbourhood regeneration, Chief Executive Fernando Chui Sai On pledged in March that he would introduce the policy of urban renewal to the city soon.

Mr. Chui further noted in a Legislative Assembly session earlier this month that the government would work towards delivering the bill or

urban renewal policy within half a year, in tandem with the formation of a special committee working on the issue.

The head of the Land, Public Works and Transport Bureau, Li Canfeng, also responded to legislator Chan Meng Kam this month, saying that the government would look at the city’s overall urban plan, land bank issue, the target group of this new policy, and other stamp duty arrangements when forming the urban renewal policy.

The city saw the formation of a consultative committee on old neighbourhoods rejuvenation in 2005.

But our new concept is that with the urban renewal policy it will not only look at old buildings, but at buildings that are five or ten years old; if the owners agree, a renovation or a reconstruction should be fine Raimundo Arrais do Rosário, Secretary for Transport and Public Works

But subsequently the bill on old neighbourhoods reform, which the committee also offered opinions on, was scrapped by the Legislative Assembly in August 2013 following years of fruitless discussions.

Sufficient supply

However, speaking to the audience yesterday Mr. Rosário expressed confidence that the city will have a sufficient supply of residential units to cope with future population growth “with or without the urban renewal policy”.

“The biggest [housing] problem is surfacing in the short term as we cannot complete the [public] housing projects on time,” the Secretary said.

“In the coming two to three years, we’re going to face a housing supply problem,” he said in response to a listener’s question. “But as the Chief Executive mentioned before the new urban reclaimed zone A is going to see the construction of 32,000 housing units, of which 28,000 are public housing. So, in the long term, it [the housing supply] will not be a big problem.”

Mr. Rosário acknowledged that the completion schedule delay was the “most serious” problem for public infrastructure projects, and apologised for the failure of the Ilha Verde public housing project not being completed next year – although he cannot give a new timeframe for the project’s completion.

The delay issue common in public infrastructure projects has been caused by incorrect estimates of completion time, or the inaccuracy of soil investigations, the Secretary said.

He also noted that most public infrastructure projects suffer from budget overrun issues, whereby budgets balloon 10 per cent or less on the agreed cost.

Business Daily | 3

August 20, 2015

Macau

DSF: Only 35,120 properties declared for lease

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inancial Services Bureau (DSF) director Iong Kong Leong said that only 35,120 units in the territory have been declared to the Bureau as ‘leased units’, admitting not all property owners in the city have fulfilled their tax obligations.

In an interview with local Chinese-language newspaper Macao Daily, the government official said the number of registered properties in the Special Administrative Region amounted to 263,712. Nevertheless, only some 13 per cent of the total have been reported to DSF as leased units.

The number of registered properties includes residential, commercial, industrial units, offices, as well as parking spaces, according to Mr. Iong, who noted that the obligations of owners of commercial and industrial units are actually higher than the others.

The tax rate for leased property has already been decreased from 16 per cent to 10 per cent, while the tax rate for a non-rental unit is only 6 per cent. In addition, when property owners declare to the Bureau their property for leasing, they will need to pay a stamp duty equivalent to 0.5 per cent of their leasing contract value, while their annual property tax will also depend upon the rental they receive.

The DSF director also claimed that a new taxation measure has been applied to profits tax Group B taxpayers, enabling them to conduct self-assessment for their own tax payable, in order to decrease tax disputes caused by different evaluations.

Group B taxpayers refer to those individuals or corporations without appropriate accounting books and records. Hence, Mr. Iong perceives that it was more frequent for this group of taxpayers to argue about the tax payable assessed by the government before. The government official hopes the new measure can encourage Group B taxpayers to conduct assessments themselves, so that administrative procedures can also be simplified.

According to Mr. Iong, Group B taxpayers only account for 5 per cent of the city’s total taxpayers. A recent DSF notice indicated that the number of taxpayers of Profits Tax subject to tax payment fell to 1,911 for the fiscal year 2014 from 44,819 the previous year, following Chief Executive Fernando Chui Sai On’s announcement in the March Policy Address that the ceiling amount of the exemption for profits tax for fiscal year 2014 would be extended from its original MOP320,000 (US$40,000) to MOP600,000.

K.L.

4 | Business Daily

August 20, 2015

Macau

Dealer vacancies shrink 79 pct in Q2

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mid the downturn of the city’s gaming revenues, the gaming industry offered only 507 jobs in the second quarter of this year, representing a plunge of

66.8 per cent as compared to the 1,529 jobs on offer one year ago.

Vacancies for dealers, in particular, dropped by 78.7 per cent yearon-year, the latest data released

by Statistics and Census Service (DSEC) reveals.

According to DSEC, the city’s gaming industry supported 57,422 full-time employees as at the end of the

second quarter, a slight increase of 1.3 per cent year-on-year. Nevertheless, the number of dealers decreased 2.5 per cent year-on-year to 25,072. In addition, vacancies for the position dropped to 107 from 503 one year ago.

Nevertheless, the average earning of dealers increased 6 per cent yearon-year to MOP18,580 (US$2,322) as at the end of the second quarter, while the overall average earning of full-time employees in the industry rose 6.5 per cent year-on-year to MOP21,480.

Dealers accounted for 43.7 per cent of the total full-time workforce in the industry in the second quarter, followed by hard and soft count clerks, as well as service and sales workers, accounting for 28.3 per cent and 10.8 per cent of the total, respectively.

The sector welcomed 1,972 new employees in the second quarter, representing a decrease of 36.9 per cent from 3,124 one year ago, driving the employee recruitment rate down 2 percentage points year-on-year to 3.5 per cent.

In addition, the employee turnover rate and job vacancy rate also declined 2.6 and 1.7 percentage points, reaching 1.5 per cent and 0.9 per cent, respectively. DSEC said the drop in such rates indicated a slowdown in demand for manpower in the industry.

DSEC also noted that its data did not cover the city’s junket promoters and junket associates.

K.L.

FMG submitting petition to Melco Crown today urging promotions One year after the union’s wave of protests targetting the city’s gaming operators the Forefront of Macau Gaming (FMG) will submit a petition to Melco Crown this afternoon demanding promotion for some 1,000 high-duty dealers of the operator whom it claims are unfairly paid

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ocal gaming labour union Forefront of Macau Gaming (FMG) and alliance say they had received complaints from some 1,000 gaming workers of Melco Crown Entertainment Ltd. who are primarily high-duty dealers, claiming that they have been ‘unfairly treated’ by their gaming boss. The workers, assisted by the unions, will submit a petition to the company’s human resources office at four o’clock this afternoon.

The former secretarygeneral of FMG, Cloee Chao, told Business Daily in a phone interview yesterday that these high-duty dealers of the gaming operator are paid the same salaries as ordinary dealers although they undertake the tasks of supervisors. A high-duty dealer, according to Ms. Chao, is a position between dealer and supervisor, and always perceived as an intern supervisor.

“Workers have complained to us that they

have been assigned the tasks of supervisors. However, their salary is basically the same as normal dealers despite [the fact that] they may receive some MOP90 on the day they are assigned for supervisors’ tasks. But basically, the benefits they receive are the same as dealers, too,” said Ms. Chao, who is now director of new gaming association Union of New Macau Gaming Workers Rights (no official English title) which is coorganising the labour action today.

Taking action

The action representative said the 1,000-something complaints that the unions had received means almost all of the operator’s highduty dealers, who work in City of Dreams and Altira Macau, are dissatisfied with their current remuneration, and hope the company can formally promote them to a supervisor position.

“A high-duty dealer of the company told me that she has been in this position for more than four years. When she entered the company from another gaming company, the HR office told her that it would be better for her to work as a high-duty dealer first and that she could be promoted to formal supervisor soon,” she said.

According to Ms. Chao, the unions collected some 300 signatures from these Melco Crown workers in just four hours on Monday, estimating that more than 100 workers will join in submitting the petition this afternoon.

Business Daily contacted Melco Crown’s press office for a response to the action and the allegations of its workers but had received no reply from the gaming operator before this story went to press.

Not only HD dealers

High-duty dealers, however, are not the only group of

Melco Crown workers seeking help from the gaming labour unions, Ms. Chao said.

“After the HD dealers turned to us, some 150 dealers of the company have also come to us for help,” she said, claiming that these dealers are urging the gaming operator to combine their basic salary and tea money (tips) into one salary.

“Currently, the company’s contribution to the workers’ provident fund is based on their basic salary. They hope that the company can make contributions based on their whole [income],” she said.

Protest possibility not excluded

Ms. Chao said that they hope the company will initiate a discussion with the unions following the petition, otherwise they will seek help from the city’s Labour Affairs Bureau. “In the worst case [scenario] we don’t eliminate the possibility of a protest,” the gaming leader warned.

Last summer, FMG staged a wave of protests targeting the city’s six gaming operators, in particular Sands China, Galaxy Entertainment Group, and SJM Holdings Ltd. No protest was particularly aimed at Melco Crown.

“It was because we didn’t receive enough complaints from the Melco workers at that time. We usually only stage labour action when the complaints that we receive from workers of one company reach a certain number,” Ms. Chao explained.

K.L.

Business Daily | 5

August 20, 2015

Macau

Galaxy controlling costs, profit declines 66.2 pct in H1 The gaming operator has revealed its financial results for the first half of the year and a salary freeze for senior directors as part of the measures implemented to adapt costs to the ‘new normal’ João Santos Filipe

jsfilipe@macaubusinessdaily.com

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alaxy Entertainment Group profit declined 66.2 per cent year-on-year during the first six months of the year to HK$2.02 billion from HK$5.98 billion. The results were announced yesterday in a press conference in Hong Kong held by the company.

In spite of such a steep drop in terms of profits, the Chairman of Galaxy, Lui Che Woo, stressed that there are encouraging political signs concerning the Macau gaming market and that the properties that opened in May - Galaxy Macau Phase II and Broadway - are for the time being successful.

“Market conditions within Macau remain challenging. But we’re pleased to see signs of market stabilisation, more flexibility from the government on the smoking lounges in casinos and the easing of the transit visa rules”, Lui Che Woo said. “The June gaming revenues should be the worst, as revenues rebounded some few per cent in July. So it has probably hit bottom already. The continuous drop in gaming revenues should be almost over”.

Cost control

The revenue of the group plunged 33.9 per cent year-on-year in the first half of the year to HK$25.37 billion from HK$38.41 billion in 2014. EBIDTA [Earnings before interest, taxes, depreciation, and amortization] dropped 43 per cent year-on-year to HK$4.16 billion from HK$7.29 billion.

“As anticipated, customers’ spending behaviour across the market remains cautious, resulting in lower year-on-year revenues for

As anticipated, customers’ spending behaviour across the market remains cautious, resulting in lower year-on-year revenues for the group.

As a result, earnings in the second quarter were partially impacted by lower revenues and the opening costs of Galaxy Macau Phase II and Broadway Macau Lui Che Woo, Chairman of Galaxy Entertainment Group

the group. As a result, earnings in the second quarter were partially impacted by lower revenues and the opening costs of Galaxy Macau Phase II and Broadway Macau”, Mr. Lui explained.

Yesterday, Galaxy also announced that it has implemented a salary freeze for all senior executives within the company. This is part of the “cost control initiatives” adopted by the group to adapt to declining gaming revenues. While no more examples of cost control measures were revealed, the company explained that the priority is still to provide superior service for its clients.

Out of luck

Overall gaming operations generated most of the revenue for the group totalling HK$23.37 billion versus HK$36.36 billion for the first half of the previous year. This represents a share of 92.1 per cent of revenue.

At the same time, administrative fees from gaming operations increased to HK$11 million from HK$4 million in the previous year.

Hotel operations were the second major source of revenue, while Phase II of Galaxy and Broadway are already having a positive effect on income, with these operations increasing to HK$1.03 billion from HK$0.925 billion, an 11.4 per cent increase yearon-year. During the press conference Mr. Lui also announced that during the second quarter the hotel occupancy of Galaxy’s properties had reached 97 per cent.

Concerning the second quarter of the year, the Chief Financial Officer, Robert Drake, explained that a streak of bad luck for the Galaxy house

Effects of RMB depreciation yet to be seen The recent depreciation of the renminbi was considered to have had a negative impact on the market because it may reduce the spending power of Mainland visitors. But Galaxy management believe the effects have yet to be seen.

“We’ve seen good signs in Macau, namely the relaxation in terms of transit visa and the flexibility on smoking lounges. But now there’s also the renminbi depreciation, the effects of which have yet to be seen”, said Francis Lui Yiu Tung, Deputy Chairman, at yesterday’s press conference.

“The depreciation of the renmimbi is impacting everybody. We’re still waiting to see how this will impact us. But if in the long term this measure is good for the Chinese economy then it will be good for China, Macau and for Galaxy as well”, the Chief Financial Officer of Galaxy, Robert Drake, told journalists.

took HK$335 million away from the gaming tables.

However, gaming was not the only sector of Galaxy to be affected by adverse market conditions. In terms of the sale of construction materials, they went down to HK$0.909 from HK$1.02 billion due to the “softening of demand in the number of its major markets”, namely Hong Kong, Macau and the Mainland.

6 | Business Daily

August 20, 2015

Macau Brands

Trends

Longchamp’s big winner Raquel Dias newsdesk@macaubusinessdaily.com

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ongchamp was founded in 1948 in Paris in the post-war period. The company is still active and still managed by its founding family, Cassegrain. Although the brand is known for its leather and travelling goods, one product definitely stands out from all the others.

In 1993, the brand launched its Le Pliage (literally, the folding) line and ladies of all ages went crazy for the concept. You see, there’s absolutely no reason why someone would not like to carry a leather and canvas bag, in which everything fits.

When the time comes to pack everything back, not to worry as this bag can be neatly folded.

To date, approximately 32 million Le Pliage have been sold and it’s said that one bag sells every 15 seconds.

When it first appeared on the market it was an effort by the brand to appeal to the female market as Longchamp had been essentially a male oriented brand until then.

Two characteristics made it so popular. Firstly it came in different sizes thus you could choose the one that best adapted to your needs; secondly, it came (and still does) in an array of colours.

What woman doesn’t want to travel with different handbags for her different outfits?

Every year, the brand launches special colours or special patterns, usually designed by relevant artists who have added an allleather version as well and a few other sizes to the original collection. This Autumn is dedicated to cat lovers, and the La Pliage Miaou bag is as cute as can be. The bag comes in pink and navy blue canvas and features a funny cat face and a cute Miaou scribble on the back. Cheeky, cute and inimitably French.

Bowie: No delay on MGM Cotai project

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GM China Chief Executive Officer (CEO) Grant Bowie has affirmed that the construction of the operator’s new project in Cotai does not face any delay.

Mr. Bowie told reporters yesterday that he hopes that MGM China’s new Cotai project can be unveiled during the fourth quarter of 2016 as scheduled, whilst indicating that the

exact opening date will depend on related evaluation procedures.

Hoping that the new project can be granted 500 gaming tables, the businessman said the number of tables that the company can get will in the end be dependent upon the government’s decision.

Meanwhile, asked by reporters when he thinks the city’s gaming

revenues will rebound, Mr. Bowie responded that the operators should enhance their service quality to attract more customers.

The MGM CEO also revealed that the sales of the gaming operator’s food & beverages business have dropped slightly this month but claimed the hotel occupancy rate is stable as the scale of MGM is rather small.

Alleged violation of Joseph Lau's privacy case to be heard in October

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he hearing for the case of Hong Kong media outlet Apple Daily's alleged violation of the privacy ordinance by publishing tycoon Joseph Lau Luen Hung's medical records will be held on October 12, Hong Kong's Chinese-language media reported.

The prosecution for Lau said that five witnesses will give evidence in the case, with two from Macau.

Apple Daily newspaper and its former chief editor, Cheung Kim Hung, were accused of publishing Lau's medical records on April 30 2013, following Lau's absence from Macau's Court of First Instance, where he was to stand trial on bribery and money laundering charges, citing illness.

Macau's Court of Second Instance ruled last month that Lau and fellow Hong Kong businessman Steven Lo Kit Sing's grounds of appeal against them having been found guilty of bribing former Public Works Secretary Ao Man Long had failed. Each were sentenced in March last year by the Court of First Instance to five years and three months in jail.

S.L.

Business Daily | 7

August 20, 2015

Gaming

Apollo said to get Caesars creditor demand to abandon parent

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pollo Global Management LLC, one of the owners of Caesars Entertainment Corp., received an ultimatum from creditors who are the staunchest opponents of the casino operator’s bankruptcy plan, demanding the private-equity firm surrender control of the stillsolvent parent company to them.

The opponents, junior bondholders of Caesars’ bankrupt unit, made their demand in a meeting this month, according to two people with knowledge of the matter. Through the parent, creditors would then take charge of several profitable units outside of the bankruptcy case.

In exchange, the creditor group would withdraw the pile of lawsuits it’s filed related to the bankruptcy, said the people, who asked not to be identified because the talks are private. Apollo rejected the offer, but the two sides are continuing negotiations, they said.

The second-lien group includes Appaloosa Management, Oaktree Capital Group LLC and Tennenbaum Capital Partners, according to a February court filing.

The junior creditors’ proposal would wipe out much of the US$4.4 billion that Apollo, TPG Capital and co-investors put into the casino company’s US$30.7 billion buyout, which was struck before the credit

crisis unfolded in 2008. Apollo and TPG injected at least US$600 million into Caesars Growth Partners LLC, a profitable unit owned by the parent that runs a group of casinos spun out of the company in 2013.

New talks

The offer was the opening line in a new round of talks among secondlien bondholders represented by Jones Day and Houlihan Lokey Inc., Caesars itself, and Apollo, the lead negotiator in talks to restructure Caesars Entertainment Operating

Co. Divisions between the parties had become increasingly toxic in the eightmonth-old bankruptcy as Caesars has gained support from other junior creditors while the second- lien group ramped up efforts to circumvent the the company’s reorganization plan.

Charles Zehren, a spokesman for Apollo at Rubenstein Associates, didn’t respond to telephone and e-mail messages seeking comment.

Emily Wofford, a spokeswoman for Caesars, and John Gallagher, a spokesman for Houlihan, declined to comment. Dave Petrou, a

spokesman for Jones Day, didn’t return messages.

Caesars and its private-equity majority owners have been seeking support for a plan to turn the bankrupt subsidiary into a real estate investment trust and cut its US$19.9 billion of debt in half. The parent put the unit into bankruptcy in January.

The private-equity firms have already agreed to give up more of their ownership stakes in the parent than when the first version of the reorganization proposal was filed in the bankruptcy. Caesars last month wooed some second-lien bondholders into signing onto its restructuring deal by offering them as much as US$400 million of notes that can be converted into equity of the parent.

Unless amendments are made, that agreement will expire on Sept. 18 if Caesars fails to get least 50.1 per cent of second- lien holders to sign on, according to a copy of the agreement included in a July 21 regulatory filing.

The biggest of Caesars’ secondlien bonds, US$3.6 billion of 10 per cent notes due in December 2018, fell 0.3 cent to 32 cents on the dollar on Friday, according to Trace, the bondprice reporting system of the Financial Industry Regulatory Authority. They reached their highest closing level in a year -- 32.3 cents -- on Aug. 5.

Bloomberg

8 | Business Daily

August 20, 2015

Greater China

Foreign investment buoyant thanks to mergers and acquisitions FDI growth has slowed in recent years owing to factors including rising costs, competition from Southeast Asian countries, and concerns over official investigations into foreign companies

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oreign investment into China rose 5.2 percent in July compared to the previous year, largely on the back of mergers and acquisitions by overseas firms, the commerce ministry said yesterday.

Overall foreign direct investment (FDI), which excludes financial sectors, was US$8.22 billion last month, the ministry said, and US$76.63 billion in the first seven months of the year, a 7.9 percent increase.

“The amount and the proportion of foreign capital mergers and acquisitions rose sharply between January and July,” it said in a statement.

The proportion of M&A activity in FDI rose to 18.2 percent in the January-July period, it added, up from 4.6 percent in the same seven months a year ago.

China’s outbound overseas direct investment (ODI) last month was US$7.5 billion, a sharp decline of 18.6 percent compared to a year earlier

were no similarly large deals in those months this year.

Full year ODI growth is still expected to be 10-15 percent or “even higher”, he said.

ODI in the January-July period rose 20.8 percent yearon-year to US$63.5 billion.

ODI passes US$100 bn

Shen Danyang, China’s Commerce ministry spokesman

and the second consecutive monthly fall after one of 15.5 percent in June, the ministry said.

Commerce ministry spokesman Shen Danyang

attributed the drops to a high comparative base.

“There were several bigticket ODI projects in June and July last year,” he told reporters, adding that there

China drew a total of US$119.6 billion of FDI in 2014, up 1.7 percent, while ODI was up 14.1 percent at US$102.9 billion, passing the US$100 billion mark for the first time.

In the January-July period, investment from the 28-member European Union (EU) into China rose 18.4 percent to US$4.53 billion, the ministry said.

Investment from France, which is included in the EU total, rose 78.6 percent to US$810 million. From Japan, with which China is in disputes over territory and wartime history, it fell 24.2 percent to US$2.14 billion.

And it fell sharply from the United States, dropping 29.2 percent to US$1.28 billion, the figures showed.

Hong Kong is by far the biggest investor in China, accounting for US$56.52 billion of the seven-month total. It showed a gain of 14.5 percent during the period.

At the same time China’s acquisition of foreign assets, particularly energy and resources, has increased with firms encouraged to invest abroad to gain market access and international experience.

Outbound investment from China into the US rose 35.8 percent, while investment into the EU fell 36.1 percent, the ministry said, without giving totals.

The ASEAN group of Southeast Asian countries saw investment from China rise by 57.6 percent, the ministry said, while that to Hong Kong soared 118.7 percent.

AFP

Devaluation

Tighter regulation, increa scandal all suggest FX ac Jamie McGeever

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hina’s currency devaluation should give a shot in the arm to global foreign exchange volumes as traders take advantage of and protect themselves against the surprise surge in volatility, but its longer-term impact on market activity may not be so benign.

Investors with longer-term horizons than a day’s trading profit, from pension funds seeking stable returns to companies considering expanding overseas, will be alarmed by the prospect of wild swings in exchange rates triggered by another round of “currency wars”.

Former Brazilian finance minister Guido Mantega coined the term “currency wars” in 2010. It refers to countries trying to make their exports more competitive - and ultimately boost their growth - at the expense of rivals, by weakening their exchange rates.

Policymakers fear Beijing’s move could accelerate this race to the bottom, particularly as most countries, including those in the developed and industrialized world, have few growth-boosting policy tools left open to them.

It’s a worry for a troubled foreign exchange industry.

After years of rapid growth, which made it the world’s largest financial

Business Daily | 9

August 20, 2015

Greater China Slowdown sends ripples across Asian banks

Banks region-wide are suffering even when, like in Indonesia, Port operators report disappointing H1 results they are not lending much directly to Chinese companies Lawrence White

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sian lenders are seeing their loan books rapidly deteriorate across the region as China’s slowing economy dampens trade and hurts companies that had borrowed heavily from the banks.

Among 23 major non-Chinese lenders, all but 6 reported an increase in soured loans in the first half of 2015, the strongest indication yet of how China’s slowdown is infecting banks’ balance sheets, data compiled

by SNL Financial for Reuters show.

KEY POINTS Bad loans on the rise at Asian banks in Q2 Even banks with no direct Chinese exposure are hurt Slowdown seen hitting commodity credit in particular

That trend accelerated in the second quarter, the banks’ data show.

“Second-quarter results have seen banks across Asia suffer rising bad loans after a period of historic lows in NPL levels,” said Josh Klaczek, JPMorgan head of Asia financials research.

“China’s slowing growth has particularly hit shorter duration trade-related loans, but is likely to have a broader impact on commodity credit, given its importance as an end-user.”

The data indicate how banks region-wide are suffering even when, like in Indonesia, they are not lending much directly to Chinese companies, as trade across Asia stutters.

Indonesian banks saw provisions against bad loans as much as triple in the first half of 2015.

“Most of the Indonesian banks said their increasing non performing loans (NPLs) are because of the mining and construction sectors, which have been hit the most by slowing demand from China,” said analyst Syaiful Adrian at Ciptadana Securities.

The world’s No.2 economy is officially targeted to grow at 7 percent

this year, but some economists believe it is expanding at a slower pace. Data this month showed Chinese producer prices hit their lowest point since late 2009.

Singapore’s banks, which had boosted their China credit, were this year hit by a drop in billions of dollars of China trade financing deals as mainland borrowing conditions eased while offshore interest rates widened.

Hong Kong’s Bank of East Asia said impairment losses had more than doubled to HK$782 million (US$100.83 million) in the first half and warned its outlook looked challenging amid China’s slowdown and a stock market plunge.

In Thailand, bad loans at commercial banks rose in the second quarter to their highest level since 2012, hit by a slowdown of Thai exports, especially to China.

Mike Smith, CEO of Australia and New Zealand Banking Group, played down on Tuesday concerns despite a 13 percent rise in bank bad debt charges: “Is it going to get significantly worse? I don’t think so.”

Reuters

may be bad news for FX industry

ased automation, greater competition, and a global market-rigging ctivity glory days are over

China remains the key risk and reward for global investors Cross Border Capital statement

market and a money-spinner for big banks, trading volumes are slowly shrinking and jobs are being lost.

Tighter regulation, increased automation, greater competition, and a global market-rigging scandal all suggest its glory days are over. The depressive impact on investment of a

lengthy currency war would do little to restore its fortunes.

“Any prolonged uncertainty in the market resulting from this, and real-money players such as pension and mutual funds will be less inclined to invest,” said Neil Mellor, senior currency strategist at Bank of New York Mellon in London.

Offshore yuan trading on Thomson Reuters platforms reached a record US$26 billion on August 12, the day after China devalued the yuan. It had grown 350 percent year-on-year in 2014.

On rival platform EBS - the main venue for dollar, yen and euro trading - the yuan ended 2014 as one of its top five traded currencies.

But the growth in yuan trading in recent years is atypical of the market at large, according to the latest FX trading volume data compiled by the Bank of England, New York Federal Reserve and global FX settlement system CLS. Daily trading in London fell 8 percent to US$2.48 trillion in the six months to April, driven by a 13 percent slump in spot volumes to US$973 billion a day, the BoE said.

Average daily volume in North America fell 20 percent to US$881.21 billion, thanks to a 25 percent slump in spot transactions to US$426.99

billion, according to the New York Federal Reserve.

Data from CLS, used almost universally by the banking industry to process or settle foreign exchange trades, shows that global average daily volume slipped 0.6 percent to US$4.61 trillion in May. As recently as last November the global FX market was turning over US$5.17 trillion a day, according to CLS. As analysts at Morgan Stanley point out, China accounts for 21 percent of the trade-weighted dollar index used by the Federal Reserve.

It is the biggest single component of the equivalent euro trade-weighted index at around 23 percent. So what happens to the yuan has a growing influence on dollar and euro flows.

Analysts at London-based independent investment advisory firm Cross Border Capital say China’s credit markets have grown 12-fold since 2000 and are now worth around US$25 trillion - roughly the same size as U.S. credit markets.

“Her credit markets are fragile and they are unwinding what has been the world’s biggest ever credit boom, and capital outflows are meaningful,” they wrote in a report last month.

In that, the foreign exchange industry is no exception.

Reuters

Listed port operators along China’s east coast have reported disappointing data for the first half of 2015 amid the country’s declining foreign trade. The revenue of Jinzhou Port, in northeast China’s Liaoning Province, decreased 2.74 percent year on year, with profit down 15.83 percent.

Rizhao Port, in the eastern province of Shandong, saw its revenue drop 15.74 percent from the same period last year.

Profits slipped by more than 40 percent.

Xiamen International Port, in southeast China’s Fujian Province, registered a 0.41-percent fall in revenue. Net profit excluding non-recurring gains and losses was down 13.82 percent.

Beijing injects US$100 billion into banks China has injected nearly US$100 billion from its foreign exchange reserves into two policy banks, which lend based on government directives, to help spur the country’s sluggish economy, state media reported. The central bank on Tuesday completed putting US$48 billion into the China Development Bank and US$45 billion into the Export-Import Bank of China, the official Xinhua news agency reported. The move was to enhance their capital base and support the economy, it said.

Weaker yuan could trigger new wave of diesel exports China is set to add to recent record diesel shipments as refiners take advantage of a lower yuan and export fuel into a market already suffering from oversupply and falling margins. A weaker yuan makes Chinese exports more competitive and could help refiners such as Sinopec and Petrochina shed excess diesel as local demand falls amid an economic slowdown that has left storage tanks brimming. The government has already more than doubled diesel export quotas for the year so far by granting additional allowances of 2.86 million tonnes in its third quarter review of domestic supply and demand.

Yum gets new leadership Yum Brands announced new leadership for its China division as investor activists lobby for the owner of the KFC and Pizza Hut brands to spin off that business, which is its biggest driver of revenue and profit. Yum said company veteran Micky Pant, 60, would replace retiring Sam Su, 63, as chief executive of the China division. Su, who has been with Yum for 26 years, was instrumental in making Yum the biggest Western restaurant chain in China. Pant, currently CEO of Yum’s KFC Division, will become CEO of Yum China.

Cooperation Centre with Asia and Africa launched China yesterday opened an academic institute in Beijing that will focus on its relations with other parts of Asia and Africa.

The China-Asia-Africa Cooperation Centre, proposed by President Xi Jinping at the Asian-African Summit in Indonesia in April, will organize exchanges with foreign academic institutions and hold seminars on regional issues. It will aim to recruit around 20 researchers. The centre is managed by the Institute of International Studies (CIIS), an organization administered by the Ministry of Foreign Affairs.

10 | Business Daily

August 20, 2015

Greater China

An aerial view of a large hole in the ground in the aftermath of a huge explosion that rocked the port city of Tianjin

Tianjin blasts echo across economy Northern China faces “an immediate interruption in chemical and plastic supply” for up to a month, research firm IHS said

W

ith a swathe of one of the world’s busiest ports in ruins, more than a billion dollars in losses, and some major multinational firms still unable to access their premises, the economic impact of the Tianjin explosions could reverberate for months.

Last week’s blasts triggered a giant fireball and killed 114 people, sparking fears over toxic pollutants in the city’s air and water, though authorities have insisted both are safe.

They also devastated a large area of the port of Tianjin, a key gateway to the world’s second-largest economy and its biggest trader in goods.

Among the most striking images of the disaster have been those showing countless lines of imported cars burned to a crisp, with about 10,000 new vehicles near the blast site reportedly destroyed.

More than 150 companies in the Fortune 500 -- the US magazine’s listing of the world’s biggest firms -- have operations in the city, and its port is one of the 10 busiest globally.

The city has a population of 15 million people, almost twice that of London, and an economy roughly the size of the Czech Republic.

“Economic activity in

Tianjin has yet to return to normal several days after the devastating explosions there,” Capital Economics, a research firm, said in a note to clients.

“While most of the port has remained in operation, damage to warehousing and factory facilities has been severe,” it added, warning that “disruption is likely to spread along supply chains”.

No access

Some of the world’s biggest companies have had their operations in the area affected, including Japan’s Toyota, the number two global automaker.

Production at its plant in the area remained suspended yesterday. More than 50 out of 12,000 employees at the factory, which produces models including the Corolla sedan, were injured.

“We are still assessing the situation,” a Toyota spokesman said.

Pharmaceutical giant GlaxoSmithKline also has a plant in the area around the blast site, and a spokeswoman told AFP that it had been unable to access it to assess the damage.

US agricultural machinery manufacturer John Deere said its factory was damaged, Bloomberg News reported.

French carmaker Renault said yesterday it was diverting its imports to Shanghai.

European aircraft manufacturer Airbus has a giant assembly plant in Tianjin, its only such facility in Asia and crucial to one of its most important markets.

Its staff were safe, it said, but it has offered to move employees to downtown Tianjin, away from the port area, and was analysing “the logistics situation”.

“We are trying to find solutions,” a spokesman added.

Soft drinks giant CocaCola and Japanese automaker Honda both told AFP they were evaluating the impact of the blasts.

Shares plunge

In a statement, the American Chamber of Commerce in China said it anticipate that Tianjin authorities would “rapidly and transparently complete their assessments and investigations, rebuild the Tianjin port and brand, and restore trust in the city”.

According to the American Association of Port Authorities’ 2013 world ports rankings, the most recent available on its website, Tianjin ranked third globally for cargo volume on 477 million tonnes, and 10th for container traffic, with nearly 13 million twenty foot equivalent units.

Tianjin Port itself says that operations have returned

Economic activity in Tianjin has yet to return to normal several days after the devastating explosions there Capital Economics

to normal “except for those at the site or surrounding areas” -- which could cover a significant section of the facilities. It did not respond to requests for details from AFP. Shares in Tianjin Port Development Holdings tumbled more than 13 percent in Hong Kong on Monday -their biggest loss since 2009

-- and were down 2.9 percent to HK$1.36 yesterday.

Losses in the auto sector alone were estimated at US$310 million, according to the People’s Daily, the official mouthpiece of China’s ruling Communist Party, and the Fitch ratings agency has warned that insurance claims resulting from the explosions could amount to US$1.5 billion.

Analysts say the longterm effect will depend on how long port operations are disrupted, with investment bank Nomura saying in a note that while it did not expect a “significant” impact on the economy, “The key issue is whether this area will be affected permanently or temporarily.”

Northern China faces “an immediate interruption in chemical and plastic supply” for up to a month, research firm IHS said.

“The port is responsible for the area covering Beijing and the surrounding area, so it’s very important,” said Tse Leung Yip, an associate professor at the International Centre for Maritime Studies at Hong Kong’s Polytechnic University.

“Ships could berth nearby, but it’s not very convenient, especially because Beijing really relies on Tianjin’s port.”

AFP

Business Daily | 11

August 20, 2015

Asia

Vietnam follows Beijing’s steps and devalues dong With yesterday’s new band, the dong could fall to 22,547 per dollar in interbank deals Ho Binh Minh

KEY POINTS Vietnam lowers mid-point rate to 21,890 dong/dollar Trading band widened to 3 pct from 2 pct Dollar/dong stable on interbank market Adjustments sufficient till early 2016 -c.bank

Central bank of Vietnam

V

ietnam devalued the dong for the third time this year yesterday, as authorities sought to support a languid export sector facing fresh challenges from a surprise devaluation of the Chinese yuan.

The State Bank of Vietnam, the nation’s central bank, also widened the dollar/dong

trading band for the second time in a week, underscoring concerns a weaker yuan could further inflame a bloated trade deficit.

China, Vietnam’s top trading partner, rattled global financial markets when it devalued its currency by nearly 2 percent on August 11, heightening worries of a global currency war.

Yesterday the State Bank of Vietnam lowered the official mid-point rate by 0.99 percent to 21,890 dong per US dollar and widened the trading band to 3 percent from 2 percent.

Export-reliant Vietnam posted a trade deficit of US$3.53 billion in JanuaryJuly, compared with a US$1.59 billion surplus in the

year-ago period. Shipments grew 8.9 percent in the first seven months, below the government’s 10 percent target.

The weaker yuan has sparked concern of more Chinese goods flooding the southern neighbour’s market, putting further pressure on the trade balance.

“The Vietnamese dong’s exchange rate now has sufficiently large ground to be flexible in front of adverse impacts on the international and domestic markets not only from now to the year end, but also to the first months of 2016,” the central bank said in a statement.

The moves help “ensure the competitiveness of Vietnamese goods,” it said.

Vietnam had a trade deficit of US$19.33 billion with China in the first seven months of 2015, versus a deficit of US$14.88 billion a year ago.

“The devaluation is reasonable since many countries competing with Vietnam in export have devalued their currency,” said Nguyen Thanh Lam, deputy manager of retail division at Maybank Kim Eng Securities.

The previous mid-point rate had been in place since May 7 when the central bank allowed a 1-percent currency depreciation. The first devaluation in 2015 was also 1 percent on January 7.

With yesterday’s new band, the dong could fall to 22,547 per dollar in interbank deals, or 2 percent down from the previous day. The band had been doubled to 2 percent on August 12.

The dong has now weakened around 3 percent in both the interbank and the unofficial markets, against a central bank’s pledge to let the currency slip 2 percent in 2015.

Reuters

Thai central bank warns on further rate cut outcome Monetary committee said policy should continue to support the economic recovery

S

ome members of Thailand’s monetary policy committee felt further interest rate cuts could pose risks to financial stability amid increased global market volatility, minutes from the central bank’s August 5 meeting showed yesterday.

The committee - comprised of three members from the Bank of Thailand plus four others - unanimously voted to keep the one-day repurchase rate unchanged at 1.50 percent at the meeting, just above the record low of 1.25 percent.

It unexpectedly cut the rate in March and April to try to boost Southeast Asia’s second-largest economy, which has yet to regain traction more than a year after the May 2014 army coup due to stubbornly weak exports and domestic demand.

According to the minutes, the committee agreed that monetary conditions remained accommodative following previous rate cuts and a weakening of the baht currency,

which has depreciated by 7.4 percent against the dollar this year.

Some policy members felt a “further rate reduction could pose risks to financial market stability in the short term amid heightened global market volatility,” the minutes said.

Some members noted risks to the economy and financial stability if rates were cut and investors pulled money out of the country in search of higher returns elsewhere. Lower borrowing costs could also aggravate already record levels of household debt.

The committee said monetary policy should continue to support the economic recovery, which was expected to “remain “subdued amid greater downside risks to growth.”

“The economic outlook was subject to more negative factors, leading to a slight downward revision of the growth projection for 2015 from the previous meeting,” the minutes said.

The central bank’s current growth forecast for this year is 3 percent and

The economic outlook was subject to more negative factors, leading to a slight downward revision of the growth projection for 2015 from the previous meeting Thai monetary policy committee’s minutes

it is due to give a new projection on September 25.

On Monday, the state planning agency lowered its 2015 GDP growth forecast to 2.7-3.2 percent from 3.0-4.0 percent. Many economists believe even the new forecast is still too optimistic.

Growth last year was only 0.9 percent.

Thailand’s economy grew just 0.4 percent in April-June from the previous quarter, putting pressure on the military government to spur activity.

Prime Minister Prayuth Chan-ocha said on Tuesday he had submitted a list of new cabinet members to the country’s king for approval.

Bangkok’s bomb blast on Monday, which killed 22 people, nearly half of them foreigners, is a further blow to the ailing economy.

The committee next reviews monetary policy on September 16.

Reuters

12 | Business Daily

August 20, 2015

Asia

Japan exports stumble on China slowdown Imports fell 3.2 percent as weak commodity prices helped bring down the country’s energy bill

The most notable point is that exports are not growing -- the Japanese economy cannot rely on overseas demand for future growth Taro Saito, senior economist, NLI Research Institute

China-bound shipments were off 1.3 percent from 12 months earlier in volume terms, outstripping a 0.4 percent fall to the rest of Asia.

Despite a recovery in the US economy, a slowdown in China -Asia’s top economy and a major market for Japanese exporters -- has raised a red flag.

The central bank devalued the yuan last week, sparking concern China is growing more slowly than thought and prompting fears it could start a currency war in which countries compete to boost exports by cutting the value of their units.

The weak figures were part of broader picture that showed Japan’s trade deficit narrowed a less-thanexpected 72.3 percent in July from a year ago, as the cost of energy imports kept falling.

Abenomics struggling

J

apan’s exports slowed in July, official data showed yesterday, adding to concerns about the fragile recovery in the world’s number three economy as demand falls in neighbouring giant China.

The lacklustre figures come days after news Japan’s economy contracted last quarter, boosting

speculation the central bank will be forced to unleash more stimulus as Tokyo’s “Abenomics” growth blitz stumbles.

While the value of Japan’s exports rose 7.6 percent last month from a year ago, partly driven by rising vehicle shipments, the volume of goods slipped 0.7 percent from July 2014.

Japan’s monthly deficit came in at 268.05 billion yen (US$2.15 billion), well below 966.5 billion yen a year earlier, the finance ministry said. Economists had predicted the shortfall would shrink to around 53 billion yen.

Imports fell 3.2 percent as weak commodity prices helped bring down the country’s energy bill, which

soared after Tokyo replaced nuclear power with pricey fossil fuels in the aftermath of the 2011 Fukushima nuclear crisis.

Japan’s still-struggling trade picture was highlighted in the GDP data this week, as the economy shrank 0.4 percent in the three months to June -- or 1.6 percent on an annualised basis.

The contraction, which was not quite as bad as expected, was blamed on weak consumer spending at home and slowing exports after two consecutive quarters of growth.

The figures come more than two years after Prime Minister Shinzo Abe (pictured )launched a policy blitz, dubbed Abenomics, to kickstart anaemic growth and conquer years of deflation.

The scheme called for big government spending, massive Bank of Japan (BoJ) monetary easing and reforms to cut red tape in Japan’s highly regulated economy -- reforms that have now stalled, however.

Household spending has also been unsteady following a sales tax rise last year, brought in to pay down a massive national debt, which saw consumers rush to stores before prices rose.

BoJ chief Haruhiko Kuroda has pushed back a timeline for hitting a 2.0 percent inflation target, a cornerstone of Abenomics, although he insists healthy price rises are around the corner.

This month, Kuroda said he would consider expanding the bank’s record 80 trillion yen annual asset-buying scheme -- a means to pump money into the economy similar to the US Federal Reserve’s quantitative easing -- if weak oil prices keep holding back near-zero inflation.

AFP

India’s thirst for gasoline supports Asian petrol margins In the first six months of the year, India’s gasoline demand grew 14.17 percent Nidhi Verma and Seng Li Peng

S

trong Indian imports of gasoline, boosted by a shift towards petrol car sales, are expected to underpin Asian margins for the fuel at least for the rest of the fiscal year to next March, industry sources say.

India has surplus refining capacity, but there has been maintenance at some plants and gasoline demand has risen after a cut in diesel subsidies increased the attractiveness of petrol cars.

Gasoline imports from April to June were the highest in more than four years, official data showed.

As a result, Asia’s average gasoline profit margin for

refiners, or the crack, in the first seven months of 2015 was US$12.60 a barrel, the highest for the period since 2009, based on Reuters data going back to the second half of 2008.

“Gasoline imports are there as we are seeing a robust growth in demand,” said B. Ashok, chairman of Indian Oil Corp (IOC), the country’s biggest refiner, which undertook maintenance at its Koyali refinery from March to April.

In the first six months of the year, India’s gasoline demand grew 14.17 percent, official data

showed, and trade sources expect growth this year to reach 17 percent.

Although India still exports more gasoline than it buys, a government source said state refiners would continue importing at least until the end of this fiscal year to March 31 2016.

Higher domestic demand meant that total gasoline exports for January-June 2015 fell about 5.2 percent to 7.2 million tonnes or 337,400 barrels per day (bpd), while imports have spiked to about 23,400 bpd from about 2,850 bpd.

For all of 2015,

consultancy JBC Energy expects India’s gasoline surplus to fall to around 310,000 bpd and drop below 300,000 bpd in the next few years, versus 345,000 bpd in 2014.

IOC, the key importer of gasoline, has sought almost 700,000 tonnes for MarchSeptember delivery.

State refiners also buy gasoline and diesel from private firms Reliance Industries and Essar Oil, but since they charged more for coastal supplies an IOC source said his firm had switched to imports.

Further tightening the market, has been a switch

by some north Indian states to less polluting Euro IV gasoline.

IOC’s Panipat refinery is only able to meet 75 percent of demand for Euro IV, the IOC source said.

India’s strong gasoline demand comes as major consumers Japan and Australia shut refining capacity and switch instead to imports.

Overall demand is also growing.

ESAI Energy research agency expects global gasoline consumption to grow by 50,000 bpd to 420,000 bpd this year.

Reuters

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Business Daily | 13

August 20, 2015

Asia Post-reshuffle, Indonesia beset by renewed government squabbles

Hotel Lotte to hire IPO managers in September

New minister Rizal Ramli is known for his strident and often nationalistic views on the economy

L

ess than a week after Joko Widodo called on ministers to set aside their egos, the Indonesian president’s new cabinet is beset by renewed squabbles, threatening to undo attempts to revive an economy growing at the slowest pace for six years.

Rizal Ramli, the new coordinating minister for maritime affairs, drew a rare rebuke from Widodo after criticising Vice President Jusuf Kalla and State-Owned Enterprises Minister Rini Soemarno.

The president told Ramli to voice his concerns privately at cabinet meetings, the president’s spokesman, Teten Masduki, said yesterday.

“The government is trying hard to attract investment. It must be solid and united,” Masduki said.

Widodo has vowed to lift growth to 7 percent, but critics say the economy has actually gone into reverse because of sniping ministers and bureaucrats.

In the second quarter, growth slipped to 4.67 percent, its slowest pace in six years, amid drooping domestic demand and sliding prices for coal and commodities. The rupiah has dropped 10 percent against the dollar this year to 17-year lows and is Southeast Asia’s worst performing currency after Malaysia’s ringgit.

Ramli, one of six new ministers

Co-ordinating Minister for Maritime Affairs Rizal Ramli (3rd from right) on occasion of new cabinet presentation

brought into office in a cabinet reshuffle last week meant to assuage investors’ concerns about policy muddles, challenged Kalla to debate the vice president’s “unrealistic” plans to build 35,000 megawatts of power plants over five years.

“Actually the majority of this programme are JK’s projects,” Ramli told Metro TV, referring to the vice president by his nickname. “It would be enough if just one-third succeed.”

Kalla responded by saying Widodo himself inaugurated the power programme, and that it is one of the government’s signature policies.

“That (comment) is playing down the president’s authority,” Kalla said.

Seen as close to Megawati

Sukarnoputri, the head of Widodo’s political party, Ramli oversees several ministries, including energy, transport and tourism.

“Ramli likes making a racket,” vice presidential spokesman Husain Abdullah said. “Rather than helping the government, he makes things more complicated.”

Ramli has also denounced plans

by Indonesia’s national airline, PT Garuda Indonesia Tbk, to buy 30 Airbus jets with US$44.5 billion in loans. Soemarno, the state-owned enterprises minister, told him to back off.

Analysts predict more ructions ahead.

G

The report warned that the vast majority of the final value of New Zealand dairy ingredients was being captured by non-New Zealand firms in Southeast Asia.

It cited the retail shelf price of a carton of UHT (ultra-heat treated) milk at NZ$1.73 (US$1.14), of which just 13 NZ cents (9 U.S. cents) went to the New Zealand dairy processor and 18 NZ cents (12 U.S. cents) went to the farmer.

New Zealand was this year commemorating 40 years of ties with ASEAN, which was its fourth

Inflation rate accelerated more than expected in July to 3.3 percent from a year earlier as prices rose during Ramadan and the subsequent Eid al-Fitr celebrations. A weaker ringgit, which has lost over 14 percent of its value against the dollar so far this year, also boosted prices of imports. Economists polled by Reuters had expected the consumer price index (CPI) to rise 2.9 percent in July from 2.5 percent in June. Higher tobacco prices accounted for most of the pick-up in July inflation, statistics department data showed yesterday.

Japan’s spokesman positive about economy Japan’s top government spokesman said yesterday the positive trend in the nation’s economy remained intact and that it was on a moderate recovery track.

“Corporate earnings are at record high levels and the environment for jobs and wages has significantly improved,” Chief Cabinet Secretary Yoshihide Suga told a news conference. His comments came after data on Monday showed the economy shrank at an annualized pace of 1.6 percent in April-June as exports slumped and consumers cut back spending.

Kiwis have free trade agreements with ASEAN as a group and with Singapore, Thailand and Malaysia separately

rowing consumer demand for dairy products in Southeast Asia is offering untapped export opportunities for the New Zealand dairy industry, according to a government-commissioned report out yesterday.

The report said six of the Association of South East Asian Nations (ASEAN) nations held opportunities for market-ready New Zealand products including drinking milk products, yoghurt, condensed and evaporated milk, cheese, butter, ice-cream and infant formula.

Malaysia’s inflation accelerates more than expected

Reuters

New Zealand companies missing out on ASEAN opportunities

Asian firms are occupying dairy products’ niche markets

Conglomerate Lotte Group said yesterday its South Korean hotel arm Hotel Lotte Co Ltd, a key vehicle for control for the group’s South Korean businesses, will hire managers for an initial public offering by early September. Lotte Group, in a text message sent to reporters, did not elaborate on when the listing will be completed. Last week it said it expected Hotel Lotte to have a market capitalisation of about 10 trillion won (US$8.43 billion) after an IPO.

Treasury Wine swings to profit

largest trading partner, Economic Development Minister Steven Joyce said in a statement on the launch of the report.

“In the past five years, New Zealand’s trade with ASEAN has grown at a rate second only to China. New Zealand is the largest supplier of milk powder to Southeast Asia and boasts a strong import share across most major dairy products,” said Joyce.

New Zealand had free trade agreements with ASEAN as a group and with Singapore, Thailand and Malaysia separately.

Dairy companies had made significant investments in the manufacture of products such as infant formula and UHT milk, Primary Industries Minister Nathan Guy said in the statement.

“We are also seeing the emergence of a number of niche players with a focus on the premium end of the market.”

The six nations -- Thailand, Malaysia, Singapore, Indonesia, the Philippines and Vietnam -- with a total population of 583 million, were an attractive market for consumerready dairy exporters.

Xinhua

Treasury Wine Estates, the world’s biggest standalone wine company, swung to its first full-year profit as a focus on its more expensive labels began to pay off after a disastrous U.S. expansion drive. The return to profitability vindicates Chief Executive Michael Clarke’s strategy of building up Treasury’s more lucrative high-end offerings like Penfolds. Statutory net profit came in at A$77.6 million (US$56.91 million) for the 2014-15 financial year, the company said, compared with the A$100.9 million loss it posted in 2013-14. Revenue rose 8.1 percent to A$1.96 billion.

Kirin to buy F&N’s stake in Myanmar Brewery Japan’s Kirin Holdings is set to buy Fraser and Neave’s (F&N) 55 percent stake in Myanmar’s biggest brewer, Myanmar Brewery Ltd, for US$560 million, a source familiar with the deal said yesterday. Earlier this month, Singapore’s F&N agreed to sell its 55 percent stake in Myanmar Brewery to government-backed Myanma Economic Holdings Ltd (MEHL) for US$560 million, bringing an end to a lengthy dispute. The source said Kirin was coming in as MEHL’s nominee and is looking to buy the stake at the agreed price of US$560 million.

14 | Business Daily

August 20, 2015

International

German parliament backs Greek bailout with large majority The Bundestag’s blessing was required for German participation in the latest Greek bailout plan Deborah Cole

UK study endorses e-cigarettes Health officials in Britain have for the first time endorsed e-cigarettes, saying they are 95 percent safer than tobacco equivalents and even suggesting doctors should be able to prescribe the “game-changing” devices to smokers trying to quit. E-cigarettes, which allow users to inhale nicotine-laced vapour but contain no tobacco, have surged in popularity in recent years but health bodies have so far been wary of advocating them as a safer alternative. In a study published yesterday, Public Health England (PHE) an agency of Britain’s Department of Health, backed their use.

Wal-Mart pharmacy business drags on profit The world’s largest retailer has a drug problem. Wal-Mart Stores said on Tuesday that lower margins in its pharmacy business had emerged as a drag on profits, as it gets paid less by drug plan managers and as fewer customers pay in cash, since Obamacare has increased the ranks of insured Americans.

The company warned that the margin squeeze would continue for at least the remainder of the year, although a spokesman told Reuters the pharmacy business is profitable and that Wal-Mart has no plans to sell it or find a partner to share the risk.

Fitch upgrades Greece to ‘CCC’ Ratings agency Fitch upgraded its credit rating for Greece by one notch on Tuesday, saying the latest bailout deal the country struck with its foreign lenders reduced the chance of default.

Greece and its European and IMF lenders reached an 85 billion euro (US$94 billion) bailout agreement last week after nailing down the terms of new loans needed to save the country from financial ruin. The deal gives Greece some respite after a year marked by acrimonious talks with lenders, the imposition of capital controls and a three-week shutdown of its banks.

Target reaches agreement with Visa over data breach Target Corp said it has reached an agreement with Visa card issuers to reimburse up to US$67 million in costs related to a data breach at the retailer in 2013, according to a source familiar with the matter. The breach during the holiday shopping season compromised at least 40 million credit cards and may have resulted in the theft of personal information from as many as 110 million people. The agreement comes three months after a proposed US$19 million settlement between Target and Mastercard fell through as not enough banks accepted the deal.

T

he German parliament voted by an overwhelming majority yesterday to back a third bailout for Greece, with Chancellor Angela Merkel spared a major rebellion of deputies opposing the aid.

Interrupting their holidays for the second time this summer to cast ballots on a Greek rescue, lawmakers in the Bundestag lower house approved the 86-billion-euro (US$95-billion) rescue by 454 votes to 113.

Eighteen abstained and attendance was markedly lower than during a vote last month approving the start of negotiations on the package.

While the approval was virtually guaranteed given the dominance of Merkel’s left-right “grand coalition,” the key question was whether the chancellor would face damaging dissent within her own camp.

The mass-market daily Bild had predicted around 120 MPs alone could jump ship. An official breakdown of how deputies voted was expected later yesterday but much of the dissent seemed to come from the far-left Linke party rather than the conservatives.

Germany’s powerful finance minister, Wolfgang Schaeuble, had opened the debate telling MPs it would be “irresponsible” not to approve a third bailout for Greece.

He said Athens had earned a fresh opportunity to salvage its economy with the help of its eurozone partners, including its de-facto paymaster Germany.

“There is no guarantee that all of this will work and there can always be doubts,” he said.

Underlining the controversy throughout the eurozone surrounding

Members of the German Bundestag gather for a referendum in Berlin yesterday

the latest lifeline for Athens, Dutch Prime Minister Mark Rutte was to face a grilling in his own parliament, and a possible no-confidence vote, over his cabinet’s support for the bailout.

But grumbling has grown ever louder within Merkel’s Christian Union bloc over help extended to the Greek government of leftist Prime Minister Alexis Tsipras.

‘Stabbing chancellor in back’

The Christian Democrats’ general secretary, Peter Tauber, warned this week that a vote against the bailout was “tantamount to stabbing the chancellor in the back” two years before the party fervently hopes to see her stand for a fourth term.

Schaeuble, a fiscal hawk who drove a hard bargain in countless rounds of bailout negotiations with Greece, insisted deputies could vote for the package with a clear conscience.

Brazil June Economic Activity Falls More Than Analysts Forecast The non-seasonally adjusted economic index fell 1.2 percent from a year ago Bloomberg News and David Biller

B

razil’s economy in June declined more than forecast as the central bank signals it will maintain interest rates at the highest level since 2006 in the face of a looming recession.

The economic activity seasonally adjusted index, a proxy for gross domestic product, fell 0.58 percent in June from the prior month after

rising a revised 0.06 percent in May, the central bank said yesterday. The median estimate of 34 economists surveyed by Bloomberg was for a tumble of 0.5 percent.

Brazil’s business and consumer confidence levels are at record lows as high rates along with tighter fiscal policy stymie activity. Even with Latin America’s largest economy forecast to

Addressing one key area of concern, the involvement of the International Monetary Fund (IMF) in the third bailout, Schaeuble told MPs there was “not the slightest doubt” it would agree by October to participate, calling it “indispensable”.

Conservatives see the IMF as a guarantor of stability and rigour.

But while the IMF has insisted on significant debt relief for Greece, Germany has ruled out a writedown and argued instead for longer maturities or lower interest rates on the principle.

Meanwhile in the Netherlands, lawmakers in the 150-seat Lower House were also recalled from summer recess over the bailout.

The liberal Dutch premier has come under fire for breaking a 2012 election promise in which he said no more money would go to Athens after two previous bailouts.

post back-to-back years of recession, the government is loath to loosen its purse strings amid the threat of having its credit rating being cut to junk.

The non-seasonally adjusted economic index fell 1.2 percent from a year ago, compared with a median estimate of a 1.3 percent drop.

The country’s economy will contract 2.01 percent this year and 0.15 percent in 2016, according to a central bank survey of analysts published Monday.

The central bank has boosted the key rate in seven straight meetings to 14.25 percent, most recently by 50 basis points in July. Keeping the Selic (Special Clearance and Escrow System) at the current level for a sufficiently prolonged period is necessary to slow inflation to the 4.5 percent target by the end of next year, the bank’s President Alexandre Tombini said on August 14.

Moody’s Investors Service this month cut Brazil one level to Baa3, its lowest investment grade rating, from Baa2. Standard & Poor’s, which rates Brazil BBB-, or a step above junk, last month cut its outlook on Brazil’s debt to negative.

Bloomberg News

Business Daily | 15

August 20, 2015

Opinion Business

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Leading reports from Asia’s best business newspapers

BOJ still not printing babies as Abenomics stalls James Saft

Reuters columnist

TAIPEI TIMES Five foreign semiconductor and pharmaceutical companies are to invest more than NT$11 billion (US$336.9 million) in Taiwan in the next three years, the Ministry of Economic Affairs said yesterday. To encourage more foreign companies to invest in Taiwan, Vice Minister of Economic Affairs Bill Cho led a delegation on a visit to 11 companies in the US and Canada from August 8 to Tuesday last week. “We inked letters of intent with five of the 11 companies, including semiconductor equipment manufacturer S-Cubed Inc and Pharmascience Inc,” Cho told a press conference in Taipei.

THE TIMES OF INDIA Finance minister Arun Jaitley said that increased banking penetration and use of technology in payments will reduce the prevalence of unaccounted money. Launching State Bank of India’s digital wallet ‘SBI Buddy’ on Tuesday, Jaitley said that technology is bringing out a change in the behaviour of users and customers. “With more people come into the banking fold, it is not only going to make expenditure easier, it is going to make accounting for the money much easier.

It is probably going to bring in a lot of money within the official net,” said Jaitley.

THE KOREA HERALD South Korea’s tax authorities have conducted a month-long tax probe into the fast food chain arm of Lotte Group, which is embroiled in a family feud over control of the sprawling retail giant, sources said yesterday. Investigators from the National Tax Service inspected the main office of Lotteria in Seoul between July 7 and August 11, according to the sources. It is the first tax probe into Lotteria since 2011 and comes after the service carried out an audit into Daehong Communications, the advertising arm of Lotte.

BANGKOK POST Business leaders believe Monday night’s explosion at the Ratchaprasong intersection will hurt tourism but expect the overall negative effect on the economy will be more psychological and short term. Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said tourism would be the sector hit hardest by the horrific blast at the Erawan Shrine, whose victims included Thais and foreign tourists alike. “In the long term, we’ll have to wait and see what exactly the real impact on foreign investors will be,” he said.

W

hat is the word for spending 3 percent of output on stimulus but only generating 2 percent growth over nearly three years?

Abenomics.

A central bank can print money, as Japan is learning, but it can’t print babies or loosen immigration controls.

Japan’s output slid into negative territory again in the April-June quarter, contracting at a 1.6 percent annualized clip. Private consumption fell, no surprise given that real wages have increased only sporadically.

One more quarter of economic contraction, a development not currently forecast by most economists, and Japan will suffer its fifth recession since 2008.

Bad luck too that this is happening just as less-thanchummy neighbour China is seeing its own economy splutter and experimenting with allowing its currency to fall in value.

Since its rise with the advent of Prime Minister Shinzo Abe in December 2012, Abenomics, a combination of fiscal stimulus, radical monetary policy and economic reform, has proved itself good at doing some things, mostly in financial markets, but less good at others, such as in the real economy.

Abenomics, an all-out attempt to break Japan from the grip of malaise, has very effectively driven corporate profits and the stock market higher, at the same time the value of the yen lower, the latter phenomenon driving the former.

Yet all of this has not created the

virtuous circle of investment, spiking exports and rising wages its architects expected.

“In case this situation continues, the government and the Bank of Japan’s strong commitment to achieve its 2 percent inflation target will be open to question.

If the market and corporates become disappointed, economic sentiment will deteriorate and there will be no driving force to propel an exit from deflation,” Societe Generale economists Takuji Aida and Kiyoko Katahira wrote in a note to clients.

It is questionable if there is such a force now. Given the up-and-down performance of Japan’s economy despite massive stimulus, there is a genuine question of what more can be done.

Public sector debt is close to three times as large as annual output, interest rates have no room to fall and the BOJ is buying bonds faster than the government is issuing them.

There is some brave talk about further stimulus from the Abe government, especially if the economy remains in contraction in the current quarter. What is less clear is why what hasn’t worked so well thus far will begin to work in the future.

You can’t print babies (yet) While a cheaper yen has been a boon to Japanese exporters, it isn’t one they’ve assumed would persist indefinitely. That’s led to an expansion of corporate profit margins rather than a huge round of investment in new capacity and the hiring and wage growth that was supposed to come alongside.

Recurring pre-tax profit margins

What is less clear is why what hasn’t worked so well thus far will begin to work in the future

among Japanese corporations have touched 5 percent in recent quarters, an all-time high. To be fair, profitability has also improved at domestically focused companies, so the trend is partly due to a welcome emphasis on margins in corporate Japan.

What Japan hasn’t got, and what the Bank of Japan wouldn’t even pretend to control, is a surge in births, much less in immigration, to help counterbalance its shrinking population. It is very difficult, perhaps impossible, for a country to grow and escape deflation when it is experiencing

an aging population in long-term decline.

That line of thinking inevitably leads to doubts about debt sustainability, and also argues for the willingness of the BOJ to expand its monetary efforts.

The alternative is too dire.

Japan’s problems are not simply of its own making. Exports have been hit by falling demand in the U.S. and China. A Monday report that manufacturing in New York state contracted in August, and at the fastest pace since 2009, is a reminder that the benefits of a cheap yen depend on a vibrant global economy to which to sell goods.

China’s financial market gyrations give similar pause, particularly the move to allow the yuan to depreciate. If this is part of an on-going campaign to try to win more exports for hardhit Chinese companies, Japan is one of the main neighbours which will be hit.

The choices facing Abe and the BOJ are not easy. More yen depreciation cuts both ways. It may only further fatten profits at corporations without increasing the volume of exports. A weaker yen will also raise the price of imported goods and may make consumers less willing to spend.

Demographics are the real story, and other than encouraging more women to work, little is being done to help.

Japan, a country which is taking children’s restaurant meals out of the basket of goods to measure inflation, replacing them with hearing aids, is not addressing the fundamental issues.

Reuters

16 | Business Daily

August 20, 2015

Closing Chinese state-owned enterprises profits nosedive

Goldman Sachs’s unit obtains Hong Kong banking license

The profits of China’s state-owned enterprises (SOEs) nosedived in July, with the pace of decline picking up dramatically from the first six months of the year, data from the Ministry of Finance revealed yesterday. Their profits declined 2.3 percent year on year in the Jan.-July period to 1.4 trillion yuan (US$221.2 billion), while the drop was just 0.1 percent in the first six months. Profits of SOEs (Sinopec, one of them, pictured) directly administered by the central government tumbled 4.5 percent from January to July to about one trillion yuan, while those administered by local governments saw a 3.6-percent profit increase.

A wholly-owned unit of Goldman Sachs Group received a banking license from The Hong Kong Monetary Authority (HKMA), the HKMA announced yesterday, in a step that creates a local subsidiary through which the U.S investment bank can book its trades. The so-called restricted banking license that Goldman Sachs has obtained allows it to take deposits of HK$500,000 (US$64,495.32) and above, but is normally used for investment banking and capital markets activities, according to the HKMA’s website. They have been setting up new subsidiaries as rules have forced financial firms to rethink where they book their over-the-counter derivatives transactions.

Beijing revives bank cyber rules China, fearing the reach of the U.S. National Security Agency’s cyber spying capabilities, has advanced several cyber security measures in recent months

C

hina has resumed work on a set of banking cyber security regulations it suspended earlier this year, reviving a potential source of friction with the United States just weeks before Xi Jinping makes his first trip to Washington as China’s president, people with knowledge of the matter said.

At a meeting last week in Beijing, officials from the China Banking Regulatory Commission (CBRC) told representatives from several Western technology companies, including Microsoft, IBM and Cisco Systems, they would seek opinions over the next month on a new version of the bank procurement rules, one of those present at the meeting said.

The previous regulations - containing provisions that required Chinese banks to buy more domestic IT equipment and Western tech vendors to disclose secret source code if they sell to lenders - drew strong protests from foreign business lobbies, the U.S. and European governments.

Chinese regulators suspended the plan in April, saying they would weigh feedback from domestic banks. The suspension was seen as a diplomatic victory

for the Obama administration, coming shortly after visits to Beijing by Treasury Secretary Jack Lew and Commerce Secretary Penny Pritzker.

While foreign tech companies were briefly optimistic that the rules would be dropped indefinitely, their resumption now underlines China’s determination to follow through on what is considered a top national security priority for Beijing - and a persistent irritant in relations with Washington.

Xi, who visited California in 2013, will make his first state visit next month to the White House, where cyber security disputes, including the theft of U.S. government personnel data by suspected

Cathay Pacific H1 profit up nearly sixfold

Chinese hackers, are expected to be on the agenda.

Slump in sales

Executives at Western companies, which make hundreds of millions of dollars a year selling everything from servers to cloud computing software to China’s big banks, welcomed the opportunity to offer input, but remained sceptical that the procurement rules, even if they were revised, would reverse a recent slump in sales to China’s state-owned banks.

Many fear that even if Beijing formally rolled back some of the more onerous terms, banks would still unofficially be discouraged from purchasing foreign equipment.

While foreign tech companies were briefly optimistic that the rules would be dropped indefinitely, their resumption now underlines China’s determination to go on

People familiar with the meeting said the CBRC provided few details about how they will proceed with the regulations, but there would be more thorough consultations than used for drafting the earlier rules.

High-level executives at Chinese technology companies, which could gain

PBOC opens liquidity tap again

H

ong Kong flag carrier Cathay Pacific said yesterday first-half profit rose almost six fold from a year earlier, helped by lower fuel prices, but shares fell to a nine-month low as the result missed expectations.

Net profit in the six months through June rose to HK$1.97 billion (US$254 million) from HK$347 million in the same period last year, helped by a slump in world oil prices that cut fuel costs by over a third.

But around half of the HK$7.08 billion gain was offset by losses from oil hedging, and profits missed the HK$2.22 billion median estimate of six analysts polled by Bloomberg News.

Revenue for the period fell 0.9 percent to HK$50.39 billion while passenger yield, a key measure of profitability, also dropped.

“The group’s performance in the first six months of 2015 was considerably better than in the same period in 2014,” Cathay Pacific chairman John Slosar said in a statement filed to the Hong Kong stock exchange.

But Cathay warned it still faces “strong competition” from other airlines and airports in the region.

AFP

C

hina’s central bank has opened its liquidity tap again, providing 110 billion yuan (US$17 billion) to 14 lenders yesterday.

The six-month Medium-term Lending Facility from the People’s Bank of China to the commercial lenders was priced at 3.35 percent, the central bank said on its official Weibo account, without specifying the recipients. The rate was unchanged from an MLF operation in July.

The PBOC uses such injections to keep liquidity ample as the government tries to underpin a faltering stock market and drains funds from the banking system to support the yuan. The Shanghai Composite Index reversed a plunge of as much as 5.1 percent to close up 1.23 percent.

China is expected to spend US$40 billion of its foreign-exchange reserves a month to keep the currency from sliding further, a Bloomberg survey showed. As the PBOC defends the yuan, it must buy the currency in the market, draining liquidity. The central bank provided 250 billion yuan of MLF loans to banks in July, and total outstanding MLF credit was 380 billion yuan at the end of July, according to PBOC data.

Bloomberg News

from a retreat of Western rivals in China, were made aware last month that the banking sector rules will not be dropped altogether, said a person from one of those companies.

Respected governmentaffiliated experts have defended these as reasonable and fair, noting that intense political opposition from Capitol Hill has essentially locked out Chinese manufacturers Huawei and ZTE from selling telecom equipment in the United States.

Still, the banking sector regulations have been criticized by the United States and Europe as protectionist measures that unfairly exclude foreign products and potentially violate China’s obligations as a member of the World Trade Organization.

CBRC officials appeared sensitive to the criticism, saying at last week’s meeting they had consulted China’s Ministry of Commerce and WTO experts to ensure that its proposals would meet China’s free-trade obligations, according to the person who attended the meeting.

Reuters

Poll victor to build Sri Lankan unity government

G

eneral election victor Ranil Wickremesinghe yesterday called on Sri Lankans to unite as he set about the task of forming a national unity government that will seek to heal the divisions of the past.

In his first major statement since his United National Party (UNP) foiled ex-president Mahinda Rajapaksa’s comeback bid, Wickremesinghe struck a note of reconciliation.

“I want everyone to come together now. Think of the country, think of the people,” he told a spray of television cameras on the lawn of his official residence.

“We can achieve unity, progress in this country if we work together.”

Wickremesinghe, 66, who has led a minority government since President Maithripala Sirisena beat Rajapaksa in a presidential election in January, said he expected to be sworn in as prime minister.

Although his centre-right party fell tantalisingly short of a parliamentary majority, it can count on supporters of Sirisena from the opposition Sri Lankan Freedom Party (SLFP) to control parliament and push ahead with reforms.

Reuters