Macau Business Daily September 7, 2015

MOP 6.00

Junket woes hit jewellers

Closing editor: Joanne Kuai

Traditionally a strong month for gold sales. But August has lost its sparkle. Local jewellers posted a much weakened retail performance. Macau Goldsmiths Guild say small-scale jewellery shops lost 20-30 pct sales y-o-y. While those reliant upon gamblers are down 70-80 pct. More low to mid-range priced products have been brought into the mix

Year IV

Number 874 Monday September 7, 2015

Publisher: Paulo A. Azevedo

Page 2

Fitch Rating: MSAR Outlook ‘Stable’

Chief Executive Chui Sai On is adopting a wait-and-see attitude. But not for too long. September’s AMCM: Total deposits financial figures will be crucial in deciding upon extended austerity measures. Fitch rating agency says down 2.3 per cent in July Page 2 such measures will impact the domestic economy. But maintains the MSAR’s ‘stable outlook’ and AArating. Reflecting ‘the territory’s exceptionally strong sovereign balance sheet and external position’ Lionel Leong Pages

3&4

confirms Jockey Club concession extension

Page 3

1,700 Opinions

Chinese banks results boosted by overseas activity

Everybody’s got an opinion. The Land, Public Works and Transport Bureau has received some 1,700 on reclamation Zone A and Zone B. Building heights. Penha Hill views. Traffic solutions. Public housing. And the fourth connection between Macau and Taipa. All hot topics – or potatoes, depending upon one’s perspective

Page 8

Market rout causes China-focused hedge funds to lose out to Japanese counterparts

Page 8

Page 4

G20 Talks Central bank heads. Finance ministers from the G20 group. All gathering in Turkey to discuss the world’s problems. The Fed’s rate hike and RMB depreciation top the list. Monetary policy is not enough to overcome sluggish global growth, it is agreed

Page 10

HSI - Movers September 4

EGM now a player

Name

Lenovo Group Ltd

+3.10

VIP and mass are suffering. But electronic gaming has recorded its largest share to date. Accounting for 5.7 pct of overall gaming revenues in August.

Union Gaming analysts note the Electronic Gaming Market has topped HK$1bln vis-à-vis July’s take

China Merchants Hold

+3.07

Galaxy Entertainment

+2.83

China Construction B

-2.28

Wharf Holdings Ltd/Th

-2.53

Ping An Insurance Gro

-3.26

China Petroleum & Che

-3.41

PetroChina Co Ltd

-3.65

Page 5

www.macaubusinessdaily.com

Interview

%Day

Sands China Ltd

+5.91

Belle International Ho

+3.29

Source: Bloomberg

Salad Days

I SSN 2226-8294

Promoting a healthy, green lifestyle, Concept H offers vegetarian takeaways plus organic and fairtrade products.

Shop proprietor Calista Chan told Business Daily that locals need to be coaxed into the concepts - but is sure demand is there. Located in a very ‘local’ neighbourhood, Concept H seeks to encourage the community to embrace the culture of living healthily and green

Pages 6 & 7

2015-9-7

2015-9-8

2015-9-9

27˚ 32˚

26˚ 30˚

25˚ 29˚

2 | Business Daily

September 7, 2015

Macau

Goldsmiths Guild: Jewellery sales still plunging in August In the traditionally strong month of August, local jewellers still posted a much weakened retail performance than a year ago, say the Macau Goldsmiths Guild Stephanie Lai

sw.lai@macaubusinessdaily.com

D

espite the improved consumer sentiment of August, jewellery retailers here experienced a sales turnover fall of at least 20 per cent year-onyear in the holiday period even though some of them have adjusted their product mix to include more mid and low-priced items, Macau Goldsmiths Guild director Lei Chi Fong has told us.

Last month, local jewellery retailers posted higher sales and saw better consumer sentiment when compared to the first half of this year but the sales turnover generated in the month experienced a steep drop compared to a year ago, according to Mr. Lei. “The smaller-scale jewellery shops on the streets still lost some 20-30 per cent of sales in August compared to a year ago,” said Mr. Lei, who also owns local chain jeweller Seng Fung Jewellery Co. Ltd. “As for those that are reliant upon gamblers, their sales decline is even steeper at some 70-80 percent of fall”.

While weaker consumer sentiment was evident in jewellery sales in the first half of this year many shops have already adjusted their product mix to include more low to mid-range priced products as Beijing's antigraft drive has already driven away big-spending clients, Mr. Lei remarked.

“For Seng Fung, we are not reliant upon those high rollers. Our street shops always have an even portfolio of clients across the spending

spectrum,” the guild director said. “But of course what we see now is that the jewellery market is only left with those that can spend on smaller ticket [items] and that they are very prudent in spending.”

In the second quarter of this year, the value of retail sales in watches, clocks and jewellery has dropped by 29 per cent year-on-year to MOP2.98 billion, according to official data. The value of this retail category plunged 30 per cent to MOP6.71

billion for the first six months of this year compared to a year ago.

As at the second quarter, the per capita spending of Mainland Chinese visitors – a major source for local jewellery sales – declined 24.3 per cent year-on-year to MOP2,012. For the first two quarters of this year fewer Chinese visitors travelled here, with official data showing a 4.2 per cent drop in the number of arrivals at 9.78 million.

Mr. Lei believes that the high-end jewellery business outlook remained negative in Hong Kong and Macau as Chinese consumers have become prudent or are sidestepping the two SARs when travelling.

Henry Cheng Kar Shun, who chairs Hong Konglisted jeweller Chow Tai Fook Jewellery Group, told reporters on Thursday that the company has already included more lower-priced items in its sales portfolio in response to weaker purchasing sentiment. This arrangement will lower the average sales price of Chow Tai Fook’s products by about 10 per cent, Mr. Cheng said.

Chow Tai Fook, which also runs stores in Macau, reported in June that its net profit for the year ended March was down 25 per cent to HK$5.46 billion from the previous year. The jeweller's average sales price of gem-set jewellery fell 12.7 per cent and that of gold products was down 1.2 per cent.

Total deposits decline 2.3 pct in July During the seven months of the year both residents’ and non-residents’ deposits declined. Only the public sector increased deposits with the banking sector

T

otal deposits declined 2.3 per cent in July to MOP845.4 billion from MOP865.0 billion in June, data from the Monetary Authority of Macau (AMCM) released on Friday reveals.

During this period, both deposits by residents and non-residents declined, 0.8 per cent and 6.5 per cent, respectively. At the same time, deposits in Hong Kong dollars, renminbi and other foreign currency

decreased 3.6 per cent, 4.1 per cent and 0.6 per cent, respectively. The public sector increased deposits with the banking sector by 1 per cent in July to MOP122.9 billion from MOP121.7 billion in June.

At the end of July the share of deposits by currency were Hong Kong dollars 41.2 per cent, US dollars 21.9 per cent, Macanese Patacas 19.4 per cent and Renminbi 13.4 per cent.

Also, during July, domestic loans to the private sector increased 2.2 per cent to MOP384.1 billion from MOP376.0 billion in June.

Of these, MOP102.7 billion was MOP-denominated (26.7 per cent), MOP252.1 billion was denominated in Hong Kong dollars (65.6 per cent), MOP3.3 billion was denominated in CNY (0.8 per cent) and MOP23.5

billion was denominated in US dollars (6.1 per cent).

External loans grew 0.6 per cent to MOP387.9 billion from MOP385.7 billion. In relation to this, loans denominated in US dollars accounted for 50.8 per cent (MOP197.2 billion), Hong Kong dollars 22 per cent (MOP85.4 billion), Renminbi 20.3 per cent (MOP78.9 billion) and Macanese Patacas 1.5 per cent (MOP5.7 billion).

The July loan-to-deposit ratio for both the resident and non-resident sectors rose 3.3 percentage points to 91.3 per cent from 88.1 per cent in June. During the same period, currency in circulation grew 1.4 per cent whilst demand deposits dropped 16.4 per cent.

J.S.F.

Business Daily | 3

September 7, 2015

Macau

Chui: More cost-cutting measures decided soon The Chief Executive does not rule out further cost-cutting measures if government income is lower than expected Stephanie Lai

sw.lai@macaubusinessdaily.com

M

acau Chief Executive Fernando Chui Sai On said on Friday that whether a second round of austerity measures is imposed on the administration will depend upon the city’s financial situation for this month and next, and that the government will pay especially close attention to September’s government revenue.

“When our revenue is lower than expected, a way to deal with it is to tighten our spending,” Mr. Chui told reporters in Beijing on Friday when asked whether more austerity measures will be announced in the coming months.

But he did not reveal exactly what level of government revenue would trigger another round of cost-cutting measures for the administration.

“What I feel now is that we have to observe [MSAR’s public finances] for one or two months, especially our income for September,” the Chief Executive said.

Mr. Chui said recently that the austerity measures put in place will not be repealed even if gross gaming revenue for the city exceeds

MOP20 billion (US$2.5 billion) for September.

On September 1, the local government announced the immediate enactment of a set of cuts in public spending seeking to save MOP1.4 billion for the remaining months of this fiscal year.

The cost-cutting moves - dubbed by the government as ‘austerity measures’ - are fully internal to the

Concession extension for Jockey Club confirmed

T

he Macau Secretary for Economy and Finance Lionel Leong Vai Tac confirmed to reporters in Beijing on Friday that the government has already extended the horse-betting concession for Macau Horse Racing Co. Ltd. (which runs Macau Jockey Club) for two more years until 2017.

The extension terms are the same as in the previous contract, the Secretary added. Macau Horse Racing Co. Ltd. has held the monopoly for horseracing betting since 1978, with the last contract, renewed by the Government about 10 years ago, expiring on August 31.

The new contract is similar to the previous one and involves a payment of MOP15 million per year

by the Macau Horse Racing Co. to the government for the exclusive right to run the horseracing betting business in the territory. This amount has remained stable since 2005. At the time, the company managed to guarantee a decrease of 50 per cent of the concession fee as the contract signed in 1999 defined that Macau Horse Racing Co. would have paid MOP30 million per year.

The losses of Macau Jockey Club have been increasing; last year, the company lost MOP51.25 million compared to a loss of MOP41.4 million in 2013, according to information published in Macau’s Official Gazette. The Club has failed to make an annual profit since 2005.

government as it involves the freezing of the administration’s expenses on office supplies and consumables, as well as the budgeted investment spending on minor items such as furniture purchase or small-scale construction.

The government reiterated

throughout last week that cost-cutting will not impact the city’s social welfare policies and public investment plans (PIDDA) – namely those involving hefty multiple-year investments in infrastructure projects.

The announcement of the austerity measures follows the release of official data showing a 35.5 per cent yearon-year drop in gross gaming revenue for August to MOP18.62 billion, representing a losing streak extending to 15 consecutive months. This figure means Macau’s casino revenue for the first eighth months of this year reached MOP158.88 billion, or a monthly MOP19.86 billion.

In March, the government amended the budget for the fiscal year of 2015, revising its estimate for average monthly gross gaming revenue from the original MOP27.5 billion to MOP20 billion - a level below that is the trigger to the government’s cost-cutting measures.

Speaking to reporters upon his return to Macau, Mr. Chui noted an important task for the government at the moment is to increase visitor arrival figures.

“We’ll get proactive in attracting more visitors to come here, as arrival figures have been falling recently,” Mr. Chui said. “We hope that we can make some improvement in enhancing visitor arrivals, which stood at 31.5 million [last year].”

For the first half of this year, the number of visitor arrivals has dropped 3.5 per cent to 14.76 million.

The Chief Executive added that he is currently discussing tourism promotion with Secretary of Social Affairs and Culture Alexis Tam Chon Weng, with the conclusions to be announced to the public soon.

4 | Business Daily

September 7, 2015

Macau

Fitch: Austerity measures to hit domestic demand American rating agency maintains a ‘stable outlook’ for the MSAR in spite of the decline of GDP. But austerity measures are expected to impact the local economy João Santos Filipe

jsfilipe@macaubusinessdaily.com

A

usterity measures announced by the government, possibly extended in the coming months, may end up hitting the already slowing domestic demand in the territory. This is the view of the Fitch rating agency that announced last

Friday it was maintaining a ‘stable outlook’ on Macau’s AA- rating in spite of the 26.4 per cent year-on-year decline in Gross Domestic Product (GDP) for the second quarter.

‘There have been some signs that the domestic economy is beginning to slow.

Household consumption and capital investment growth have fallen albeit from a high base. Government has also announced measures to tighten spending, which will help to mitigate the impact on the fiscal account but may squeeze domestic demand’,

the rating agency report reads.

Besides stressing the high dependency upon the gaming sector, the American agency commented on the future impact of the slowdown of the property market, which has been cooling down since the fourth quarter of last year.

‘Risks are also growing to income growth and to Macau banks’ loan growth, which could feed through to a further slowdown in the domestic property market’, they reported.

‘Macau's banking sector benefits from conservative underwriting standards, which supports asset quality and relatively healthy capitalisation. Institutional support from Mainland Chinese parents in terms of capital, funding, and operations also provides a buffer to mitigate unexpected shocks’, they noted.

Strong fiscal reserves

The strong fiscal reserves are enough for the agency

to consider that the territory is healthy enough to go through the changes of the gaming market, which are less VIP oriented and more mass market. The agency also notes the potential of the new Cotai resorts that can help attract more mass market visitors to the territory.

‘Yet, Fitch maintains a Stable Outlook on Macau's AA- rating, reflecting the territory's exceptionally strong sovereign balance sheet and external position.

It has no debt liabilities, and retains fiscal reserves and accumulated surpluses in excess of 100 per cent of GDP - enough to almost cover six years of expenditure at the 2015 level projected by government’, the report reads. ‘This gives the territory significant policy space to accommodate a structural shift in the economy and support diversification away from the current reliance on VIP gaming’.

During the course of this year, Fitch expects the economy of the territory to shrink by 16 per cent year-on-year, driven by the decline of gaming revenues, expected to be about 30 per cent.

As at August, the decline stood at 36.5 per cent (MOP158.88 billion) but the agency is expecting a recovery during the second part of the year. Nonetheless there is a warning for investors that policies such as the ‘full smoking ban in casinos, restriction on Mainland visitor arrivals and a continued slowdown in the Chinese economy’ will slow down the recovery.

DSSOPT collect 1,700 opinions on new reclamation zones Residents have expressed their views on the effects of reclaimed Zone B on the landscape and Penha Hill, traffic, public housing, and the fourth connection between Macau and Taipa

T

he effects of reclaimed Zone B on the landscape, public equipment in Zone A, traffic, public housing, the fourth connection between Macau and Taipa, population density and environmental protection are some of the hot topics on which residents have expressed their opinions.

The Land, Public Works and Transport Bureau (DSSOPT) is now working on the final report of the public consultation that will be presented to the population. However, the Bureau press release did not reveal the date of the presentation of the final report.

The fact that the effects of the Zone B reclamation on the Macau landscape was one of the main topics

of the opinions submitted is not a surprise. In a preliminary review of the opinions on this public consultation with journalists, which took place on 14 August, the Bureau revealed that the height of the buildings to be constructed on reclaimed land Zone B, which may block views of Penha Hill, were dividing the opinions of residents.

At that time, of 117 opinions collected, 60 said that that it was important to control the height of buildings in Zone B to avoid blocking the views of Penha Hill and threatening the World Heritage City status of the territory, while 57 believe that the reclaimed land will not be properly utilised if building height is too low.

J.S.F.

Business Daily | 5

September 7, 2015

Macau

Macau plugs into electronic gaming While VIP and mass segments are declining, in August electronic gaming recorded the largest share to date, accounting for 5.7 per cent of overall gaming revenues João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he importance of the Electronic Gaming Market (EGM) to the total revenue of Macau casinos is increasing and, according to the latest research note from Union Gaming, set a record for this segment by contributing 5.7 per cent to total gross gaming revenues in August. Total gaming revenues in the territory stood at MOP18.623 billion in August versus MOP18.615 billion in the previous month.

‘Average daily table revenue (ADR) for the month totalled HK$550.4 million [MOP556.9 million] in August, down modestly from the HK$552.8 million [MOP569.4 million] in July.

The difference between August and July was EGM revenue, which totalled HK$1.02 billion [MOP1.05 billion] versus HK$940 million [MOP968.2 million] in July’, the report, signed by analysts Christopher Jones and John DeCree, reads.

The analysts go as far as to say that EGM contribution to total gaming revenues has hit a new high, which can also be explained in part by the declining revenues from table games in both VIP and mass segments.

Electronic Gaming Market Share August

July

SJM

8.40%

10.60%

Sands China

34.40%

30.80%

Galaxy

13.90%

14.90%

MPEL

21.20%

19.70%

MGM

11.10%

12.80%

Wynn

11.00%

11.20%

Total

100%

100%

Source: DICJ and Union Gaming Research

‘While still a very small piece of the puzzle, the EGM contribution is becoming more meaningful at the current lower levels of GGR [Gross Gaming Revenue].

In August, EGM contributed 5.7 per cent of total GGR, the highest contribution level from EGMs yet’.

According to the investment bank, EGM contributed 5.7 per cent, which means MOP1.05 billion of the total MOP18.615 billion in August, versus the 5.2 per cent of July, when EGM

contributed with MOP968.2 million out of MOP18.615 billion.

Sands China’s territory

Concerning the Electronic Gaming Market the gaming operator taking the largest share is Sands China with 34.4 per cent in August. The company was also leader of the overall market for the same month with a share of 25.2 per cent, according to Business Daily calculations.

Second place was occupied by Melco Crown Entertainment, which recorded a share of 21.2 per cent, while its overall share in terms of gaming revenue was 13.5 per cent.

The last place on the podium in terms of EGM was assumed by Galaxy, with 13.9 per cent, which also ranked third in overall revenues (21.2 per cent).

Still in terms of EGM, the remaining places were taken by MGM with 11.1 per cent (overall market 8.9 per cent), Wynn with 11 per cent (9.4 per cent) and SJM with 8.4 per cent (21.8 per cent).

6 | Business Daily

September 7, 2015

Macau

“Locals’ demand for organic, nutritious, and fairtrade products has yet to be fulfilled” There’s still a big demand for organic, fairtrade products as locals become increasingly aware of healthy living, says Calista Chan, owner of vegetarian takeaway and organic, fairtrade products retail shop Concept H. Ms. Chan tells Business Daily that her shop, mainly targeting locals, would like to bring the culture of healthy diet and living to all ordinary citizens Joanne Kuai

joannekuai@macaubusinessdaily.com

Why did you decide to create Concept H and open the shop?

One of the main reasons is that there are many organic shops in Macau that are opened or operated by foreigners but there aren’t really a lot of Cantonese speakers who are keen on promoting the concept of organic products, living healthily and green to the local community.

The majority of the population here in Macau are Chinese who wouldn’t necessarily frequent organic shops that require English language skills to be a customer.

That’s why we see a demand in the market. That’s when the idea came to me to open a shop with this concept.

On the other hand, food is very significant to our health. Many times we see urban people get ill because of the bad, oily food they eat. You cannot control the amount of monosodium glutamate (MSG) you consume when dining out. Unhealthy diet finally results in an imbalance of nutrition in one’s body. Personally, I used to have stomach problems but since I’ve adopted a healthy diet the problems have gone.

That’s why here at Concept H we want to offer the kind of food that’s different from common restaurants.

For example, the rice we have is prepared from vegetables of five different colours. The nutrition is more balanced and it’s of a lighter taste compared to other food outlets. We don’t add MSG at all and the seasonings are carefully selected for products, such as extra virgin olive oil and sea salt.

What do you mainly offer here in your shop?

We currently have two main businesses. One is vegetarian takeaway. We make quick, innovative vegetarian food such as hamburger and oatmeal. They can be freshly prepared in a relatively short time so that people can have them to take away quickly and eat back in the office.

The other one is retail - organic and fairtrade products. The products come from all over the world; the closest from Hong Kong and also Taiwan, Malaysia, Thailand, etc. Also, a lot of products come from Europe where they have a very high standard for organic food. And they are also certified non-genetically modified foods – non-GMO food.

How did you become aware of the concept of green, organic food and living style?

Actually, I was in very different fields such as tourism and the hotel industry. But I majored in environmental studies. That’s why I’ve always been interested in these aspects. In addition, I lived in Seattle for five years.

I was more exposed to this kind of culture and had more opportunities to learn about it.

I’ve been paying a lot of attention when preparing my own meals.

So, I’d like to combine the ideas of vegetarianism, organic and green and promote the whole concept so that more people are aware of it.

In addition, I wanted to engage in some areas that I’d learned about, related to the environment in general. We are also advocating being environmentally friendly here in the shop. For example, the boxes we use are made of recycled paper. There’s a discount

if you bring your own lunchbox to take the food away in. If you bring your own containers for the products we sell, there will be a 5 per cent discount. There are also other policies encouraging people not to use plastic bags, or disposable tableware, or not wasting stuff.

Why did you choose Rua de Henrique de Macedo for your shop?

First of all, it’s a very local neighbourhood. In addition, it’s very near the Central district, Tap Sac, Rua do Campo.

The ground floor has been up and running since our opening late last year. And we’ve recently taken the upper floor although we’re still formulating ideas about what to do with it. I’m planning to organise workshops,

There aren’t really a lot of Cantonese speakers who are keen on promoting the concept of organic products, living healthily and green to the local community. That’s why we see a demand in the market

Business Daily | 7

September 7, 2015

Macau Some other organic shops appear to be more ‘high-end’ but we really like to bring the idea of healthy diet and living to all ordinary residents

such as cooking classes, nutrition seminars and the promotion of fairtrade awareness.

Why do you want to bring fairtrade products to Macau?

Fairtrade is an organization that helps farmers in third-world countries. They teach them the techniques of agriculture and give them some standards so that the products are of higher quality.

Meanwhile, they have councils set up helping the regions manage their agriculture industry so that they won’t be exploited by traders and monopolies who play with the prices. A portion of the profits of fairtrade products goes directly back to the farmers.

That’s one of the reasons why these fine products are not necessarily of a higher price. For example, the fairtrade coffee we have here is no more expensive than elsewhere. Traditionally, cultivated coffee is very low cost but when selling through a big chain or monopolised brands, traders at each level would take part of the profits thus the goods for sale to regular customers ended up being very expensive.

What do you think of the awareness of healthy diets and living style among the local community?

In the beginning, our aim was to promote the idea to the local community.

We’ve come to understand that compared to the younger generation the elderly have more trouble accepting the concept.

They have the stereotype that organic, fairtrade and vegetarian products are more expensive.

They are more price sensitive.

Youngsters usually have a higher acceptance of the idea.

A lot of our customers are office ladies, people working nearby, or mothers. Sometimes they’re searching especially for organic food and when they hear about us they come to pay us a visit and shop here.

One thing I didn’t expect is that there is a diversity of nationalities living in this neighbourhood.

We have a lot of Filipino, Thai, Vietnamese customers, as well as Portuguese. They come here to shop for the products or take our meals.

How is the business going so far?

We haven’t taken back the initial investment yet. It’s actually not a lot. For example, the decoration of the shop is quite simple and we’ve made a lot of stuff ourselves such as assembling the shelves and painting the blackboard.

The main cost lies in the kitchen appliances, machines and initial product sourcing.

But since the opening of the shop at the end of last year we’ve managed to more or less break even on a monthly basis with the rent, inventory and operating costs, etc.

FAIRTRADE Fairtrade is an alternative approach to conventional trade based on a partnership between producers and traders, businesses and consumers. The international Fairtrade system - comprising Fairtrade International and its member organizations - represents the world’s largest and most recognized fair trade system.

Fairtrade is about better prices, decent working conditions and fair terms of trade for farmers and workers.

It’s about supporting the development of thriving farming and worker communities that have more control over their futures and protecting the environment in which they live and work.

The Mark means that the Fairtrade ingredients in the product have been

produced by small-scale farmer organisations or plantations that meet Fairtrade social, economic and environmental standards.

Key components of the international Fairtrade Standards: Fairtrade Minimum Price: a price floor to protect producers if market prices fall; Fairtrade Premium: additional funds for producers to invest in community or business development projects; Democratic decision-making at the producer level; Long-term, stable contracts with buyers; Protection of the environment; Adherence to core International Labour Organization conventions.

What kind of marketing approaches have you adopted, and what’s most effective in your opinion?

We haven’t used a lot of flyers since they’re not very environmentally friendly. The effectiveness of publicity is not very high using papers. We mainly use social media such as Facebook and WeChat to promote our brand. We’re preparing the launch of our own website as well.

You can send enquiries and place orders through these social media.

The video on our Facebook page is mainly to explain what we do so that it’s easier for people to understand.

The effect of social media is quite strong in Macau as it’s a relatively small place. When people hear about you it’s not that difficult to find you. Especially during holidays, we see a lot of new faces who are not regular customers that come especially because they’ve heard about us.

Nowadays, for food takeaway, there are usually regular customers who work nearby and come here for lunch. For retail, I’m very happy to see a lot of return customers that have recognized our products being of good quality and even introduce them to their friends.

For instance, we have quinoa here, and people that like it share the information by word-of-mouth and they will come here and buy.

What makes your shop special compared to other organic shops we see in Macau?

Many organic shops here in Macau import their products from Taiwan or a single origin.

However, since we also engage in promoting fairtrade products you can see that the goods we offer come from a variety of places.

They are more diverse. In addition, we pay extra attention to selecting these products. We wouldn’t choose products that contain preservatives or additives.

Moreover, some other organic shops appear to be more ‘highend’ but we really like to bring the idea of healthy diet and living to all ordinary residents.

Human resources are one of the main difficulties in running a business in Macau. Have you encountered such problems?

Actually, our recruitment requirement is quite simple, which is [employees] can work here stably for a long period. We thought about this and it came to our mind that some housewives are not employed but have lots of spare time. They are our ideal kind of employees. We also welcome university students who would like to gain some work experience.

Of course, when we expand our business in the future, it will require more specialised and experienced staff.

Have you sought government support, as you are a young entrepreneur start-up running a small and medium-sized business?

We’re considering it. When we expand and enlarge our scope of business, we may need support as it would require larger amounts of funding. But since in the beginning the initial investment was not that much we didn’t apply. We’ll consider it in the future.

What’s your idea of expanding?

We’d like to do more promotional events advocating the ideas of nutrition, fairtrade, organic, and concepts of this sort. We’d also like to take up the role of distributor if there’s an opportunity.

Have you considered partnering other organizations, like fitness centres, to supply nutritious meals or provide catering?

Concept H Located at 10A Rua de Henrique de Macedo, Macau, Concept H is a shop and brand that promotes a healthy, green living lifestyle. Healthy, Honest & Home is what ‘H’ stands for.

Concept H noticed that in recent years, health awareness, including having a healthy diet and exercising has been increasing in the local community but some are too busy to follow the formula while at the same time facing growing problems like pollution, super bacteria and viruses.

Concept H suggests simple and healthy diet suggestions that are easy to implement in our daily lives, thus improving the quality of health as a whole.

Apart from providing meals, Concept H also shares green concepts, ranging from the environmental benefits of vegetarian and vegan diets to the production and value of organic products. Concept H says it vows to contribute knowledge to the community because they believe living healthily and green is a form of culture.

Customers ask whether we could cater nutritious meals.

Some people see the meals we offer here and think that they’re for people who want to lose weight. But actually everyone needs to adopt a healthier and more balanced diet. That’s why we would like to team up with nutritionists and see if there are more opportunities to explore.

The most ideal scene is to partner up with schools and provide nutritious meals for children like lunch. It’s been long operating in Hong Kong but few schools provide food in Macau.

8 | Business Daily

September 7, 2015

Greater China

Overseas businesses boost Mainland banks

The foreign capital market poses new challenges to the banks’ overseas strategies, especi exchange rate, which affecting the liquidity of the yuan

I

nterim reports of 16 A-shares listed Chinese banks posted slight profit growth, thanks to their overseas business offsetting the impact of the slowing-domestic economy.

The net profits of China’s largest state-owned banks expanded less than 1 percent in the first half (H1) this year, except for Bank of China (BOC), which saw 1.69 percent expansion.

Overseas commercial businesses of China Communication Bank (CCB) netted the bank 2.12 billion yuan (US$332.92 million) in the JanuaryJune period, up 35.61 percent year on year.

The Agricultural Bank of China’s (ABC) overseas branches reported net profits of 1.81 billion yuan, up 22.8 percent from a year ago.

The H1 pre-tax profits of BOC hit US$4.65 billion and Industrial and Commercial Bank of China (ICBC) gained 13 percent to 1.71 billion yuan.

Yi Huiman, ICBC president, said the bank was increasing business abroad foreign to improve its global competitiveness.

The foreign capital market posed new challenges to the banks’ overseas strategies, especially the fluctuating exchange rate, which affected the liquidity of yuan.

“Offshore RMB liquidity will be improved as the currency goes global, and cross-border RMB businesses

Offshore RMB liquidity will be improved as the currency goes global, and cross-border RMB businesses remain heavyweight in the overseas sectors of Chinese-funded banks Mao Yumin, president, China Communication Bank (Asia subsidiary)

remains heavyweight in the overseas sectors of Chinese-funded banks,” said Mao Yumin, president of CCB (Asia), a CCB subsidiary.

BOC vice president Zhang Jinliang said banks should grasp the opportunity afforded by the recent changes to the RMB exchange rate, and establish offshore RMB businesses.

According to interim reports,

cross-border RMB settlement by CCB hit 834.15 billion yuan, and BOC reported 2.63 trillion yuan. The total cross-border RMB businesses of ICBC rose by 16.5 percent to 1.99 trillion yuan.

“Cross-border use of China’s yuan is an irresistible trend,” suggested Hu Zhanghong, executive president of CCB International, adding that the banking sector needed more overseas innovative businesses and better services for RMB capital abroad.

Meanwhile, central policies like the Shanghai-Hong Kong Stock Connect will provide facilitate more RMB business in Hong Kong.

“We take Hong Kong as a ‘bridgehead’ for our overseas businesses,” said Chen Siqing, BOC’s president. BOC (Hong Kong) has signed agreements or loan contracts with enterprises in free trade zones in Guangdong, Tianjin and Fujian, to launch direct yuan-denominated loans.

Domestic markets focused hedge funds lose top spot to Japan peers Funds’ failure to protect investors’ capital could see them face fresh pressure to justify their higher fees Nishant Kumar

in July, data from industry tracker Thomson Reuters Lipper showed.

“It will take time for investors’ and fund managers’ confidence in China to return to positive and stable sentiment, especially with some managers having had to suspend fund investments and redemptions,” said Miranda Ademaj, chief executive of hedge fund investor Skënderbeg Alternative.

Mounting losses

C

hina-focused hedge funds suffered record losses in the past three months and were overtaken by their Japan-themed peers as this year’s best performers, leaving them at risk of a surge in redemptions.

China hedge funds, which collectively manage US$21.5 billion in assets, posted a 17.9 percent loss for June-August, the worst ever for a threemonth period, amid a rout in Chinese stock markets, data from hedge fund tracker Eurekahedge shows.

Some managers were caught out by the extent of the selloff in China, re-entering the market prematurely.

“Many managers thought the collapse had nearly ended when it was just midway through and they increased exposure significantly then hammered,” said Theodore Qi Shou, chief investment officer of Hong Kong-based Skybound Capital, who invests in hedge funds.

“I certainly expect that many investors will be rethinking their China strategy,” said Peter Douglas, founder of Singapore-based hedge fund consultant GFIA. “Being the world’s second-largest economy and a geopolitical powerhouse is all well and good, but this is, in capital market terms, still a fairly early stage emerging market and I think a lot of investors had forgotten that.”

Losses over the past three months eroded funds’ gains earlier in the year. Chinese

funds were up only 3.6 percent year to date by the end of August, overtaken by Japan hedge funds which returned 6.3 percent in the first eight months of 2015, making them the bestperforming regional group globally, Eurekahedge said.

There were exceptions, such as the Ariose China Growth Fund and Tairen China Fund, both of which made money betting stocks would fall.

China’s stock markets are down nearly 40 percent since mid-June and as a result,

investor interest in China hedge funds has already started to fade.

Eurekahedge estimates net inflows fell to US$376 million in July, from more than US$800 million in May. Exact withdrawals from hedge funds in August will be known in the coming months as these funds allow only monthly or quarterly redemptions.

In the broader industry, investors withdrew a net US$2.8 billion from offshore China-focused equity mutual and exchange traded funds

Among funds hardest hit was the Quam China Focus hedge fund. It was up 60 percent by the end of May but is now nursing a 1.2 percent loss this year after sliding almost 21 percent last month through Aug. 28, data seen by Reuters showed.

Other losers in August included the US$2 billion Golden China Fund, which lost 8.9 percent, and the Zeal China Fund, which fell 4.6 percent, the data showed.

A bias towards small and mid-cap stocks, a failure to hedge and some forced unwinding of short bets on signals from local authorities contributed to the poor performance, said Shou at Skybound Capital.

Those who bet on prices falling early won out.

They included specialist short-sellers Ariose China Growth Fund and Tairen China Fund, which both gained 8 percent through July, letters to investors seen

by Reuters showed.

Reuters

Business Daily | 9

September 7, 2015

Greater China Beijing supports Putin's idea of developing Russia's Far East

s

ially the fluctuating

Putin's turn to Asia comes at a time when relations with the West are low Katya Golubkova

C

Many domestic enterprises with financing needs have filled for their IPOs in Hong Kong Exchanges as A shares IPOs had been suspended, and the market for yuan-denominated bonds has maintained momentum in Hong Kong since 2014 providing extra opportunities.

China’s top securities regulator said on July 10 that it will continue with its approval procedures for IPOs, although it confirmed that there will be no IPOs in the near term.

Xinhua

hinese Vice Premier Wang Yang said on Saturday that Russia’s push to revamp its run-down Far East region coincided with Beijing’s strategy, backing President Vladimir Putin’s drive for new sources of growth.

At the Eastern Economic Forum in the Pacific Port of Vladivostok on Friday, Putin promised favourable business conditions and state support to Asian and domestic investors willing to come to Russia’s most remote land.

“The Far East development strategy coincides with China’s strategy of north-east rebirth,” Wang said. “(The) Russia-Chinese partnership will definitely bring generous fruits.”

But for Putin’s campaign to attract Asian funds to Russia, timing may be his worst enemy: the slowdown in the Chinese economy poses risks.

Russia needs money badly sanctions and falling oil prices have hit the economy hard, with gross domestic product expected to fall 3.3 percent this year after growing 0.6 percent in 2014. China’s growth, meanwhile, is slowing and its stock market falling, forcing Beijing into

Global markets on tenterhooks awaiting data But many analysts expect China to avert a hard landing, even though economic growth will definitely slow this year

G

lobal stock markets will be on edge this week as China announces a slew of data investors will comb for clues about slowing growth in the world’s secondlargest economy.

The government is scheduled to

release monthly trade and inflation figures, as well as industrial output, fixed-asset investment and retail sales in the coming days.

Although analysts cautioned not to read too much into the monthly release of the Purchasing Managers’

Japanese bank Nomura is forecasting “weak” trade data for August with exports falling 7.0 percent year-on-year and imports dropping 10 percent

rate cuts and a yuan devaluation to buttress the economy.

Ian Ivory, a partner at Golstblat BLP, said the Chinese slowdown will hardest affect emerging markets which are providers of raw materials.

“Russia is another classic example that will feel the pain, and China will be a further negative drag on the Russian economy,” Ivory said in e-mailed comments.

Andrey Kuzyayev, a former head of overseas operations at Lukoil, Russia’s No.2 oil producer, played down the worries, saying the development of the Far East was not a temporary whim, but a long-term goal for the country.

“We need to make up time we have lost,” he said. “Cycles in any economy are the norm, not deviation. There will be a slowdown but obviously there will be acceleration later.”

Wang’s address to the forum on Saturday was short and he left immediately afterwards, in the middle of the session, followed by Chinese officials, including Wang Yilin, chairman of the board at China National Petroleum Corporation.

Reuters

Index (PMI), Chinese growth is clearly slowing and more weak data could be an excuse to sell.

“There is a risk (of overreaction) because investors’ confidence level is at a very fragile stage. Any data that’s not on the good side, investors will react more than they should,” Jackson Wong, associate director at Simsen International Financial Group in Hong Kong, told AFP. ANZ Banking Group forecasts China’s gross domestic product (GDP) growth will slump to an annual 6.4 percent in the third quarter, before rebounding to 6.8 percent in the October to December period -- but still below the government’s full-year goal of around 7.0 percent.

“Further aggressive monetary easing and proactive fiscal policy, along with financial liberalisation, are needed to maintain GDP growth” at the official target, it said in a research report.

Japanese bank Nomura is forecasting “weak” trade data for August with exports falling 7.0 percent year-on-year and imports dropping 10 percent. Consumer price inflation could tick up to 1.8 percent for the month on higher pork prices, though the threat of deflation remains, it said.

“China’s economy has certainly been weak this year and still faces further downward pressures, but we think fears of an economic hard landing due to stock market gyrations are exaggerated,” UBS economists Donna Kwok and Wang Tao said in a research report.

“While it is difficult to confirm whether GDP growth was really close to 7 percent as reported, it has certainly not grounded to a halt.

Neither is it in the process of falling apart as widely proclaimed by some China bears.”

AFP

Moody’s reviews CITIC Securities’ ratings Moody’s has placed CITIC Securities’ ratings on review for downgrade after executives from the largest brokerage in China were involved in a government probe into market manipulation. The rating agency said it will review CITIC Securities’s Baa1 foreign currency long-term issuer rating and P-2 foreign currency short-term issuer rating to decide whether it will downgrade them. The action came after four senior managers at CITIC Securities were put under “criminal compulsory measures” for suspected insider trading, as part of government efforts to contain repeated plunges in the stock market.

More cross-border payments billed in RMB The share of cross-border payments using Chinese currency across Asia rose from 24 percent to 33 in 12 months ending July this year, SWIFT said in its latest tracker of the Chinese yuan. The rising share of yuan-denominated transactions is fuelled by growing adoption of the Chinese currency across several Asian economies thanks to clearing centres established with China’s major trade partners in the region.

Payments between South Korea and China jumped 173 percent from a year ago, followed by a 45 percent increase from Taiwan and 19 percent from Singapore.

PBOC’s governor says stocks correction roughly in place The recent corrective process in China’s stock market has roughly been in place, and a more stable financial market is expected, central bank Governor Zhou Xiaochuan said during the G20 Finance Ministers and Central Bank Governors Meeting in Turkey. The assuring remarks, released by the People’s Bank of China on its website, follow concerns over China’s financial stability stoked by the recent round of adjustments. In the last trading day, the key Shanghai index settled at 3,160.17 points, declining nearly 40 percent from its June peak and wiping out most of this year’s gains.

Tibet’s GDP increased by 281 times in 50 years GDP soared from 327 million yuan in 1965 to 92.08 billion yuan (US$14.5 bln) in 2014, a 281-fold increase, a government white paper published yesterday said. It showed that under the system of regional ethnic autonomy, Tibet’s economic and social development has achieved leapfrog development by constantly reaching higher levels, according to the white paper titled “Successful Practice of Regional Ethnic Autonomy in Tibet.” Since 1994, the local GDP has grown at an annual rate of 12.4 percent on average, registering double-digit growth for 20 consecutive years.

Alibaba sees huge potential in LatAm China’s leading e-commerce company Alibaba sees “huge potential to develop e-commerce” in Latin America, Michael Lee, Alibaba’s director of global marketing and business development, told Xinhua in a recent interview here. Despite the advantages of “a large market opportunity with highly capable entrepreneurs in Latin America,” Lee also indicated the challenges of developing this market. Countries in the region show great varieties in terms of economy, Internet penetration and wide-ranging regulations governing e-commerce,” he said.

“This is why we feel we must study the region carefully on a case-by-case basis.”

10 | Business Daily

September 7, 2015

Greater China

Yuan’s depreciation and Fed’s hike monopolize G20 talks G20 officials welcomed strengthening activity in some economies but said that growth fell short of expectations because reforms were not being implemented quickly enough Randall Palmer and Nick Tattersall

F

inancial leaders from the world’s 20 biggest economies agreed on Saturday to step up reform efforts to boost disappointingly slow growth, saying reliance on ultralow interest rates would not be enough to accelerate economic expansion.

But they also said they were confident growth would pick up and, as a result, interest rates in “some advanced economies” -- code for the United States -- would have to rise.

“We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies,” the communique of the G20 finance ministers and central bankers said.

The wording defied pressure from emerging markets to brand an expected U.S. rate rise as a risk to growth.

“We heard different opinions on the possible Fed decision. Some think the Fed needs to make a decision sooner rather than later, while others think it should delay,” Turkish Deputy Prime Minister Cevdet Yilmaz told a news conference.

To limit the volatility of capital flows from emerging economies into dollars -- the reason for concern about a future Federal Reserve hike -- G20 financial leaders said they would avoid any surprise or excessive moves.

“We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimise negative spill overs, mitigate uncertainty and promote transparency,” they said.

Concern about the turbulence that might be caused by a possible Fed rate hike was amplified by investor

Monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth G20 finance ministers and central bankers communique

worries over an economic slowdown in China, the world’s second-biggest economy.

G20 officials said they discussed the devaluation by China of its yuan currency in August, a move some may see as a realignment to market rates rather than a move to help exports.

“Many supported the measures that China took... the ministers were very tolerant,” Russian deputy finance minister, Sergei Storchak told a news briefing.

The Chinese devaluation as well as the stock market plunge on growth jitters were all part of a difficult path to a more liberal economy, officials said.

“It’s an unbelievably difficult transformation and it’s not surprising that there are bumps, that it’s not a perfectly smooth process, and I think we had plenty of explanations, opportunity to ask questions, and it was a dialogue, and a very open one,” IMF head Christine Lagarde said after the meeting.

But some were less impressed.

“Their explanations weren’t very good. They should have been much clearer,” said Japanese Finance Minister Taro Aso about the Chinese.

U.S. Treasury Secretary Jack Lew noted that global economies were keen to see the world’s second-largest economy move to an exchange rate that reflected market fundamentals.

“When the world has called on China to move toward a more marketdetermined exchange rate, it’s in the context of doing so in an orderly way with clearly articulated policies that can be understood and that reinforce themselves in a positive way,” he said in a statement.

Low rates alone “won’t cut it”

Last year, G20 leaders agreed to boost global output over the next five years by 2 percent above what was already expected at the time through coordinated reforms and investment.

But they were behind schedule, the G20 communique indicated.

“We are making progress towards our commitments (but)... more effort is needed for implementation,” the statement said.

Lagarde was even more explicit, making clear governments had for too long relied on the supply of cheap cash from central banks that have been running ultra-loose monetary policy.

Participants pose for photographs during a family photo session at the G20 Joint Meeting of Finance and Labour Ministers in Ankara

“Monetary policy alone will not cut it. It is necessary. It is recommended from our perspective, particularly in Europe and in Japan still, but it will not cut it on its own,” she said.

“Clearly in the fiscal sphere as well as in the structural reforms sphere, more needs to be done, and it needs to accompany and eventually take the baton from the central bank governors.”

But, in what appeared to be a vicious circle, the reforms were made more difficult by the weaker global growth, Canadian Finance Minister Joe Oliver told reporters.

“We’re making progress, but the base that we hoped we would have, we haven’t arrived at, because the growth has been disappointing and the projections have been downgraded,” Oliver said, adding that one-third of the G20’s extra growth commitments have been implemented.

Boosting investment was key, the G20 financial leaders agreed.

Governments will prepare their final investment strategies by November, when G20 leaders are to meet to discuss them in Antalya in Turkey.

While not a topic of the agenda, officials informally discussed on the side-lines China’s ambitions for its yuan currency to become part of the special drawing rights (SDR), a virtual currency used only by the IMF. Washington’s Lew voiced an openness to that happening, as long as China carried out promised reforms.

“If they make the kinds of reforms that they have committed to and indicated they are prepared to make, there’s an openness to a positive outcome of the review.”

Reuters

Business Daily | 11

September 7, 2015

Asia

Thai constitution draft rejected by junta’s reform council Like the 2014 coup and another in 2006, the constitution was seen as an attempt to diminish the electoral dominance of the Shinawatra family Suttinee Yuvejwattana

T

hailand’s National Reform Council rejected a draft constitution in a vote in Bangkok yesterday, delaying the junta’s plan to hold an election as early as late 2016.

Less than half of the militaryappointed council supported the draft, Chairman Thienchay Kiranandana said after a televised vote. A new committee will be set up within a month and will have 180 days to write another draft.

The proposed charter attracted criticism from both sides of Thailand’s political divide. The Pheu Thai party, which was ousted by a military coup in May 2014, said it would take power away from voters, while the Democrat party said it risked deepening the nation’s problems and spurring more violence. Yesterday’s failed vote means the drafting process will restart from scratch and there will be no time frame for a return to democracy.

The draft was a revision of a version released in April, and could have stopped any single party from dominating parliament. It would also have introduced additional checks from unelected bodies on future governments and allow for an unelected prime minister to be chosen from outside parliament.

Like the 2014 coup and another in 2006, the constitution was seen as an attempt to diminish the

The Thai Parliament. Members of the National Reform Council (NRC) voting on the new draft constitution at Parliament House in Bangkok yesterday

electoral dominance of the Shinawatra family, whose allied parties have won every national election in the past 14 years.

The most contentious clause would have led to the creation of a “committee on reform and reconciliation” made up of the heads of the armed forces, police, the prime minister, heads of the senate and house and appointed experts. The committee for the first five years would have been allowed to take over executive and legislative powers if it deemed there was a political crisis. Critics say

it would have created a state within a state and legalize coups in a country that has seen 12 military takeovers since 1932.

Parties unite

The constitution drafters struggled to explain how the committee would play a supportive role, said Boonlert Kachayudhadej, a member of the National Reform Committee who voted against the charter. The largest political parties, which are usually at odds, were united in their opposition to the charter, he said.

Before yesterday’s vote, Prime Minister Prayuth ChanOcha said political reforms would continue in line with the interim charter, which was written by a committee he appointed after seizing power as head of the army and being installed as premier.

Prayuth will appoint 21 members of a new constitutional drafting committee in the next 30 days and they will have 180 days to complete a new charter draft before a national referendum is held, said Kamnoon Sidhisamarn, a spokesman for the Constitutional Drafting Committee.

“Now it’s the prime minister’s job to appoint 21 members of the new CDC and also a 200-member steering council for reform,” said Surachai Liengboonlertchai, the vice president of the National Legislative Assembly, the junta-appointed parliament. “We will move ahead in line with the interim constitution. We may take 180 days more than earlier scheduled, but we need to do it to get a constitutional draft that’s acceptable to everyone.’

Bloomberg News

Japan, Iran to start investment talks next week There have been no new Japanese investments in Iran since 1993

J

apan and Iran will start talks next week to negotiate a bilateral investment treaty, as Washington moves to ease sanctions against Tehran and Tokyo looks to step up its interests in the resource rich nation.

Japanese and Iranian officials will meet in Tehran from today through to Wednesday to secure a deal, Chief Cabinet Secretary Yoshihide Suga said Friday, as other energy consumers also rush to explore Tehran’s commercial potential.

“The aim of these negotiations is to protect the investment activities of Japanese companies,” Suga told reporters at a regular briefing.

When asked how resource-poor Japan would tap Iran’s energy potential, Suga said: “Keeping those various factors in mind, Japan will take the necessary steps and not be later than other nations.”

The move comes as Washington secures support in Congress for its nuclear deal with Iran, designed to limit its nuclear programme in exchange for the easing of US-led international sanctions.

The historic deal was clinched in July after two years of negotiations to address Western concerns that Iran was developing a nuclear bomb -- a claim Iran denies.

Japan hopes the lifting of sanctions will lead to increased auto exports to Iran and more Iranian energy imports, although Tokyo officials are bracing themselves for fierce international competition for market access, local media reported.

Tokyo, which is heavily dependent on Middle Eastern oil, has maintained friendly relations with Tehran through its years of ostracism, keeping up diplomatic dialogue that many developed countries cut off decades ago.

But Tokyo has reduced its Iranian oil imports in recent years under pressure from fellow developed powers backing the US-led sanction regime.

There have also been no new Japanese investments in Iran since 1993, according to official data. There were approximately 30 Japanese firms operating in the country as of July last year, data showed.

Iran has meanwhile praised Japan’s nuclear technology, even after the 2011 Fukushima crisis, and said more investment in Iran’s atomic sector could boost bilateral relations.

Japanese Foreign Minister Fumio Kishida is also expected to visit Iran as early as next month to set up a bilateral committee to discuss energy and infrastructure development and other economic issues, Kyodo News said.

AFP

Chief Cabinet Secretary Yoshihide Suga

12 | Business Daily

September 7, 2015

Asia

IMF says Japan doesn’t need more easing if inflation stays anchored There is a good chance the IMF will cut Japan’s economic growth forecasts for 2015 and 2016 in its next World Economic Outlook report Leika Kihara

T

he Bank of Japan does not need to expand monetary policy in October even if it cuts its growth and price forecasts, as long as inflation expectations are well anchored, the IMF’s mission chief for Japan said on Friday.

Kalpana Kochhar, who is also deputy director of the International Monetary Fund’s Asia and Pacific Department, said there was scope for China to expand the yuan’s trading band further.

“What Chinese authorities are doing is what the IMF has recommended for a long time, which is to allow markets to determine the exchange rate,” she said on Beijing’s decision last month to devalue its currency.

“One benefit is that loosening the (yuan’s) link to the dollar gives Chinese authorities some independence to conduct their own monetary policy,” she told Reuters.

Kochhar said there was a good chance the IMF would cut Japan’s economic growth forecasts for 2015 and 2016 in its next World Economic Outlook report as China’s slowdown

KEY POINTS IMF may cut Japan GDP f’casts in next report – Kochhar China’s yuan band has scope to widen further BOJ should focus on inflation expectations, not growth Does not see China yuan devaluation triggering currency war BOJ likely to revise down view on overseas growth-sources

and sluggish Asian demand weigh on exports.

“So far the recovery in Japan this year has been frankly disappointing and bumpy,” she said, adding that wage gains have been particularly weak despite a tightening labour market.

No ‘currency war’

Japan’s economy contracted in AprilJune due to weak consumption and exports and analysts expect only a modest rebound in the current quarter, keeping the BOJ under pressure to further ease monetary policy.

The BOJ is likely to offer a bleaker view on overseas economies next week and may revise down its assessment on exports, sources say.

Some investors are betting the BOJ will ease at the end of October, when it is expected to lower its upbeat economic and price forecasts in a semi-annual review of its long-term projections.

But Kochhar said the BOJ does not need to respond to temporary weakness in the economy and instead

should focus on inflation expectations - which have risen moderately – in deciding whether to deploy additional stimulus.

“The BOJ basically looks at inflation expectations and the output gap. Even if we were to lower our forecast, we see the output gap closing,” she said.

“As long as there’s not a very sharp decline in either, one could say (the BOJ is) on the right path.”

Kochhar stressed that the BOJ’s monetary efforts must be accompanied by government efforts to raise wages and deregulate the economy, in order for a sustained recovery.

She shrugged off the view China’s devaluation could unleash a rush among central banks to depreciate their currencies with monetary easing, including by the BOJ. “So far, the BOJ has responded appropriately (to market volatility).

When there is market volatility ... the best response is to let the exchange rate move,” she said.

“Exchange rate is not a target and has not been a target for the BOJ.”

Sri Lanka eases grip on rupee Central Bank Governor Arjuna Mahendran said August 17 that the country needs to draw a fine line between maintaining competitiveness of the rupee to boost exports while protecting local investments of citizens living abroad Anusha Ondaatjie

S

ri Lanka loosened the grip on its currency, becoming the latest country to signal it was giving way to the stress that’s engulfing developing economies as the U.S. moves closer to raising interest rates.

The Colombo-based central bank will no longer give a daily intervention rate from Friday “to let the market play a greater role in determining the exchange rate,” Deputy Governor Nandalal Weerasinghe said in a telephone interview. The

rupee fell the most in more than three years.

Policy makers from Vietnam to Kazakhstan followed China in devaluing currencies last month in bids to shore up their economies as tumbling commodity prices curb revenue and prospects for higher U.S. rates damp demand for riskier assets.

Sri Lanka’s decision to ease controls on the exchange rate follows a fourth straight month of declines in exports.

The move showed Sri Lanka “was not blind to outside

forces,” Finance Minister Ravi Karunanayake said on Friday.

Since China’s surprise devaluation of the yuan on August 11, currencies from South Africa’s rand to Mexico’s peso tumbled to all-time lows and emerging-market stocks slumped into bear markets. The currency of India, Sri Lanka’s biggest trading partner, has lost 3.9 percent in the period.

Still managed

The island nation’s rupee weakened 2.1 percent at 137.75 against the dollar and is down

2.9 percent in the past month.

The monetary authority will still intervene when necessary, Weerasinghe said. The central bank said yesterday it had received funds from a US$1.1 billion swap with the Reserve Bank of India that would help bolster reserves.

Central Bank Governor Arjuna Mahendran said August 17 that the country needs to draw a fine line between maintaining competitiveness of the rupee to boost exports while protecting local investments of citizens living abroad.

Reuters

Exports in June fell 4.2 percent from the previous year, the fourth straight monthly decline. Consumer prices dropped 0.2 percent in August from a year earlier, matching the previous month’s move, which was the steepest in data going back to 1996.

Stocks and currencies from developing countries fell on Friday after U.S. jobs report showed weakerthan-forecast growth in hiring balanced by the lowest unemployment rate since April 2008 and an increase in average hourly earnings.

Investors raised bets on a September lift-off to 36 percent from 26 percent before the U.S. data, while that’s still less than the 48 percent odds predicted before China devalued the yuan last month.

Sri Lanka’s central bank said it had received funds from a US$1.1 billion swap with the Reserve Bank of India that would help bolster reserves.

Bloomberg News

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

Business Daily | 13

September 7, 2015

Asia Indian government approves pricey plan to equalise veterans’ pensions

Vietnam says oil refinery not to lower fuel prices The operations of Vietnam;s only refinery Dung Quat, and other facilities to be built in the future, will not help reduce the retail prices of petroleum products domestically, local online newspaper Tuoi Tre (Youth) News reported yesterday.

“We have never said domestic gasoline prices will go down thanks to Dung Quat Oil Refinery. All oil refineries in the world are not built to reduce fuel prices,” said Nguyen Hoai Giang, chairman of the board of directors of state-owned Binh Son Refining and Petrochemical Joint stock Company, which runs the refinery.

Veterans in India have been fighting for reforms to their pension packages for years Nigam Prusty

T

he Indian government approved a long-awaited programme to equalise pension payments for retired military personnel despite it being a “huge fiscal burden,” defence minister Manohar Parrikar said on Saturday.

The programme, known as “One Rank One Pension”, or OROP, will ensure uniform pension payments to ex-servicemen who served at the same rank and for the same amount of time, regardless of the year they retired, among other measures.

Veterans in India have been fighting for reforms to their pension packages for years.

“It is a matter of deep anguish that the various governments remained ambivalent on the issue of OROP,” Parrikar said in a statement at a press conference. “Prime Minister Shri (Narendra) Modi has fulfilled his commitment and approved OROP for Armed Forces personnel.”

Approving the scheme could be a political boon to Modi, whose ruling Bharatiya Janata Party (BJP) enjoys broad support in the military.

But the programme, which the government estimates will cost the exchequer between 80 and 100 billion rupees (US$1.2-US$1.5 billion) and increase over time, may pose another challenge to Modi’s economic targets, including reducing the fiscal deficit to 3.9 percent of gross domestic product by the end of March.

Last month, Modi’s government abandoned a pro-industry land reform which the opposition had said would hurt India’s farmers.

OROP plans to reconcile the rate of payments of current and past pensioners every five years, disappointing some ex-servicemen who wanted the review to happen more frequently.

A major veterans’ group that has been protesting about the issue also objected to the exclusion from the scheme of personnel who voluntarily retired.

“This is not acceptable to us,” said retired major general Satbir Singh, a spokesman for the Indian Ex Servicemen Movement.

US$1.2-US$1.5 billion the government estimates will cost the exchequer

On the campaign trail in 2014, Modi slammed the then-ruling Congress Party for delaying OROP’s implementation, according to media reports at the time.

But critics say the current government has also dragged its feet addressing veterans’ concerns. “(The government) has treated the ex-servicemen in the most cavalier manner,” Congress leader Manish Tewari told television station NDTV on Saturday.

Reuters

Myanmar to upgrade Yangon rail line Railway authorities have invited local and foreign firms to bid for a project to develop another township station to the west of Yangon

M

yanmar is working for upgrading Yangon’s circular rail line by introducing a foreign loan of US$207 million for the project as part of its Yangon Central Railway Station expansion project.

Provided by the Japan International Cooperation Agency (JICA), the loan is to purchase trains which will enable to offer faster and more regular services of the Yangon circular rail line.

The project will halve the travel time when the upgrade is completed in 2021.

With about 130,000 passengers depending on rail transport in Yangon daily, the city circular trains are running about 200 rounds a day.

The rail transport authorities has also been planning privatization of the Yangon city circular train as part of its efforts to effectively run the rail transport business under the build, operate and transfer (BOT) system.

Tender process for Myanmar’s Yangon Central Railway Station expansion project has been in progress with three developers having submitted the tender proposal to the Myanmar railways authorities to compete for the station’s comprehensive development project.

Yangon railway station

The three unidentified developers are from nine domestic and foreign companies selected for implementing the project.

The Yangon Central Railway Station comprehensive development project, which covers 25.11 hectares of land, called for an investment of US$2 billion to US$2.5 billion.

The project, which includes designand-build work and is prioritized as in the form of joint venture with

Japan may exempt food, drinks from sales tax hike Japan may exempt some food and beverages from a planned increase in the sales tax, government sources said. Prime Minister Shinzo Abe’s government plans to raise the nationwide sales tax to 10 percent in 2017 from 8 percent currently to pay for rising healthcare costs, but many politicians worry about the impact on low-income households. The government will use a national identity number system it plans to introduce for tax and social security to administer tax rebates on purchases of some food and drinks, the sources said.

Cambodia’s rice exports up The country exported 342,136 tons of milled rice in the first eight months of 2015, an increase of 46 percent from the 233,859 tons over the same period of last year, according to the latest report on Saturday. Three top buyers of Cambodian rice are China, France and Poland, said the report released by the Secretariat of One Window Service for Rice Export. From January to August this year, the country had sold 74,949 tons of rice to China, 45,493 tons to France, and 38,370 tons to Poland, it said.

Philippines inflation at record low

private enterprises, is expected to start later this year.

According to the Myanmar Railways, the resettlement action plan and the conceptual plan have already been drawn and the first phase of the project deals with resettlement of railways staff families living in the railways quarters and relocation of factories of the railways in the project area.

Un d er a p l a n o f m a s s i v e transformation of the railway station into one of the city’s most sparkling new projects, the Myanmar authorities were inviting ideas and expression of interest from local and international investors to undertake design-andbuild work for the comprehensive development of the 130-year-old railway station in accordance with international rules and regulations.

In wake of paying around 40-45 billion Kyats (US$31.5 to US$35.4 million) annually in subsidy to the Myanmar Railways, the government called for developing the colonialera-left station as a rail concerned business including high-rise buildings and hotels in accordance with international rules and regulations to enable reduction of the annual subsidy.

Xinhua

Inflation rate hit an all-time low of 0.6 percent in August with the decline in the prices of food, energy, and oil rates, the Philippine Statistics Authority (PSA) said on Friday. The August inflation was lower than the 0.8 percent recorded in July and 4.9 percent in August last year, bringing the year-to- date level to 1.7 percent, below the target range of 2.0-4.0 percent set by the government for this year. By commodity groups, the housing, water, electricity, gas and other fuels index declined by 1.7 percent and transport index declined by 0.6 percent in August.

ADB projects Nepal’s growth rate at 5.5 percent Nepal’s economy may grow by 5.5 percent in the current fiscal year, which is 0.5 percent lower than the government’s projection, according to the Asian Development Bank (ADB). Nepal’s government has a target of 6 percent growth in the budget for the current fiscal year.

According to ADB’s Macroeconomic Update released on Thursday, the growth rate is possible on the back of agricultural growth, pace of reconstruction work and revival of tourism. Beside agriculture, the pace of reconstruction works and tourism revival followed by the April 25 massive earthquake are the major elements for economic growth.

14 | Business Daily

September 7, 2015

International Maduro pushes for OPEC heads of state summit Venezuelan President Nicolas Maduro has suggested to the Emir of Qatar a summit for heads of state of OPEC countries to defend oil prices, an idea he said the leader of the Arab Gulf state “liked”. “I made the proposal, he liked the idea, he said he was in agreement with the idea, and as president of our organization for summits he will make the necessary consultations,” Maduro said in an interview with television channel Telesur on Saturday. The Venezuelan leader also suggested non-OPEC countries, which include Russia, take part.

Ferrari CEO will not leave post before IPO Ferrari Chief Executive Amedeo Felisa will not leave his post before the luxury sports car maker’s initial public offering (IPO) planned for later this year, the boss of parent company Fiat Chrysler Automobiles (FCA) said on Saturday.

Felisa, who is nearly 70, is planning to retire soon and the listing would be a good time to do so, but no final decision has been made, a source familiar with the matter told Reuters last week.

Sources have said FCA Chief Executive Sergio Marchionne is preparing to step into the chief executive role.

U.S. unemployment rate drops The U.S. total nonfarm payroll employment increased by 173,000 in August, and the unemployment rate went down to 5.1 percent, remaining at a level which Federal Reserve considers to be full employment, data from the Labour Department showed Friday. The payroll gains in August, while less than expected, followed advances in July and June that were stronger than previously reported.

The Labour Department revised July’s job gains up to 245,000 from its previous estimate of 215,000, and June’s data were revised up to 245,000 from 231,000.

Lagarde says Fed must be sure before moving Fed Vice Chairman Stanley Fischer gave a mixed review of the latest U.S. jobs report in a briefing to G-20 officials Greg Quinn and Alessandro Speciale

T

he U.S. Federal Reserve must be certain that the job market and inflation are strong enough to justify raising interest rates, the head of the International Monetary Fund said after a Group of 20 meeting focused on the pressure the increase may place on the global economy.

“The Fed has not raised interest rates in such a long time, that it should really do it for good, not give it a try and then have to come back,” IMF Managing Director Christine Lagarde (pictured) said at a press conference Saturday in Ankara. “The IMF thinks that it is better to make sure that data are absolutely confirmed, that there is no uncertainty, neither on the front of

The IMF thinks that it is better to make sure that data are absolutely confirmed, that there is no uncertainty, neither on the front of price stability nor on the employment and unemployment front

price stability nor on the employment and unemployment front, before it actually makes that move.”

Traders are torn on when the Fed will raise interest rates, with Bill Gross of Janus Capital Management seeing an even chance that the Fed could raise or hold rates when it meets September 16-17. Investors scaled back expectations for the U.S.’s first rate increase since 2006 after a selloff in China became a global stock-market rout. The Fed’s key interest rate has been frozen since 2008.

Fed officials explained their thinking on a possible rate increase during the G-20 meeting, Spanish Economy Minister Luis de Guindos said. “They made a series of comments about monetary policy with some factors that favour a rate increase and others that might push it back,” he said.

Fed Vice Chairman Stanley Fischer gave a mixed review of the latest U.S. jobs report in a briefing to G-20 officials, Luxembourg Finance Minister Pierre Gramegna said in a Bloomberg Television interview.

“He told us that the numbers

in the U.S. are excellent because unemployment went down from 5.3 to 5.1 percent, which is an excellent number, but then he immediately cautioned that the number of 173,000 additional jobs was an August figure and that the August figure wasn’t very reliable,” Gramegna said.

Emerging-market officials at the G-20 were divided on whether it’s better for the Fed to tighten its policy this month or later on, saying that there were “both sentiments in the room,” said the Luxembourg finance chief.

The gain in payrolls, while less than forecast, followed advances in July and June that were stronger than previously reported, the Labor Department said Friday. The jobless rate was the lowest since April 2008.

The strength of the economy and the jobs market though has yet to lift inflation up to the Fed’s 2 percent target. Prices in the U.S. rose 0.3 percent in the 12 months through July, measured by the Fed’s preferred gauge. Inflation has lingered below the Fed’s target for more than three years.

Bloomberg News

Christine Lagarde, IMF Managing Director

Gazprom seals big gas deals in Europe Russia’s Gazprom has bolstered its industrial presence in the heart of Europe with two major gas deals that were announced on Friday despite on-going tensions with Moscow over the conflict in eastern Ukraine. The first of the deals, an asset swap with German chemicals group BASF that gives Russia greater access to gas trading and storage in Germany, was a surprise as the companies had abandoned it only nine months ago, citing a “difficult political environment”. The second deal would double the capacity of the Nord Stream pipeline to deliver gas to Europe through the Baltic Sea, bypassing Ukraine.

Debt issuance to be the first step for a euro zone budget

The idea has met opposition in Germany Majority of UK voters with Vice Chancellor Sigmar Gabriel favour leaving EU asking for more details A majority of Britons now favour leaving the European Union amid concerns over immigration, an opinion poll showed on Saturday, signalling a shift in views ahead of a referendum on Britain’s membership of the bloc. The survey, by polling firm Survation for the Mail yesterday’s newspaper, found 51 percent of respondents wanted to leave the EU and 49 percent wanted to remain, excluding undecided voters. While the results are within the poll’s margin of error and represent a statistical tie, the previous comparable poll, had found support for staying in the EU at 54 percent.

A

common euro zone budget should initially be funded through joint debt issuance and taxpayers’ money should only be used at a later stage, French Economy Minister Emmanuel Macron said on Saturday.

France wants the euro zone to have its own joint budget to carry out investments.

Macron, in an interview with a German newspaper this week, proposed giving a new commissioner

powers to coordinate economic policy across the single currency bloc and preside over fiscal transfers between its 19 members.

The idea has met opposition in Germany with Vice Chancellor Sigmar Gabriel asking for more details and saying he was strictly against a “euro tax, or a value-added tax” to fund a common budget.

Germany has also traditionally opposed the idea of shared debt issuance, fearing it would encourage

fiscal profligacy in weaker euro zone members.

Macron said financing the shared budget through taxes from the onset would slow down the project.

“For me it should be the first step of a euro zone budget: raising money with a joint liability,” he told a press conference at the Ambrosetti business forum in northern Italy.

He expressed confidence a mechanism could be agreed to “raise money together for new proposals, new projects and dealing with euro zone issues.”

“As a second stage we have to raise taxes or share taxes. I think it more efficient not to make it a precondition for the euro zone budget otherwise it will take a lot of time,” he said.

The euro zone debt crisis, which put the currency union at risk, has ignited a debate over further integration, but the idea of fiscal transfers from richer to poorer countries is anathema in Germany, the bloc’s powerhouse.

Macron said a shared budget was essential: “You need somebody in charge of allocating the money where it’s relevant for the common interest.”

Reuters

Business Daily | 15

September 7, 2015

Opinion Business

wires

A false alarm about China

Leading reports from Asia’s best business newspapers Shang-Jin Wei

Chief Economist at the Asian Development Bank and the head of its Economic Research and Regional Cooperation Department

BANGKOK POST New measures to help struggling small and mediumsized enterprises (SMEs) are yet to be concluded, but a Government House source says they are likely to include tax breaks and 100 billion baht in soft loans at 4% interest. The state-owned Government Savings Bank (GSB) will lend 100 billion baht at a 2% rate to commercial banks, which will then relend the money to SMEs at no more than 4%. The Finance Ministry has already asked the Thai Bankers’ Association to participate in the SME softloan scheme.

TAIPEI TIMES The tourism industry has taken a hit, with government figures showing a decline in businessoriented visitors to the nation.

According to the Tourism Bureau, the ratio of foreign individuals on business visits was more than 22 percent in 2008, but the figure has declined to 7.77 percent last year, and was 7.67 percent, or 382,300 people, in the first half. Shanghai’s Consumer Electronics Association Asia in May, one week prior to the Computex Taipei exhibition, caused a significant decrease in visitors to the Taipei event, a hotel manager said on condition of anonymity.

THE KOREA HERALD South Korea’s automobile exports shrank for the second month in a row in August due to unfavourable exchange rates and economic slowdown in emerging markets, the government said yesterday. In August, outbound shipments of automobiles contracted 0.7 percent on-year to 181,915 units, with the total value of cars exported dropping 9.1 percent to US$2.7 billion, the Ministry of Trade, Industry and Energy said. Compared to July, when carmakers such as Hyundai Motor Co., Kia Motors Corp. and GM Korea Co. exported 258,781 units, last month’s total plunged 29.6 percent.

PHILSTAR ING Bank is taking a second look at its P46.5 to US$1 year-end forecast amid the continued weakening of regional currencies against the US dollar. Joey Cuyegkeng, senior economist at ING Bank Manila, said the local currency is likely to trade within 46.50 to 47 per greenback in the near term.

“External developments and local political developments may keep the market testing the upper end of the range especially if US labor data surprises on the upside,” Cuyegkeng said. Political uncertainties are looming and could be a source of the Philippine peso weakness, he also said.

The shift to a services structured society can be noticed with just a glimpse of the increasing retail sales figures

T

o hear some pundits tell it, China’s economic miracle – one that lifted 300 million people out of poverty and shifted the world’s geopolitical centre of gravity – is coming to a tumultuous end. The volatile stock market and the renminbi’s “surprise” depreciation are signs of imminent economic collapse, according to this view, as risky investments and high levels of government debt put the brakes on decades of turbo-charged output growth.

Fortunately, there is little reason to believe such dire predictions, or that the market gyrations that have been driving recent headlines represent anything more than shortterm volatility. After all, equityprice movements are a poor predictor of the real economy’s performance.

Indeed, when Chinese GDP was growing strongly during 2010-2013, stock prices were falling. More recently, when stock prices began soaring during the first half of 2015, the economy’s slowdown had already begun. As the American economist Paul Samuelson famously quipped, “The stock market has called nine of the last five recessions.”

China’s growth has slowed largely as a result of changes in its fundamentals: less favourable demographics, a shift in emphasis from exports and public investment to the service sector and domestic consumption, and lower demand from advanced economies. But China’s past success also contributed to this slowdown, in the form of higher wages, which narrow the scope for rapid growth based on low-cost labour and technological catch-up.

Additional signs of weakness, including soft data on exports

and investment, emerged in the first half of 2015. But other important indicators – like retail sales and housing – show upticks. And, perhaps most important, the country’s labour market remains healthy, creating some 7.2 million new urban jobs – many of them in services – in the first half of 2015. Meanwhile, wage growth remains strong and uninterrupted. China’s growth rate may be lower than 7% this year, but I do not believe that it will end up very far from the government’s target of “about 7%.”

The volatility in equity prices in recent months has more to do with the peculiarities of China’s stock markets than with the country’s underlying economic fundamentals. In more developed economies, such as the United States and Europe, many institutional investors – who tend to be focused on long-term fundamentals – help stabilize stock markets. By contrast, the Chinese markets are dominated by retail investors, who are more likely to pursue short-term gains and engage in momentum trading, thereby exacerbating volatility and creating a greater disconnect between equity prices and real economic growth.

Moreover, the firms listed on China’s stock exchanges are not representative of the country’s companies. Majority state-owned firms account for two-thirds of the market value of the country’s exchanges, for example, though they are responsible for no more than one-third of Chinese GDP and an even smaller share of employment.

The rise and fall of the Chinese stock market should also be understood in the context of

The rise and fall of the Chinese stock market should also be understood in the context of Chinese households’ limited options for storing savings

Chinese households’ limited options for storing savings. The run-up in prices took place at a time when deposit interest rates were officially capped.

When the alternatives are few and provide only low returns, the equity market looks more attractive, especially if – as was the case – the country’s major newspapers are running bullish editorials about stock prices.

More recent developments may have contributed to the downward pressure on prices, including discussion about abolishing interest-rate ceilings on deposits (the cap on term deposits of one year or more was removed on August 25).

The greater ease with which wealthy households can move

savings out of the country, along with an anticipated increase in interest rates in the United States, was likely another contributing factor.

Furthermore, as Harvard’s Jeffrey Frankel has pointed out, regulators increased margin requirements several times this year, making it harder to buy stocks with borrowed money.

And, as with all stock markets, shifts in sentiment that are not connected to fundamentals can also drive volatility.

Whether China’s economy can continue to grow rapidly will depend far more on its ability to reform than on how its stock markets perform. If China is to thrive in the long term, raising its aggregate productivity is key.

This means that it will need to overhaul its state-owned firms and the financial sector so that resources can flow to the most productive investment projects.

Lowering the tax burden on firms – including the payroll tax – would also be useful.

Reforms that increase the flexibility of the labour market are also in order. While China used to have a relatively flexible labour market in the manufacturing sector, firms’ reallocation of workers based on market needs has become more difficult in recent years.

Greater flexibility might not stimulate short-term growth, but it would improve resilience to future negative shocks, whether they originate at home or abroad.

As long as China continues to pursue pro-market reforms, it will remain the largest singlecountry contributor to global GDP growth over the medium term – unperturbed by stockmarket volatility. If reforms stall, falling stock prices are likely to be the least of China’s worries.

Project Syndicate

16 | Business Daily

September 7, 2015

Closing Corruption behind high-end mooncakes ahead of festivals

Bangladeshi court lifts ban on movie of deadly building collapse

With Mid-Autumn Festival just around the corner, a senior disciplinary official has issued a stern warning against corruption and extravagance.

While lauding the Communist Party of China’s (CPC) fight against undesirable work styles, Song Dajun, deputy chief of the Party work style supervision office under the CPC Central Commission for Discipline Inspection (CCDI) said: “the root is still there even though the tree has fallen.” It is customary to hold banquets and give gifts, usually the mooncakes, during the festival, which falls on September 27 this year. The CCDI is concerned that the festivals will be used as a cover for subtle bribery.

Bangladesh’s Supreme Court yesterday lifted a ban on the screening of a movie on the Rana Plaza factory building collapse, which left more than 1,130 people, mostly garment workers, dead. The court judges led

by Chief Justice SK Sinha passed the order in response to a petition filed by producer of the movie Shamima Akhter challenging a High Court order. The High Court banned for six months the exhibition and screening of Rana Plaza following a petition filed by Sirajul Islam Rony, president of Bangladesh National Garments Workers Employees League. In March the High Court instructed the film makers to delete scenes portraying horrors, cruelty and violence associated with the tragedy.

German industries make economic case to welcome refugees Companies want a guarantee that a trainee they take on will not be deported Mathilde Richter

A

s thousands of refugees arrive every day in Germany, calls are growing louder from business leaders in Europe’s biggest economy to offer them jobs.

“If we can integrate them quickly into the jobs market, we’ll be helping the refugees, but also helping ourselves as well,” the head of the powerful BDI industry federation, Ulrich Grillo, said this week.

For the countless Syrians,

Afghans and Eritreans fleeing war and oppression in their home countries and seeking refuge in Europe, Germany is their chief destination, as it is for Kosovars and Albanians.

Europe’s top economy expects to receive 800,000 asylum seekers this year -- a record figure.

Beyond the humanitarian imperative to offer protection, businesses are increasingly seeing an economic case to

Indonesia expects bids for rail project from China and Japan

B

keep the asylum seekers, particularly since Germany’s rapidly ageing population and low birth rate are slowly depleting its pool of skilled labour.

At 6.4 percent, unemployment in Germany is currently at its lowest level since unification, but the employers’ federation BDA estimates the country is still short of 140,000 engineers, programmers and technicians.

The healthcare and leisure sectors are also wringing their hands for qualified workers.

In all, some 40,000 training places across all sectors are expected to remain unfilled this year.

The Prognos think-tank forecasts the shortage of qualified workers will rise to 1.8 million in 2020, and as many as 3.9 million by 2040, if nothing is done.

Well-qualified

The influx of migrants could therefore be the answer as many of them are young

and have “really good qualifications,” said Grillo at BDI. Already, at a local level, more and more businesses are opening their doors to the new arrivals, encouraged by new initiatives.

In the Augsburg region of Bavaria in south Germany, for example, the HWK local Chamber of Crafts has appointed an “intercultural advisor” to deal specifically with the issue. And the advisor has succeeded in placing 63 young refugees in a training scheme since the start of the year.

In order to copy and amplify the success of such schemes, the head of the BDA employers’ federation, Ingo Kramer, has called for “efforts at all levels”.

His call was particularly aimed at Germany’s leaders, said Alexander Wilhelm, who is in charge of labour market policy at the BDA. “It’s up to the government to act” by easing the rules

on access to jobs, Wilhelm told AFP. Companies want a guarantee that a trainee they take on will not be deported from one day to the next.

Businesses must also currently prove that there is no German candidate to fill a position before they hire a refugee or asylum-seeker, a rule which the Labour Agency would like to see abolished as soon as possible.

On businesses’ wish list of things are the speeding up procedures for recognising professional and educational qualifications, assessing arrivals’ qualifications upon registration and putting more money on the table to help them learn German.

This is because “to enter the labour market or secure an apprenticeship, there is generally a lack of German language skills,” said the head of the Chamber of Crafts, Holger Schwannecke.

AFP

China to integrate customs special supervision areas

Saudi to cut spending, issue more bonds to shore up budget

C

S

ids were expected from China and Japan for a medium-speed rail project in Indonesia that will be 40 percent cheaper than the US$6 billion bullet train project that Jakarta scrapped last week, an Indonesian minister said in an interview yesterday.

China and Japan were disappointed by the cancellation of the high-speed rail project, announced by the government on Friday, but could renew rivalries to build the medium-speed rail link between the capital Jakarta and the third-largest city, Bandung.

“Both China and Japan are still interested in the medium-speed train,” Coordinating Minister for Maritime Affairs, Rizal Ramli, said.

“Indonesia is just the first battlefield between China and Japan,” Ramli said, adding, “there are other countries that would be interested in similar projects so the stakes are high.” A Japanese embassy official in Jakarta said the Japanese government would not be bidding, but that Indonesia had invited private Japanese companies to participate.

State Enterprises Minister Rini Soemarno said on Friday that Japanese requests for government guarantees and government loans for state-owned enterprises were too burdensome for Indonesia, and had not been sought by China.

hina will integrate its specially-supervised bonded zones to facilitate and encourage trade in key areas such as the high-tech and high-value added sectors, according to a circular issued by the State Council.

The move aims to promote the transformation and upgrading of the processing sector, facilitate the implementation of major national strategies including the Beijing-Tianjin-Hebei integrated development program and support regional economic development.

Export processing zones, bonded logistics parks, cross-border industrial zones, and the newly-established special supervision areas will all be integrated under the umbrella term comprehensive bonded zones.

These zones will be administered and supervised under a unified model, and businesses including bonded processing, bonded logistics and bonded warehousing services will be promoted.

Enterprises in the special supervision areas are encouraged to develop high-tech, high valueadded domestic and foreign maintenance and remanufacturing services, as well as exploring overseas market through cross-border e-commerce, according to the circular.

Reuters

Xinhua

audi Arabia will cut spending and issue more bonds as it faces a record budget shortfall due to falling oil prices, the finance minister said yesterday.

The kingdom -- the biggest Arab economy and the world’s largest oil exporter -- is facing an unprecedented budget crunch after crude prices dropped by more than half in a year to below US$50 a barrel.

It has so far relied on its huge fiscal reserves to bridge the gap but Finance Minister Ibrahim al-Assaf said more measures would be necessary.

“We are working... to cut unnecessary expenditure,” Assaf told Dubai-based CNBC Arabia in Washington, where he is accompanying King Salman on a visit.

He provided no details on the scale of the cuts but insisted key spending in education and health and on infrastructure would not be affected.

He said the government would issue more conventional treasury bonds and Islamic sukuk bonds to “finance the budget deficit” -- which is projected by the International Monetary Fund at a record US$130 billion for this year.

AFP