Macau Business Daily September 14, 2015

MOP 6.00

Sending a signal

Closing editor: Joanne Kuai

MOP200 mln compensation.

Secretary for Economy and Finance Lionel Leong Vai Tac has confirmed payment to Macau Cable Television Company Ltd. This follows a court decision. Effectively punishing the gov’t for countenancing the illegal retransmission of TV signals by public antenna companies

Year IV

Number 879 Monday September 14, 2015

Publisher: Paulo A. Azevedo

Page 3

Deja Vu

We’ve been here before. With a different junket. This time, up to HK$2 bln (US$258 mln) may have Local casinos fuming gone missing. Allegedly purloined by a former cage manager for junket promoter Dore. As a result, as China’s gamblers puff away elsewhere interested parties gathered outside Wynn Resorts Ltd. in protest on Saturday. A complaint about Page 4 the fraud has been filed with police. Meanwhile, the hotel casino operator’s stock continued to drop Beijing makes on Friday on the back of the news Page

5

reserve requirements rules more flexible

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Inadequate Growth Growth in China’s industrial production and retail sales accelerated in August. Industrial production, measuring output from factories, workshops and mines, rose 6.1 pct y-o-y, the National Bureau of Statistics announced. Describing the sector as still weak

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Commodities output reflects China’s industrial situation

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Circuit breakers seen calming biggest swings since 1997

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HSI - Movers September 11

Betting on recovery

Name

Going for broke. Alexis Tam says the city can beat last year’s tourist arrivals record. The Secretary for Social Affairs and Culture believes 2015 numbers can exceed 32 million. He also said the MSAR should focus on developing its infrastructure. And not let excessive tourism blight residents’ quality of life

www.macaubusinessdaily.com

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Interview

Mortgage loans drop The city’s new residential mortgage loans declined 23.9 pct in July. To MOP4.19 bln from MOP5.5 bln during the same period last year. Loans approved to residents decreased 24.8 pct. While loans approved to non-residents increased 20 pct y-o-y

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Domino Effect Macau’s economic-financial dependency upon gaming. It will continue for decades, retired Monetary Authority official José Félix Pontes says. And, yes, there will be fallout from the troubled industry’s long losing streak. The economist subscribes to the concept of diversification. And is adamant that easy to implement changes could make the world of difference to the city’s SMEs

Pages 6&7

%Day

China Resources Powe

+3.93

Sun Hung Kai Propertie

+3.93

Cheung Kong Property

+2.99

Kunlun Energy Co Ltd

+2.50

Bank of China Ltd

+2.29

CNOOC Ltd

-2.61

CK Hutchison Holdings

-2.96

China Life Insurance C

-2.96

PetroChina Co Ltd

-3.85

China Shenhua Energy

-5.09

Source: Bloomberg

I SSN 2226-8294

2015-9-14

2015-9-15

2015-9-16

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September 14, 2015

Macau

Alexis Tam: New residential mortgage loans Confident visitor arrivals will top 32 mln shrink 23.9 pct in July The city’s Secretary for Social Affairs and Culture says the SAR will focus on building its infrastructure and not affect people’s quality of life by having too many tourists the source of tourists as in attracting more tourists from long-haul destinations, as well as enhancing regional co-operation, especially with neighbouring Guangdong Province.

Well prepared

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ecretary for Social Affairs and Culture Alexis Tam Chon Weng said he is confident that Macau can recover from the recent drop in visitor arrivals and that the total visitor arrivals for 2015 would exceed 32 million, a slight increase on the 31.5 million registered in 2014.

In July, Macau received around 2.6 million visitors, down 3.8 per cent year-onyear. Visitors from Mainland China decreased by 6.1 per cent compared to the same period last year. In the first seven months of 2015, visitor arrivals totalled 17.4 million, representing a decrease of 3.5 per cent year-on year, as well.

“We are very confident that the number of visitors will be similar to the figures we planned for in the beginning of the year. We also don’t want it to be too much or too less. We hope not to have too many visitors come to Macau during holidays and festivals. We hope to have

more visitors coming during off-peak seasons,” Mr. Tam said to local TV broadcaster TDM.

Quality of life

It has been reported that the Hong Kong retail industry has voiced its hope for more cities in Mainland China to be included in the Individual Visa Scheme (IVS) to travel to the neighbouring SAR in order to recover the slumping tourism and retail industry.

When asked whether Macau would consider making a similar request to the central government, Alexis Tam said there is no such plan yet as currently Macau’s economy is stable and the city should focus on developing its own infrastructure and supporting facilities.

The Secretary said that recklessly opening up too many IVS cities resulting in too many tourists might affect the quality of life of local residents.

He further indicated that the priority should be diversifying

The Government Information Bureau (GCS) also issued a press release during the weekend, saying local security authorities had boosted border crossing capacity and crowd control at tourist sites.

‘To date, 244 immigration counters and 251 e-Channel kiosks have been established at Macau’s border crossings.

Together with the extension of border crossing opening hours, these have greatly enhanced Macau’s border crossing capacity,’ the statement reads.

The statement adds that the Public Security Police, the Public Security Forces Affairs Bureau and the Macau Customs Service have introduced a variety of measures for convenient border crossing, and established close contact and co-operation with Mainland China’s immigration department, to provide efficient border crossing services.

In addition, regarding order control at tourist attractions, the Unitary Police Service, the Public Security Police and Fire Service have implemented crowd management measures on four occasions around the Ruins of St Paul’s and Almeida Ribeiro Avenue since last year, achieving effective results.

Statistics released by AMCM also reveal that during the seventh month of the year new approvals of commercial real estate loans dipped 27.8 per cent year-on-year João Santos Filipe

jsfilipe@macaubusinessdaily.com

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ew residential mortgage loans declined 23.9 per cent during July to MOP4.19 billion from MOP5.50 billion in the previous year, Monetary Authority of Macau (AMCM) data published on Friday shows.

This decrease was mainly caused by the reduction of residential mortgage loans approved to residents, a decrease of 24.8 per cent to MOP4.05 billion from MOP5.38 billion in July 2014. In terms of share of mortgage loans, residents represent 96.7 per cent of the market. The number of loans approved to nonresidents increased 20 per cent year-on-year to MOP0.14 billion from around MOP0.12 billion in 2014.

Of the total of MOP4.19 billion, new residential mortgages collateralized by uncompleted units amounted to MOP0.81 billion, a decrease of 25.2 per cent year-on-year from MOP1.03 billion. These loans include equitable loans, meaning that the lender is secured by taking possession of the uncompleted units.

Comparing the data from July with June, new residential mortgage loans increased 6.6 per cent from MOP3.93 billion, while

loans collateralized by uncompleted units jumped 185.6 from MOP0.28 billion.

At the end of July, new commercial real estate loans decreased 27.8 per cent yearon-year to MOP12.62 billion from MOP17.49 billion. As with residential mortgages, the decline was driven by the residents segment.

New commercial real loans extended to locals plummeted 36 per cent to MOP9.88 billion from MOP15.43 billion in July 2014. Meanwhile, commercial loans to nonresidents increased 33.4 per cent to MOP2.74 billion from MOP2.06 billion.

On a monthly basis, the new approval of commercial real estate loans increased 102.4 per cent from MOP6.24 billion, as loans to residents increased 65.3 per cent from MOP5.98 billion and loans to non-residents skyrocketed 948.7 per cent from MOP0.26 billion.

In July, the delinquency ratio for residential mortgage loans stood at 0.07 per cent, which is considered

by AMCM to be ‘virtually unchanged’ from a year ago, while the ration for commercial real loans was 0.05 per cent, a decrease of 0.02 percentage points from a year ago.

Business Daily | 3

September 14, 2015

Macau

Leong confirms MOP200 million compensation paid to Macau Cable TV The MSAR Government has finally compensated for its failure to comply with its duties by allowing public antenna companies to illegally retransmit TV signals Stephanie Lai

sw.lai@macaubusinessdaily.com

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acau’s Secretary for Economy and Finance Lionel Leong Vai Tac (pictured) confirmed to media on Friday that the government has already paid MOP200 million (US$25 million) in compensation to Macau Cable Television Company Ltd. per a court decision that the government has no right to lodge any further appeal.

Mr. Leong made the confirmation on the sidelines of a meeting with the Standing Committee for the Co-ordination of Social Affairs.

In July, the Court of Second Instance confirmed the decision of the Administrative Court that ruled that the government had to pay Macau Cable TV compensation for

its failure to comply with its duties, as defined in the Terrestrial Subscription TV Service Concession Contract signed with the company, by allowing public antenna companies to illegally retransmit TV signals.

The act of the illegal retransmitting of the TV

signals by public antenna companies from 2006 to 2009 also led to the unauthorised relay of English Premier League football matches that Thailand’s TrueVisions sports channel was broadcasting at the time – a channel available for Macau Cable TV’s subscribers.

In 2012, the Administrative Court ruled that the government would have to compensate Macau Cable TV MOP200 million, an amount that was smaller than the company’s suffered losses, which amounted to MOP238 million.

The Administrative Court’s decision to reduce the compensation was based on the considerations that the company could have taken the government to court

earlier to minimise its losses instead of waiting 11 years before taking legal action, as well as the fact that the largest shareholder of the company (Lam Io Fun) was also the

largest shareholder of Kong Seng Paging, which until 2007 was one of the ‘major public antenna companies’ involved in the illegal TV retransmission.

Leong: Government to determine Canidrome future Speaking to media on Friday, Secretary for Economy and Finance Lionel Leong Vai Tac said that the Gaming Inspection and Co-ordination Bureau (DICJ) has already appointed an academic institution to study the concession terms for the operation of the Canidrome greyhound track. The Secretary added that opinions from residents living near the Canidrome as well as tourists will be collected for analysis regarding whether the operation of the greyhound track should continue. The concession for Macau (Yat Yuen) Canidrome to run the track expires on December 31, 2015.

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September 14, 2015

Macau

Local casinos fuming as China’s gamblers puff away elsewher Macau’s casinos and gambling trip organizers are fuming over a proposed smoking ban here. Singapore’s puffing gamblers show why

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moking has been prohibited for almost a year in Macau casinos’ mass gambling floors, with the exception of a handful of designated lounges, where visitors huddle around ashtrays in glass-walled rooms during hurried gambling breaks. In contrast, smokers can light up at gaming tables and slot machines on the bottom floor of Singapore’s Marina Bay Sands casino. They can even stay seated while hostesses sell them packs of Marlboro or Dunhill cigarettes for S$17 (US$12).

A bill being considered

by Macau legislators to fully outlaw smoking in casinos promises to set the city’s 35 betting parlors further apart from rivals in Singapore and other Asian gaming destinations. While a blanket ban would be a victory for public health, Macau businesses relying on Chinese high-stakes bettors say it will be another blow to casino operators that have lost US$113 billion in market value in a wave of Beijing’s anti-graft crackdowns that started in early 2014.

“A full smoking ban will have a disastrous impact on Macau and VIP operators,” said Kwok Chi Chung, president of Macau’s Association of Gaming & Entertainment Promoters.

“It’s like adding hail to snow.”

Gaming revenue in Macau is likely to tumble 30 per cent in the three months after a complete ban is implemented, according to Kwok, whose group represents the middlemen who bring highrollers to the world’s largest gambling hub.

Kwok’s association in July petitioned China’s Macau liaison office to urge the city government “not do the wrong thing” by making casinos smoke-free. It could take a year for Macau legislators to discuss the bill on smoking ban, Macau Business reported.

Outstripping the Strip

Shandong High-Roller

He may have reason to be worried. Revenue at Illinois casinos tumbled by more than 20 per cent, or US$400 million, and admissions dropped 12 per cent after a smoking ban was introduced there, researchers from the Federal Reserve Bank of St. Louis, Missouri, and the University of Arkansas at Little Rock found in a study published in 2010. “Statewide smoking bans are likely the most significant regulations imposed on the casino gaming industry,” they said.

Bans aren’t always bad.

Never smokers and former smokers are more likely to visit casinos if they go smoke-free, researchers at the University of Wisconsin in Milwaukee reported at a conference in November.

The stakes are high. As the only Chinese city allowing commercial gambling, Macau reaped US$44 billion in gambling revenue in 2014, seven times more than all of the casinos in the Las Vegas Strip.

The fear is losing large-stake gamblers such as Zhu, a businessman from northern China’s Shandong province, who said he would visit Macau less if smoking rooms were axed.

The 46-year- old, who declined to give his full name, said he visits the former Portuguese trading post once a month to gamble, packing about 5 million yuan (US$784,000) for his latest trip.

“I can go to Korea,” Zhu said, while chain-smoking outside Melco Crown Entertainment Ltd.’s City of Dreams casino in Macau last month. “It’s even closer to Shandong.”

While Singapore is Macau’s biggest regional rival, South Korea may develop as many as nine gaming-integrated resorts. That would make it a prime destination for Chinese gamblers after Macau, according to Bloomberg Intelligence analysts Margaret Huang and Tim Craighead.

South Korea doesn’t allow smoking in the casino that only

locals are authorized to attend, but permits smoking lounges.

For the 16 casinos reserved exclusively for foreigners in the country, there are no smoking regulations although some have voluntarily designated non-smoking areas, according to DS Kim, an analyst at JPMorgan Chase & Co.

300 Million Smokers

Studies have shown smoking rates among casino-goers tend to match the broader population. That implies that in China, where there are more than 300 million smokers, at least one in every two male gamblers is likely to smoke -- a clientele governments with even the strictest antitobacco laws are more willing to accommodate.

The Las Vegas Sands Corp.-owned Marina Bay Sands casino, located at the base of an iconic building featuring the world’s largest rooftop pool, allows smoking in specified areas including private gaming salons, but not in hallways or on one of its levels designated as a nonsmoking floor. On Singapore’s Sentosa Island, the Resorts World casino allows customers to light up in designated smoking areas.

Smoking rules in casinos in Australia, which pioneered laws requiring graphic warnings and plain cigarette

packaging, vary across states.

Only international VIP players are allowed to smoke in private gaming rooms at Echo Entertainment Group Ltd.’s casino in Sydney, while domestic high-rollers are also allowed to light up in its Queensland resorts’ VIP rooms.

Philippine casinos, such as Bloomberry Resorts Corp.’s Solaire Manila, which opened in 2013, allows smoking in most areas, with smaller zones set aside for non-smokers.

Stricter Beijing

China’s government may not be as accommodating.

Beijing’s public smoking ban was applied to all indoor areas in June, an initiative that other cities may replicate, said Angela Pratt, who leads the World Health Organization’s tobacco-control efforts in the country. The central government is canvassing public opinion on a proposal to ban indoor-smoking nationwide.

For now, casino operators in Macau are “totally united” in defending their smoking lounges, said Lawrence Ho, Melco’s billionaire cochairman.

“Hopefully the government will consider the economic implications,” Ho said in a recent interview.

Bloomberg

Business Daily | 5

September 14, 2015

Macau

Alleged cage capital theft at Dore prompts deposit withdrawal claims About 30 protesters assembled outside Wynn Macau on Saturday claiming that their deposit withdrawal from junket promoter Dore had been rejected, following the alleged theft of cage capital of up to HK$2 billion from the company

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bout 30 protesters assembled outside Wynn Macau casino on Saturday afternoon claiming that junket operator Dore Entertainment Co. Ltd. had rejected their withdrawal of deposits placed with the company, which is now embroiled in reports of a former cage manager absconding with as much as HK$2 billion (US$258 million) of the company’s money.

Some protesters said they were VIP gaming agents that had placed deposits with Dore Entertainment to facilitate chip-rolling programmes, Chinese-language newspapers Macao Daily News and Oriental Daily reported.

The amount of deposits involved was at least HK$700 million, according to the reports.

Business Daily contacted Dore Entertainment with regard to the protesters’ claims but had not received a reply by

the time the story went to press.

The protest follows reports that a former cage staff member with Dore Entertainment has allegedly absconded with cage capital of as much as HK$2 billion.

In a declaration notice published in Macao Daily News on Saturday, Dore Entertainment said that it has already filed the case with police, saying that the former cage staff member ‘has allegedly used her authority to conduct some unauthorised business’, and ‘damaged the company’s interest and reputation’.

Shares fall

Casino operator Wynn Resorts Ltd. has seen its stock drop following the report of the alleged theft as Dore Entertainment runs VIP operations at the Wynn Macau casino-hotel.

Wynn Resorts, the casino company founded by billionaire

Steve Wynn, continued to see its stock drop on Friday after reports that as much as US$258 million may have been stolen from a junket operator that brings gamblers to its Macau casino.

Shares were down 2.8 per cent to US$67.72 at the close in New York. It was the third day of declines that have shaved about 10 per cent off the company’s market value.

Michael Weaver, a spokesman for Wynn, said the casino operator hadn’t lost any money and wasn’t owed any by Dore Entertainment.

The amount stolen from junket operator Dore Entertainment, which acts as a middleman for high rollers, could range from HK$200 million to HK$2 billion, according to a report by Daiwa Capital Markets analysts led

by Jamie Soo. The loss could have a ripple effect on the Macau casino industry if investors lending

to junket operators cut back and gamblers have less money to spend, Soo wrote. A theft reported last year at another junket prompted just such a liquidity squeeze, he said.

Business as usual

But the investment analysts at Credit Suisse AG had a different take on the impact of the alleged theft, saying that the incident was “very unlikely” to pose systemic damage.

“First, Dore is still in operation. Near term, we agree that some of its business may be impacted. That said, the business should completely disappear,” Credit Suisse analysts Kenneth Fong and Isis Wong wrote in a note published on Friday.

“The other agents will bring business to the other junkets (e.g.) Neptune, Suncity and Tak Chun. Besides, as we have mentioned before, the monthly rolling chips volume that Dore

generates is only 3 per cent of the system’s monthly VIP rolling chips,” the Credit Suisse team wrote. “Even if it is completely gone, it would be only less than 1 per cent of the system earnings impact (considering that VIP is only 25 per cent of the system EBITDA). From our check this morning with junkets and casino operators, VIP business continues to be steady, some even see stronger volume than August.”

Dore Entertainment Co., founded in 2006, was the first junket operator to work with Wynn, according to Macau Gaming Watch website, which cited a filing with the Hong Kong Stock Exchange.

The company operates two VIP rooms with at least 25 tables in total at Wynn Macau, according to Anthony Wong, a UBS Securities analyst. The casino had 461 tables at the end of last year, according to a public filing.

S.L. with Bloomberg

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September 14, 2015

Macau

“Macau’s economic dependency upon casinos will continue for many decades” The creation of a public instrument to implement trade credit insurance should be one of the priorities in supporting SME’s and diversifying the economy, José Félix Pontes, a recently retired member of the AMCM, told Business Daily João Santos Filipe

jsfilipe@macaubusinessdaily.com

The overall economy in Macau has been shrinking. For the second quarter alone Gross Domestic Product declined 26.4 per cent year-on-year in real terms. This decline has been mainly driven by the slowdown of gaming revenues. How do you expect this to affect the nongaming sectors?

Inevitably, the unfavourable evolution of the gaming revenues will have an impact upon other economic sectors one way or another, mainly upon those more related with the casino business.

If, in the past, in line with the excessive growth of the gaming revenues, some economic sectors benefited a lot, now, in the negative phase of the casinos, those sectors will be affected [likewise]. In a word, it’s the domino effect at work.

In your view, has the market already hit bottom in terms of revenue decline?

I’m only inclined to say that I’m moderately pessimistic… It’s better to wait for the news about gaming revenues for this current month.

One of the main goals of the Macau Government is diversification of the economy.

Is it possible for other sectors besides gaming to assume a major role?

In an interview in 2011 with another local newspaper, I said no other industry could replace the gaming business in Macau. In other words, Macau’s economic-financial dependency upon casinos will continue for many, many decades!

Concerning a certain diversification of the local economy, I believe that this objective is possible to achieve but only in the medium and long term, mainly if it was given room for the implementation of the health tourism that will be a great source of income. Macau has already a vast clientele – the citizens of the People’s Republic of China – that normally come to our city only for tourism, shopping and gaming. If we have private – or even public – providers of health tourism of high quality, those visitors will stay longer in Macau and spend more money.

Is there any policy you would advise the government pursue at this moment to boost the diversification of the local economy?

It should be implemented, in a very short time - the public instrument for the credit insurance scheme for imports and exports. It will constitute an effective and useful support for the activity of small and medium enterprises (SMEs).

If, in the past, in line with the excessive growth of gaming revenues, some economic sectors benefited a lot, now, in the negative phase of the casinos, those sectors will be affected [likewise]

In reality, such an initiative will create favourable conditions for the SMEs to expand credit lines with existing customers, or to export (or re-export) to new markets and, for companies with other commercial objectives, to extend their range of products.

Also, for enterprises with strong potential for growth, or for those that operate in high-risk sectors or with low margins, the acquisition of credit insurance entails many clear advantages. So, credit insurance can and should play a decisive role in the diversification of our local companies.

Recently, the yuan was devalued but the effects on Macau have yet to be seen. Considering that most visitors to the city come from the Mainland, how do you expect this to impact the Macau economy?

In my opinion, the sharp decline of the yuan, which was 4.6 per cent, will not continue in the near future, and its impact on the

Macau economy should be minimal and manageable.

The pataca has been pegged to the Hong Kong dollar, which in turn is pegged to the US dollar.

Some economists questioned this indirect linkage. Do you believe this should change?

In fact, the foreign exchange system adopted in Macau (and in Hong Kong) many years ago was based on the Currency Board System; that has worked very well and, in my personal opinion, is here to stay. With this scheme, there’s no question of currency stability and this is the major advantage for us, given that Macau, as a small open economy, can’t implement and sustain an independent monetary policy. Of course, when we are following the abovementioned scheme we can’t adopt a monetary policy taking into account domestic factors and this represents the main disadvantage for us.

Business Daily | 7

September 14, 2015

Macau In the region, payments are accepted in Macanese patacas or Hong Kong dollars. Some even use the renminbi. Do you believe the pataca has the power to survive on its own? Or eventually after 2049, when the Basic Law expires, the MOP will be replaced?

I strongly believe that our local currency will continue, even after the term of the Basic Law – that, much probably, will be renewed with some necessary adjustments.

And I believe this in spite of the Hong Kong dollar and the Chinese yuan being well accepted for payments in everyday transactions, and even the US dollar, particularly for the acquisition for life insurance policies.

In a certain way, the pataca represents one of the symbols that characterise Macau’s autonomy and this will be preserved as will Hong Kong’s. The essentially political rationale in keeping the status quo of the Macau Special Administrative Region will lead, in my personal opinion, to the Macanese pataca continuing as the legal tender of Macau after 2049.

The number of insurance companies in the territory has been stable at 23 since 2010. However, HSBC nonlife insurance branch is closing down. Do you believe the number of insurance companies in the territory is going to diminish?

HSBC Insurance (Asia) Limited has withdrawn from the local insurance market, as well as from Hong Kong, only due to strategic reasons taken by the head office of its financial holding. I think that despite the current unfavourable economic cycle of Macau the number of authorised non-life insurance companies will tend to increase. On the one hand, there are some huge infrastructure projects in progress, either public – new hospital, light railway – or private like new hotels. On the other, we’ll have a few niche markets associated with new compulsory insurance – medical malpractice insurance, professional liability insurance for engineers and architects – that will inevitably attract the interest of large international insurance companies.

In terms of the insurance market, it has been growing on average 30 per cent per year. Looking at the non-life insurance market, it has been growing but, after growing 40 per cent in 2012, it ended 2014 growing at 5 per cent. Do you expect growth to continue or that declining gaming revenue will affect the sector?

I guess that the gross premiums to be generated by the local insurance sector will record positive growth, not only in the non-life insurance – because of what I explained before – but also in the life insurance business. It should be noted there is a large appetite by Mainlanders to acquire life insurance in Macau, combined with the huge range of life insurance products offered by the life insurance companies operating in Macau.

Recently, one AMCM bulletin study warned the banking sector against the dangers of non-performing loans. Do you believe Macau banks must be more careful?

The AMCM, as the banking regulator, should at all times alert the banks under its supervision to take all precautions when

intervention of the AMCM, but what it has achieved in these 26 years is positive. Nobody can erase that!

There’s a large appetite

by Mainlanders to acquire life insurance in Macau

providing loans. In any case, as everybody is aware, the rate of non-performing loans in Macau is very low.

After serving for 26 years in AMCM you decided to step down. What were the reasons for this decision?

My real-time uninterrupted service exceeds 35 years. The first 9 years at the former Issuing Institute of Macau (IEM) created in 1980. And then 26 years and almost 4 months at the AMCM, which at the time of its creation on July 1989 replaced the Institute I first mentioned. In fact, I started my service at IEM on 27th April 1980 and thus, on 27th April 2015, I completed 35 years service, which is the maximum legal limit for the exercise of public functions.

How would you assess the role played by the Authority during this time?

Since its creation, I believe that the overall balance of the AMCM’s activities may be considered very positive and encouraging. It has produced much legislation and regulations for the financial and insurance sectors, and the respective supervision follows international standards, safeguarding citizens’ interests.

Also, the management of foreign exchange and fiscal reserves has been marked by extreme prudence and with the aim of guaranteeing the capital invested.

Of course, there’s always room for improvement in the legislative area and in the other fields of

Since AMCM was created, Macau has been through such a deep change in its economy.

What was the most challenging time for you in the Authority?

I refer to not only one most challenging time, but several: the implementation of the Legal Regime for Private Pension Funds (1999), the difficulties resulting from the Asian (1997) and global (2008) financial crises and the ‘medicine’ actions we had to take.

I will also mention the partial revisions of the legal frameworks of the Motor Vehicles Insurance (Third Party Risks) Ordinance (2011) and of the Employees’ Compensation Insurance (2015).

You may have retired as a member of the Board of Directors of AMCM but you will continue to serve as Chairman of the Board of the Macau Institute of Financial Services (IFS). What are the main goals of the IFS? The Macau Institute of Financial Services was established in March 2002 as a non-profit making organisation. The Monetary Authority of Macau, the Macau Association of Banks, Macau Insurers’ Association and Macau Insurance Agents & Brokers Association were the founding members.

The main goals of IFS are to upgrade performance, expertise and professional standard of Macau’s financial practitioners by providing professional training and conducting qualifying examinations in order to foster the sustainable development of Macau’s financial industry.

What activities are being developed by the IFS to achieve these goals?

To achieve these objectives we have conducted courses and exams for insurance intermediaries, seminars and similar events, and programmes related to the professional qualifications for

financial planning. Up to now, 51,818 have attended these training activities - 35,827 in the insurance intermediaries qualifying examination; 7,886 in seminars and in continuing professional development events; 6,752 in IFS courses; and 1,353 in professional qualification in financial planning programmes.

In relation to these programmes and special events what are the plans for next year?

Next year, by delegation of the AMCM, we will start the Continuing Professional Development (CPD) Programme for insurance intermediaries, and we will provide free and unbiased financial education programmes to working adults and their families with the objective of enhancing the level of financial literacy of the overall population of Macau. Besides that, we are preparing some courses for local banking practitioners to achieve a good command of Chinese, Portuguese and English, as Macau needs to have a pool of trilingual professionals in the banking sector.

In this programme, one of the subjects to be taught includes the legal framework of the financial systems of the Portuguese-speaking Countries.

Despite the current unfavourable economic cycle of Macau, the number of authorised non-life insurance companies will tend to increase

8 | Business Daily

September 14, 2015

Greater China

Economic growth weaker than expected Some economists believe current growth is already much weaker than official data suggest

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rowth in China’s investment and factory output missed forecasts in August, pointing to a further cooling in the world’s second-largest economy that will likely prompt the government to roll out more support measures.

The downbeat data came on the heels of weak trade and inflation readings, raising the chances that third-quarter economic growth may dip below 7 percent for the first time since the global crisis.

Fears of a China-led global economic slowdown have roiled global markets in recent weeks, prompting speculation that the U.S. central bank may hold off on raising interest rates later this week.

“The pace of slowdown in fixedasset investment is relatively fast dragged by the property sector, while the factory sector remains sluggish,” said Zhou Hao, senior economist at Commerzbank AG in Singapore.

“Overall, the economy is very weak and the central bank may have to continue cutting interest rates and banks’ reserve requirement,” Zhou said, adding he expected growth was very likely to dip below 7 percent in the July-September quarter.

August power output, for example, was up just 1 percent year-on-year, and production of key industrial commodities such as steel and coal weakened.

Growth in China’s fixed-asset investment, one of the crucial drivers of the economy, slowed to 10.9

KEY POINTS August data point to further cooling in economy Most data below forecasts, more stimulus measures expected Aug factory output +6.1 pct y/y, vs f’ cast +6.4 pct

Factory output also was lower than forecast, rising 6.1 percent in August from a year earlier

percent in the first eight months of 2015 - the weakest pace in nearly 15 years, data from the National Bureau of Statistics showed yesterday.

Analysts polled by Reuters had forecast an 11.1 percent rise, compared with 11.2 percent in January-July.

Factory output also was weaker than expected, rising 6.1 percent in August from a year earlier. Markets had expected a 6.4 percent increase, compared with July’s 6.0 percent.

Property continues to drag

Annual growth in China’s real estate investment also continued to cool, slowing to 3.5 percent in the first eight months, the weakest since early 2009, from 4.3 percent in January-July.

While home sales and prices are slowly recovering from a slump last year - the area of property sold rose at a slightly faster pace of 7.2 percent in January-August - analysts say it will take time for developers to work off a huge overhang of unsold houses and a sharp falloff in new construction will continue to dampen demand for materials from cement to steel.

Sales of earth excavators fell 33 percent in August from a year earlier, hitting heavy machinery makers such as China’s Sany and U.S. heavyweight Caterpillar Inc, Bank of America Merrill Lynch said in a note last week.

“The property sector is the biggest drag on China’s economy,” said Yu Pingkang, chief economist at Huatai Securities in Shenzhen.

Central bank ups flexibility in reserve requirement rules The PBOC sets different RRR requirements for banks depending on their size and type of loans

C

hina’s central bank is making its reserve requirement rules more flexible for banks to reduce the risk of an abrupt tightening in liquidity in the world’s second-largest economy as it cools.

The amount of deposits that banks must set aside as reserves at the central bank will soon be regulated on an average basis as opposed to current daily assessments, the People’s Bank of China (PBOC) said in a statement on its website.

The change, effective September 15, will help b a n ks combat su d d en funding pressures at a time of heightened volatility in the yuan that has driven capital from China.

In two online statements, the PBOC said the new rule would allow banks to set aside less reserves when they are strapped for funds, but will not be a free pass for lenders to lapse into overdrafts.

Under the changes, banks can report a daily reserve requirement ratio (RRR) that is up to 100 basis points lower

than the rate set by the PBOC, but their daily average RRR in the assessed period cannot fall under the required level.

The PBOC did not state

the period over which banks’ RRR will be assessed.

“It could release a certain amount of liquidity when there is a shortfall,” the PBOC said

People’s Bank of China branch in Shanghai

Aug retail sales +10.8 pct y/y, vs f’ cast +10.5 pct Jan-Aug fixed-asset investment +10.9 pct y/y, vs f’cast +11.1

“A pick-up in infrastructure investment is insufficient to offset the slowdown in property investment.”

Yu has pencilled in 6.9 percent growth for the third quarter.

Retail sales were the lone positive surprise, growing 10.8 percent in August from a year earlier, above forecasts of 10.5 percent, the same as July.

But the increase did not appear to jibe with recent reports from local and foreign firms in China of slowing sales.

of the rule, but added it would not affect the market now as there was ample liquidity.

The RRR is a main monetary policy tool in China, used to manage liquidity.

As China’s economy eases towards its slackest growth in 25 years, the PBOC has lowered the RRR three times this year by a total of 200 basis points to bolster bank lending.

The PBOC sets different RRR requirements for banks depending on their size and type of loans. The RRR for the largest banks is around 18 percent, but the exact level for each bank is not disclosed.

Reuters

“This helps to reduce volatility in liquidity,” said Li Qilin, an analyst at Minsheng Securities in Beijing.

Faced with suspicion China may have started a round of competitive devaluations, which authorities deny, the PBOC has aggressively intervened to prop up the yuan.

China suffered a bruising credit crunch in June 2013 when short-term interest rates shot as high as 30 percent after the PBOC allowed the money market to convulse to force banks to curtail risky lending.

Reuters

Business Daily | 9

September 14, 2015

Greater China New loans fall as lending to support stock market fades Banks are becoming more cautious about lending as the slowing economy leads to a sharp increase in bad loans Nathaniel Taplin

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hinese banks extended a smaller-than-expected 809.6 billion yuan (US$127.04 billion) of new loans in August as the impact of the government’s massive stock market rescue on the financial system faded.

Economists polled by Reuters had forecast new bank lending in August would pull back sharply to 900 billion yuan from 1.48 trillion yuan in July, the highest monthly reading since 2009 that economists say reflected a Beijing orchestrated programme to pump billions into equity markets to avert a full-blown crash.

Broad money supply (M2) in August rose 13.3 percent year-onyear, equal to July’s 13.3 percent.

Economists had predicted 13.2 percent growth.

“August new bank lending eased to normal after last month’s surge and M2 stayed at relatively high levels, indicating the central bank kept its loosening monetary policy stance to support the struggling

economy,” said Zhou Jingtong, analyst at the Bank of China in Beijing.

Although stock markets are now showing signs of steadying following a frenetic round of tough measures

by Beijing, analysts say economic growth is weakening and data points to the need for further fiscal and monetary stimulus.

Activity data for August, including industrial output and retail sales, is due to be released yesterday.

Economists say that loans extended to non-bank financial institutions skyrocketed in July as Beijing moved to support the stock markets. The same measure fell in August.

Mark Williams, chief China economist at Capital Economics in London, said cutting through the lending data to focus on the nonfinancial sector provided a small shoot of optimism. On that basis, the outstanding value of loans rose 13.7 in August from a year earlier, similar to July’s pace.

“This is the highest rate of lending growth since mid-2014, Chinese New Year distortions aside,” he wrote in a note to clients.

Total social financing, a broader measure of net new credit, rose to 1.08 trillion yuan (US$169 billion) in August from 718.8 billion yuan in July.

Rises in corporate bond financing and trust loans led the increase, suggesting Beijing’s recent decisions to loosen issuance requirements for corporates including local government financing vehicles and project finance vehicles were beginning to have an impact.

On the year, net corporate bond financing rose 48.7 percent, below July’s 72.8 percent rise but stronger than in the first half of the year, when bond issuance fell outright on the year.

Total net new corporate bond financing was 287.5 billion yuan, the highest figure since April 2014.

Idle production capacity means many Chinese companies are in no mood to take on new loans for expansion. They complain real borrowing costs are too high anyhow even after five rate cuts by the central bank since November.

“Monetary policy is relatively loose. But we should note that it’s difficult for large amount of money to enter the real economy and the problem of high borrowing costs cannot be resolved quickly,” said Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai.

Li expects the central bank to cut rates a further 25 basis points to 50 basis points by the end of the year and to reduce bank reserves to release more cash into the economy.

Reuters

Consumer confidence drops for 3rd month China’s consumer confidence declined for a third month in August partly due to a weak stock market, according to a latest index. The Bank-card Consumer Confidence Index (BCCI), compiled by Xinhua News Agency and China UnionPay, a national bank card association, declined 0.6 point from July to 82.07 in August, the third month-on-month drop in a row. On a year-on-year basis, the index dropped 1.69 percent. A lower reading shows a drop in consumers’ desire to spend. Spending on non-necessities dropped sharply, with a plunge of 13.55 percent for plane tickets.

Deal to facilitate auto export to Arab countries A Chinese trade association and a firm have signed an agreement with a Jordanian company to facilitate the export of Chinese automobiles and parts to Arab countries. The deal was reached between the China Council for Promotion of International Trade, Ningxia Silk Road ePath Co. and Aqaba National Real Estate Projects, which was headquartered in south Jordanian city of Aqaba. Under the agreement, Chinese auto exporters will be able to store cars and components in a bonded area in Aqaba owned by the Jordanian company before selling the goods to the Arab markets.

Xi urges senior leaders to set examples

Commodities output shows industrial weakness But crude oil throughput remained resilient as refiners continued to take advantage of weak global prices David Stanway and Adam Rose

C

hina’s output of key industrial commodities including coal and steel weakened in August, as government measures to cut smog ahead of World War Two commemorations further cut production already lowered by a slowing economy.

Production of coal and steel, which has steadily fallen amid weak demand and chronic oversupply, fell further in August after the government mandated the closure of scores of factories to reduce pollution in Beijing ahead of events to mark the end of World War Two that included a massive military parade.

Qiu Yuecheng, analyst with the steel trading platform Xiben New Line E-Commerce, said demand for some commodities, such as steel, may pick up in the second half of the year after the summer lull, “but with the overall economy facing pretty big downward pressures and funds still tightening, the scale of the recovery will be limited.”

Crude steel output fell 3.5 percent year-on-year to 66.94 million tonnes in August, the second consecutive monthly decline, which also triggered

a 6.6 percent drop during the month in the output of coking coal, a key steel-making material.

Raw coal output, which has been falling as a result of government measures to promote cleaner burning fuels, also dropped 2.6 percent from the same month a year-ago, according to data published by the National Bureau of Statistics yesterday.

Coal production is down 4.8 percent for the first eight months, hit by a 2.2 percent decline in thermal power production over the period as grids took on more hydropower.

Still, the anti-pollution measures failed to boost demand for natural gas, with data from the statistics bureau showing output grew 3 percent over the first eight months of the year, down from 6.9 percent in 2014 and 11.5 percent in 2013.

Crude oil throughput remained resilient as refiners continued to take advantage of weak global prices.

Runs rose 6.5 percent on the year to 10.44 million barrels per day (bpd). Domestic crude oil output stood at 18.17 million tonnes, up 3.6 percent on the year.

KEY POINTS Crude steel, raw coal output fall again in Aug Weak demand, state antismog shutdowns hit output Power generation rises 1 pct, crude throughout up 6.5 pct

Oil demand rose 5.1 percent from a year earlier to 10.26 million bpd, rising 1.4 percent from July, according to Reuters calculations using preliminary government data.

In its latest forecast released on Friday, the International Energy Agency said it expected Chinese oil demand to grow 4.1 percent this year, noting that demand has remained “remarkably resilient” amid the economic slowdown.

Reuters

Chinese President Xi Jinping has urged senior officials to set an example in improving work styles and serving the people. Xi, also general secretary of the Communist Party of China (CPC) Central Committee, made the remarks on Friday at a study session attended by members of the Political Bureau of the CPC Central Committee. “We should always keep the ‘three stricts and three earnests’ in mind, adhere to the truth and resolutely correct misconduct that goes against the cause of the CPC and the people,” said Xi while presiding over the meeting.

50 Russian firms at China-Russia expo in NE Representatives of over 50 Russian companies will arrive in northeast China’s Heilongjiang Province next month for the second China-Russia Exposition, the organizing committee of the event said Saturday. The expo, scheduled to be held from October 12 to 16 in Harbin, will attract Russian enterprises from different industries, including food and agriculture, chemicals, aviation and aerospace, banking and finance, and heavy industry and metallurgy. The results of cooperation between China and Russia, especially in equipment manufacturing, science, technology and finance, will be featured during the event, according to the committee.

10 | Business Daily

September 14, 2015

Greater China

Circuit breakers seen calming biggest swings since 1997 Hong Kong’s bourse will introduce a volatility-control mechanism as soon as 2016 that would prevent an individual stock from moving 10 percent or more during a five-minute period, once a session

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hina’s plan to introduce a stock-market circuit breaker would help calm volatility after price swings in the benchmark index surged to an 18-year high, according to analysts and investors in a Bloomberg survey.

Twelve of the 15 respondents were in favour of the proposal while the remainder were against. Under the current plan, a move of 5 percent in the CSI 300 Index would trigger a 30-minute halt for stocks, options and index futures, according to a joint statement on last Monday by the nation’s two bourses and the futures exchange.

Turmoil in China’s stock market sent a gauge of price swings to its highest level since 1997 last month as leveraged investors unwound bullish bets on concern valuations were unjustified amid slowing economic growth. Volatility has remained elevated despite unprecedented government intervention to stop a US$5 trillion rout, including banning share sales by major investors and at one stage in July allowing more than 1,400 companies to halt trading.

“If there is a fair and transparent circuit breaker mechanism in place, it should help to stabilize the markets during the most vulnerable times,” said Cedric Ma, a Hong Kongbased senior investment strategist at Convoy Asset Management Ltd., which oversees about US$500 million.

“It’s far better than letting companies suspend their shares from trading on their own.”

Stability predicted

Under the plan, a move of 7 percent by the CSI 300 measure would halt trading for the remainder of the day. The rules would also apply to convertible bonds and some other

equity-related securities. The CSI 300 index was chosen because it includes some of the largest companies traded in both Shanghai and Shenzhen, according to the statement. Feedback on the plan is being accepted until September 21.

China worked to soothe concern over its economy at the Group of 20 gathering in Turkey at the weekend, with officials predicting stabilization in the currency and stock markets in the coming weeks. People’s Bank of China Governor Zhou Xiaochuan said state intervention prevented systemic risk and stopped a free-fall. The government spent 1.5 trillion yuan (US$236 billion) from the start of the selloff three months ago through August supporting equities, according to Goldman Sachs Group Inc. For Francis Cheung, head of China strategy at CLSA Ltd., circuit breakers would be a positive step, provided officials are clear about the rules.

“The upside I see is if the government institutes circuit breakers, then it will no longer intervene in the stock market,” said Cheung in Hong Kong. “But this is not assured.”

A circuit breaker could replace existing restrictions on trading as the government promotes closer integration with global markets, according to Mo Haibo, a director at Wanjia Asset Management Co. Individual stock price moves are subject to a 10 percent daily limit, while the so-called T+1 rule prevents investors from buying and selling shares on the same day. Chinese officials have been pushing for the inclusion of mainland equities in MSCI Inc.’s global benchmark indexes.

“A circuit breaker is necessary in the long term for protection under

extreme market circumstances as China is very likely to scrap the 10 percent daily limit and the T+1 trade rule,” Mo said from Shanghai.

“Current trading rules may need to be revamped if the circuit breaker is introduced.”

A circuit breaker could increase intraday volatility as investors rush to buy or sell shares before the halt is triggered, according to Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong. The CSI 300 has risen or fallen by 5 percent

The circuit breaker mechanism may calm the market and lead to a more rational and mature performance…

It’s a reflection of an increasingly sound and diversified market mechanism Chen Jiahe, strategist, Cinda Securities Co.

on 20 occasions in the past three months and half of those times daily moves exceeded 7 percent.

“It might cause more extreme market movements because investors would fear being too slow to react to good or bad news,” So said. The halt would also increase selling pressure in Hong Kong, where the same companies would still be trading, he said.

U.S. comparison

China’s planned limits for stopping trading are lower than in the U.S., which installed market-wide circuit breakers after the 1987 crash. A 7 percent drop by the Standard & Poor’s 500 Index would trigger a 15-minute halt for companies listed on the New York Stock Exchange and Nasdaq Stock Market. Another circuit breaker kicks in if the S&P 500 extends its losses to 13 percent before 3:25 p.m. If the plunge reaches 20 percent, the entire stock market will shut for the rest of the day.

For Cinda Securities Co. strategist Chen Jiahe, the circuit breaker is a sign China’s stock market is growing up.

Among the brokerages and money managers that participated in the survey, the following were in favour of circuit breakers: Haitong International Securities Group Ltd., Shenwan Hongyuan Group Co., China Southern Fund Management Co., Delta Asia Securities Ltd., Central China Securities Co., HFT Investment Management Co., Dongxing Securities and JK Life Insurance Co. Those against the proposal were Xiangcai Securities Co., Hengsheng Asset Management Co. and CMB International.

Bloomberg News

Business Daily | 11

September 14, 2015

Asia

APEC finance ministers to refrain from competitive devaluation Meeting takes place amid growing concern about slowdown in China

F

inance ministers from the Asia-Pacific Economic Cooperation (APEC) group said they were committed to addressing weaknesses in their economies but stressed they would not seek to gain a competitive edge by weakening their currencies.

“We will refrain from competitive devaluation and resist all forms of

protectionism,” ministers from the 21-member group said in a statement at the end of a meeting on the Philippine island of Cebu.

“We maintain our commitment to strengthen economic growth and promote financial stability in the APEC region,” they said, even as they conceded risks to growth remained significant.

The Cebu meeting took

place amid growing concern about the slowdown in China, the world’s second-largest economy, and recent swings in global financial markets following its devaluation of its yuan currency last month.

China has insisted that the devaluation was not part of a currency war, but was aimed at making its exchange rate reflect market conditions more closely.

Speaking at a closing ceremony, China’s vice finance minister said volatility in Chinese stock and currency markets was temporary.

“The exchange rate movements in the past month is totally because of technical reasons and factors, and will not affect the stability of financial markets in the future,” the vice minister, Shi Yaobin, told a press briefing.

‘Abenomics’ architect says yen falls still benefit Japan’s economy The Bank of Japan is likely to offer a bleaker view on overseas economies and exports at next week’s rate review Leika Kihara and Yuko Yoshikawa

APEC members include the United States, China, Japan, South Korea, Indonesia and Canada, and together account for 57 percent of global production and 46.5 percent of world trade.

On the whole, delegates to the two-day meeting have been circumspect in their comments, often speaking in bland terms about the need for greater financial integration.

But Malaysia’s deputy minister of finance, Johari Abdul Ghani, said all the talk of integration might not amount to much because decisions taken by APEC’s larger economies were having a big impact on smaller ones.

“The developed countries, the much stronger economic countries, also have to be mindful any action that they do will affect the smaller countries in APEC,” he told Reuters, singling out China’s devaluation and eventual rises in U.S. interest rates.

Malaysia’s ringgit has slumped by 18.87 percent against the dollar this year and is the worst-performing major currency in Asia.

“We want to have financial integration. But at the same time, when you have developed countries like America, China for example, anything that they do will affect some of the emerging countries. The impact of this is that the integration will not be able to come,” he said.

Reuters

KEY POINTS BOJ can stand pat next week, should ease as early as Oct 30 Fears of more yen falls shouldn’t discourage BOJ from easing Govt should offer fiscal stimulus to ease pain from weak yen

T

he yen has “a bit more” room to fall before its costs outweigh the benefits, one of the architects of the reflationary policies of Japanese premier Shinzo Abe said on Friday, dismissing fears that more monetary easing could fuel unwelcome declines.

The Bank of Japan (BOJ) can hold off on action this week but should expand stimulus as early as its meeting on October 30 to counter weakness in the economy, said Yamamoto Kozo, a ruling party lawmaker and close economic aide to Abe. “I can see how the BOJ would prefer to stand pat (next week) because there’s not enough data to scrutinise,” Yamamoto told Reuters on Friday.

“But the economy is not doing well ... It would be strange not to

ease if the BOJ were to cut its growth forecasts.”

The BOJ is likely to offer a bleaker view on overseas economies and exports at next week’s rate review, as China’s slowdown hits Asian markets and demand for Japanese shipments.

It is also set to cut its long-term growth forecasts at the October 30 meeting, though many central bankers are wary of deploying further stimulus.

They are concerned about diminishing policy tools and the rising costs of heavy money printing - such as drying up liquidity in the bond market.

Some lawmakers have also complained that further monetary easing is unwelcome as it could further sap the yen and boost imported food

prices, hitting households and small retailers.

But Yamamoto said such pain from a weak yen should not be an excuse to hold off on monetary easing.

The government can ease the pain by offering fiscal spending of up to 5 trillion yen (US$41.47 billion) to help low-income households, he added.

With the dollar/yen still below levels hit before the collapse of Lehman Brothers in 2008, some more gains in the pair would still benefit Japan’s economy, Yamamoto said.

“A bit more (appreciation) is okay because before the collapse of Lehman Brothers, the dollar was around 124 to 125 yen,” he said, when asked if further yen falls were beneficial for Japan’s economy.

Reuters

12 | Business Daily

September 14, 2015

Asia

BOJ to stand pat despite doubts Japan bank looking for M&A targets

Easing now would run counter to the government’s policy priorities, government officials say

Japan’s biggest bank, Mitsubishi UFJ Financial Group (MUFG), wants to buy more U.S. commercial lenders and asset management firms, a top official said, citing the two segments as areas where the Tokyo-based bank still lacks scale. “In the United States, our commercial bank is ranked around 13th.

We need inorganic growth there,” said Nobuyuki Hirano, president of Japan’s largest lender by assets, referring to acquisition opportunities in a recent interview in Tokyo. MUFG is positioning asset management business as a core profit driver, along with its commercial banking, Hirano added.

Malaysia’s Prime Minister to announce measures Malaysian Prime Minister Najib Razak is expected to announce measures to strengthen the economy today as falling commodity prices weigh on growth and the ringgit currency plumbs near 18-year lows. Slowing demand from China and a political crisis swirling around Najib have also shaken investors in Southeast Asia’s third-largest economy in recent months, pushing the ringgit down nearly 19 percent against the U.S. dollar so far this year. Najib is expected to announce the new measures after a weekly meeting of the economic council today, officials at the Prime Minister’s office said.

India working to boost sugar exports India is working on a multi-year plan to boost sugar exports to deal with local oversupply, a government official was quoted as saying by an industry group, targeting markets in Africa, China and neighbouring countries in a move that could weigh on international prices.

Apart from boosting farm exports, government-backed overseas sales of sugar could also help mills clear billions of dollars they owe to 50 million cane growers -- a group equivalent in size to the population of Spain and concentrated in politically heavyweight states such as Uttar Pradesh and Maharashtra.

Pakistan’s central bank cuts main rate Pakistan’s central bank cut the monetary policy rate by 50 basis points to 6.0 percent from 6.5 percent on Saturday as lower fuel prices eased inflationary pressures. Inflation decelerated to 1.7 percent in August from a year earlier, the bank said, and it predicts that inflation for the financial year ending in 2016 will remain below the target of 6 percent. Lower borrowing costs and lower oil prices are helping Prime Minister Nawaz Sharif, who is under pressure to do more to revive the economy, end persistent power shortages and attract badly needed foreign investment.

Bank of Japan headquarters

B

ank of Japan policymakers are in no mood to expand monetary stimulus this week, sources familiar with their thinking say, even as poor data challenges their presumption that economic recovery will boost inflation to its 2 percent target next year.

When BOJ Governor Haruhiko Kuroda last opened the monetary taps, in October, he was backed by a razor-thin majority on the bank’s board, and although subsequent changes have moved the board closer to his policy stance, a repeat looks even less likely now, the sources said.

With inflation and growth still in the doldrums despite the bank’s 80 trillion yen (US$665 billion) per year asset buying measures, they said the board had grown increasingly concerned about their diminishing policy options and the downsides of the stimulus, such as draining liquidity from the government bond market.

Investors mostly expect the BOJ to stand pat at least until October 30, when it updates its long-term economic and growth forecasts, so a surprise move might have an outsized impact on markets.

But that looks like one of the very few incentives for it to act now, with risks to the bank’s policy targets such as weak global demand and China’s slowdown - mostly beyond its control, said the sources.

The government also does not welcome additional monetary steps that might weaken the yen further and boost import costs.

With an upper house election looming next year, Prime Minister Shinzo Abe’s administration has shifted its focus to helping low-income households and pensioners hit by the rising cost of living from a weak yen.

“A lot of people are getting suspicious on what benefits there are to additional monetary easing,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Politicians don’t want the yen to weaken too much.”

Unlike last October

Those betting on a surprise cite similarities to last October, when Kuroda expanded stimulus without prior warning to prevent slumping oil costs and weak consumption from hurting inflation expectations.

Kuroda’s decision caught even some of the nine board members off guard, angering four of them enough to vote against him.

With one of the dissenters having retired and been replaced by a former auto executive more supportive of Kuroda’s views, the governor would in theory have less trouble getting his way if he sees the need to ease, the sources said.

Like last October, renewed falls in oil costs are weighing on inflation.

But household income is rising and underpinning consumption, which is firmer than last October when households were feeling the direct hit from a tax hike, BOJ officials say.

Business sentiment and capital expenditure have held up even as markets have been lashed by fears

KEY POINTS Gov Kuroda has the board numbers to ease policy if needed But BOJ officials wary of expanding stimulus soon BOJ worried by diminishing options and downsides of stimulus BOJ meets Sept 14-15, decision expected Tuesday 0330-0430 GMT Kuroda to brief media Tuesday 0630 GMT [End of key points]

of a hard landing for China, they argue, based on internal hearings they conduct on firms across Japan.

It has now become a near certainty that the BOJ will cut its economic and price forecasts for this fiscal year at the October 30 review. But with few tools left to deploy, the BOJ will cling to its goals for as long as possible, even if they appear increasingly out of touch with reality, some analysts say.

Reuters

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Business Daily | 13

September 14, 2015

Asia

In India, utility debts threaten Modi’s power-for-all drive Central government has identified the power utility sector as critical to solving banks’ bad debt problems

W

ith a three-year government rescue package coming to a close, the highly indebted northern Indian state of Rajasthan is getting tough - it’s demanding farmers start paying for their electricity.

In a country where rural communities have become used to free power by hook or by crook, the state that is home to some 70 million is tasking private firms with running power distribution in its big cities as it tries to recoup what it’s owed.

Restructured power distribution debts alone amount to a quarter of Indian banks’ problematic loans, and Rajasthan’s state-run utilities owe about 610 billion Indian rupees (US$9.2 billion), with some 30 billion rupees due by end-March. While Rajasthan dropped an earlier plan to actually raise existing tariffs after

opposition from farmers, state energy minister Pushpendra Singh said the state must push on with plans to enforce existing payment rates.

“We can’t repay the interest and we still have these losses,” Singh told Reuters in an interview. “Every year we are losing more money,” he said, estimating a third of Rajasthan’s electricity is lost to theft and transmission leaks.

With these debt levels echoed across the country, Indian states have little choice but to find ways, extreme or otherwise, to face up to a longignored problem. Bad debts aren’t just threatening banks - with electricity utilities central to the problem, Prime Minister Narendra Modi’s electoral promise of power for all could be jeopardised.

India’s central bank warned in

June that the risk of states failing to repay loans on time was “very high”, as a three-year rescue package launched in 2012 comes to an end the source of Rajasthan’s urgency on collecting fees for electricity.

States who cannot pay banks what they owe over the next few years could be forced to turn to the central government for help, putting pressure on India’s consolidated fiscal deficit.

Modi’s government has ruled out a rescue package along the lines of the 2012 scheme launched under the previous government.

A top government source said New Delhi was working on a detailed plan. Under India’s federal system, responsibility for reform lies with states - all with different appetites for change, and for pursuing villagers who fail to pay.

Across India, decades of mismanagement and political meddling have left utilities selling electricity below cost and turning a blind eye to rampant theft. The result is state distributors are sitting on US$66 billion worth of debt, according to rating agency CRISIL, double the level four years ago.

Getting Indians to pay more for their power is not easy. Across the country around a fifth of power goes unpaid for and many still believe free power is a right rather than privilege.

Rajasthan’s drive to collect payments from farmers and call in private firms to help run power distribution replicates reforms made a decade ago in Modi’s home state of Gujarat. Distributors there are now largely profitable, and power is reliably available across most of the state.

But reform has proved tough and not all states are willing to take difficult steps. In largely agricultural Uttar Pradesh, farmers pay a fixed fee for unlimited power, equating to about one rupee per unit of electricity, a sixth of the generation cost. The state power company’s finance director says it has no plans to raise prices to close that gap.

Reuters

We are in touch with each of the states where the discoms (distribution companies) need to be reformed. Those states have been put on notice Arun Jaitley, India’s Finance Minister

India’s Prime Minister and Finance Minister have a steep way on energy sustainability

Singapore People’s Action Party wins parliament majority The results signal an improvement for a party that won in 2011 with its smallest share of the popular vote since 1965

S

ingapore Prime Minister Lee Hsien Loong’s People’s Action Party (PAP) won a majority of parliament seats, returning the party to power to continue more than five decades of rule.

The party formed by his father Lee Kuan Yew, the country’s first premier, won 70 out of 89 parliamentary seats based on votes counted so far, according to televised results from the Elections Department. The Workers’ Party, the nation’s most successful opposition party, secured one seat.

The election, which was called last month, gave candidates nine days to tell voters how they would

tackle issues ranging from immigration to rising living costs. The PAP has in recent years boosted spending on lower-income families and the elderly, and has sought to capitalize on the groundswell of patriotism that followed massive celebrations last month to mark the nation’s modern founding.

Earlier, Lee was lifted on the shoulders of supporters and carried around the stadium as people chanted in support of the party.

“We’re very grateful, very happy but at the same time humbled by the results,” he said in response to official results showing he won his own district.

The PAP moved after 2011 to further boost spending on lower-income families and the elderly, and sought to capitalize on the groundswell of patriotism that followed massive celebrations last month to mark the nation’s modern founding.

‘Swung back’

“Support has swung back,” Foreign Minister K. Shanmugam said in an interview at Toa Payoh stadium in central Singapore where PAP supporters gathered. “Anytime the support levels are like this we actually have to approach it with a great deal of humility,” he said. The Workers’ Party was at risk of losing its sole

multi- seat constituency of Aljunied in eastern Singapore.

“We all know that the opposition wouldn’t form the government, they are far from it,” said student Hendra Darmawar, 25, who attended the Workers’ Party gathering at a stadium in north-eastern Singapore.

Aging workforce

The Workers’ Party drew tens of thousands to its pre-election rallies, with Singaporeans packing open fields in the suburbs to listen to chairman Sylvia Lim speak.

Challenges remain for a country facing an aging workforce and doubts over traditional pillars of growth

like manufacturing and electronics. The export-driven economy has been damped by China’s slowdown, uneven recoveries in the U.S. and Europe and a commodities slump. The Singapore dollar is set for its biggest annual loss since 1997 and its stock index is the second-worst performing Asian benchmark index in local currency terms this year.

“The results show Singaporeans are not ready for change,” said veterinary clinic worker James Chua, 29, who attended the Workers’ Party event. “I believe people are too comfortable with what they have. They may not have the most perfect lifestyle but maybe there is a fear of losing what they already have.”

A record 2.46 million Singaporeans got the chance to vote, with casting a ballot compulsory for all citizens who are 21 and over.

Politicians compete in singleseat wards or multiple-seat districts. The party that gets the most number of votes in a constituency sends all its members to parliament.

Bloomberg News

14 | Business Daily

September 14, 2015

International Peru cenbank trims growth rate to 4-4.5 pct Peru’s central bank on Friday further trimmed its view of the economy’s potential growth rate, lowering it to between 4 and 4.5 percent in part because of a drop in investments, the bank’s chief economist Adrian Armas said. The central bank last estimated the pace at which Peru’s economy can expand without stoking inflation at 5 percent.

The potential growth rate, which the central bank considers when evaluating monetary policy, was 6 percent a couple years ago, said Armas. The central bank expects the sluggish economy to perk up and expand at about that pace next year.

U.S. budget deficit narrows The United States posted a budget deficit of US$64 billion in August, down about 50 percent from the same period last year, the Treasury Department said on Friday. A Treasury official said the August deficit was smaller this year mostly due to US$42 billion in payments that were shifted into last month from July. Accounting for calendar adjustments would leave the August deficit at US$112 billion, roughly the same level as in August 2014. The current fiscal year-to-date deficit stood at US$530 billion at the end of last month.

Court confirms Monsanto liability in chemical poisoning A French court upheld a 2012 ruling in which Monsanto was found to be liable in the chemical poisoning of a French farmer, who says he suffered neurological problems after inhaling the U.S. company’s Lasso weed killer. The decision by an appeal court in Lyon, southeast France, confirmed the initial judgment, the first such case heard in court in France, that ruled Monsanto was “responsible” for the intoxication and ordered the company to “fully compensate” grain grower Paul Francois.

Monsanto’s lawyer said the U.S. biotech company would now take the case to France’s highest appeal court.

Brazil in time to avert 2nd junk downgrade Standard & Poor’s decision to strip Brazil of its investment-grade credit rating puts pressure on competing ratings firms to follow suit, but the government still has time to avert another downgrade to junk which would cost billions of dollars in foreign investment. While an overwhelming majority of economists polled by Reuters consider it a matter of time before Fitch Ratings or Moody’s Investors Service also cut Brazil to a speculative rating, both agencies have signalled they are in no rush to make that move. This may give President Dilma Rousseff the time she needs to draw up and build a political consensus for unpopular budget cuts.

Schaeuble says European deposit guarantee plan will have to wait Dombrovskis said the commission would put out initial proposals in October for fleshing out EU plans for strengthening the economic and monetary union Julia Verlaine and Rainer Buergin

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European deposit-guarantee system will have to wait until financial-stability measures already on the books, such as common bank resolution rules, are fully implemented, German Finance Minister Wolfgang Schaeuble said.

Starting a debate on a euroarea deposit-guarantee system now would “put the cart before the horse,” Schaeuble told reporters in Luxembourg on Saturday after a meeting of European Union finance ministers.

One precondition for depositinsurance talks is for all EU countries to enact the Bank Recovery and Resolution Directive, which sets out rules for saving or shuttering lenders, Schaeuble said. It’s “primarily a question of the correct sequencing,” he said. His comments echoed a position paper prepared by the German government for the meeting.

This debate reignited on September 9, when European Commission President Jean-Claude Juncker said “a more common deposit guarantee system is urgently needed,” and promised a “legislative proposal on the first steps” by year-end.

In Luxembourg, Vice President

Valdis Dombrovskis said the commission would propose a twostage approach, starting with a “reinsurance scheme” for national systems and followed by a “fully fledged European deposit insurance scheme.”

‘General features’

Dombrovskis said the commission would put out initial proposals in October for fleshing out EU plans for strengthening the economic and monetary union. On a common deposit guarantee, the commission plans to set out “general features” first, then consult with member states before coming out with a legislative proposal, he said.

In its position paper, the German government effectively laid out a road map to a stronger banking union, including a common deposit guarantee.

In addition to implementation of BRRD, the paper lists steps such as strengthening the euro area’s Single Resolution Mechanism by agreeing on bridge financing for the SRM’s fund to ensure it has sufficient firepower as it’s gradually filled from bank levies over eight years to its target of 55 billion euros (US$62.4 billion).

Big banks reach settlement in swaps price-fixing U.S. and European regulators have also examined potential anti-competitive practices in the swaps market Jonathan Stempel

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welve major banks have reached a US$1.865 billion settlement to resolve investor claims that they conspired to fix prices and limit competition in the market for credit default swaps (CDS), a lawyer for the investors said on Friday.

The settlement in principle was disclosed at a hearing before U.S. District Judge Denise Cote in Manhattan.

The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc., HSBC Holdings Plc , JPMorgan Chase &

Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG. Other defendants are the International Swaps and Derivatives Association (ISDA) and Markit Ltd, which provides credit derivative pricing services.

Credit default swaps are contracts that let investors buy protection to hedge against the risk that corporate or sovereign debt issuers will not meet their payment obligations.

The market peaked at US$58 trillion in 2007, according to the Bank for International Settlements, but shrank to US$16 trillion seven years later as investors better understood its risks.

Bridge financing for the Single Resolution Fund was discussed by EU finance ministers in Luxembourg.

European Central Bank Executive Board member Benoit Coeure said “it’s very important that this new institution starts operating with full credibility.”

First step

“Let me again stress the urgency of the discussion,” he said.

Schaeuble said that payments into the resolution fund must begin before bridge financing is considered. “We can’t talk about credit lines and the like when we haven’t implemented in a first step what has been agreed.”

The biggest euro-area banks will put 2.8 billion euros this year into crisis funds intended to keep taxpayers off the hook for meltdowns in the financial industry. The size of the contributions that 33 of the largest euro-area banks say they are making suggest the SRM is on track.

The 2.8 billion euros those banks have set aside via national funds is equal to 5.1 percent of the SRM’s target volume.

Bloomberg News

American International Group Inc.’s CDS exposure was a major factor behind the 2008 federal bailout of that insurer.

In the lawsuit, investors including the Los Angeles County Employees Retirement Association and Salix Capital US Inc. claimed that the defendants’ activity caused them to pay unfair prices on CDS trades from late 2008 through the end of 2013, even though improved liquidity should have driven costs down.

They also said the banks tried in late 2008 to thwart the launch of a credit derivatives exchange being developed by CME Group Inc. by agreeing not to use new CDS platforms and pushing ISDA and Markit not to provide licenses to the exchange.

An ISDA spokeswoman said the group is “pleased the matter is close to resolution” and committed to helping ensure the safe and efficient functioning of the CDS market.

Representatives for the other defendants declined to comment.

U.S. and European regulators have also examined potential anticompetitive practices in the CDS market.

Investors’ lawyer Daniel Brockett, a partner at Quinn Emanuel Urquhart & Sullivan, said Cote gave both sides two weeks to iron out details before submitting a settlement for her preliminary approval.

Quinn Emanuel and Pearson, Simon & Warshaw are co-lead counsel for the plaintiffs.

Reuters

Business Daily | 15

September 14, 2015

Opinion Business

wires

China’s forex follies

Leading reports from Asia’s best business newspapers Barry Eichengreen

Professor at the University of California, Berkeley, and the University of Cambridge

TAIPEI TIMES Boeing Co is exploring whether to open a factory in China to complete work on its topselling 737-model jetliners, the first facility of its kind outside the US, according to a person familiar with the plans. The facility would perform tasks such as painting aircraft built at Boeing’s single-aisle plant outside Seattle, said the person, who was not authorized to comment publicly. Moving some tasks to China would free up production capacity for the 737, the world’s most widely flown airliner, as Chicago-based Boeing plots an increase to as many 60 planes a month from the current 42.

PHILSTAR The World Bank said it is mulling ways to further improve the ability of the Philippines to withstand natural disasters such as typhoons and earthquakes.

Rachel Kyte, vice president and special envoy for climate change at the World Bank, said the bank has been in talks with the Philippine government following Super Typhoon Yolanda in late 2013. “Together with the Philippine government, we are trying to build a much more robust, comprehensive, financial resilience system that will offer insurance and risk transfers at the national government level, local government unit level, and individual household level,” Kyte said.

THE KOREA HERALD Loans extended to the selfemployed by South Korean lenders this year have surged at the fastest clip ever, central bank data showed yesterday, adding to concerns over the country’s bulky and still growing household debt. Local lenders’ outstanding loans to the selfemployed reached 229.7 trillion won (US$193.7 billion) as of the end of August, growing 20.4 trillion won from the end of last year, according to the data compiled by the Bank of Korea. The increase in the eightmonth period is bigger than the previous record growth of 19.8 trillion won posted in 2007.

BANGKOK POST The government is developing a new incentive package for investment in green industries on Thailand’s eastern seaboard as part of a comprehensive package to stimulate the sluggish economy, Deputy Prime Minister Somkid Jatusripitak said. After launching measures to boost rural spending and financing for small and medium enterprises (SMEs), the country’s economic czar said his next target was to boost local and foreign investor confidence. He would do this by eliminating bureaucratic obstacles for businesses and providing incentives for both new and existing investments in environmentally-friendly industries in Laem Chabang, he said.

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n August 11, China devalued its currency by 2% and modestly reformed its exchange-rate system. This was no earthshattering event, but financial markets responded as if a meteorite had struck them.

The negative reaction is no mystery: China’s devaluation was a textbook example of how not to conduct exchangerate policy.

One of the government’s motivations was presumably to give a boost to China’s slowing economy. Although the service sector, which accounts for the majority of employment, is holding up relatively well, the country’s output of tradable goods, many of which are produced for export, is weakening sharply.

Chinese exporters are caught between the pincers of weak foreign demand and rapidly rising domestic wages.

Devaluation is the tried and true remedy for such ills. But a 2% change in currency values is too little to make much of a difference, given that wages in Chinese manufacturing are rising at an annual rate of 10%.

It could be that Chinese policymakers regard the 2% devaluation as a down payment – the first in a succession of downward adjustments. But, in that case, they violated the first rule of exchange-rate management: Don’t cut off a cat’s tail in slices.

The rationale for this rule is straightforward: If foreign investors expect that more currency depreciation will follow, they will rush out of Chinese markets to avoid further

Chinese officials should stop focusing on the SDR and start developing stable and liquid financial markets that are not subject to official manipulation

losses. Capital outflows will accelerate, financial conditions will tighten, and investment will suffer. In fact, this is precisely what China is experiencing.

A single large devaluation that gets the entire adjustment out of the way minimizes this risk.

Indeed, if investors expect the sharp improvement in competitiveness to lead to stronger economic performance, the currency will recover some of its lost value. Capital will flow in rather than out. Spending will rise rather than fall, which is precisely what China needs in the current circumstances.

Instead, by resorting to their traditional incremental approach, Chinese policymakers undermined confidence that they know what they are doing. Because they adjusted the exchange rate without describing their motives, they merely encouraged the belief that China’s economic performance is even worse than official data suggest.

Another interpretation of the August 11 move is that it paved the way for the renminbi’s inclusion in the basket of currencies that comprise the International Monetary Fund’s unit of account, Special Drawing Rights. In order to be included in the SDR basket, a currency must be widely used in international transactions.

The renminbi is already widely used to invoice and settle international merchandise trade, notably other countries’ trade with China itself.

But it is less freely traded in global currency markets, ranking only 9th overall, according to the Bank for International Settlements. This relatively low standing partly reflects China’s maintenance of controls on capital flows, which make it hard for financial-market participants to get their hands on renminbi.

But it is also a result of heavyhanded manipulation of the foreign-exchange market by the People’s Bank of China (PBOC), which makes changes in the price and availability of the renminbi opaque and uncertain.

The August 11 initiative may have been designed to alleviate this concern. In addition to devaluing, China announced that the opening “fix” – the

price at which trading of the renminbi would commence each day – would be largely based on the previous day’s closing market price. Because the PBOC had been setting the opening fix pretty much wherever it wanted, this change could be seen as moving the renminbi toward a more marketdetermined exchange rate.

If so, it is at most a very modest move in that direction. The PBOC continues to intervene heavily once the market is open, thereby limiting fluctuations in the dollar-renminbi exchange rate to less than 2% a day.

In any case, gaining admission to the SDR club is a poor excuse for wrong-footing the markets.

Given that the SDR, which the IMF uses to keep track of its own financial transactions, is of little practical importance, the Chinese authorities’ effort to add the renminbi to it amounts to little more than a vanity project. Inclusion would make no difference in terms of progress toward China’s goal of developing its currency into a first-class international and reserve currency widely used by private and official foreign investors.

If Chinese officials are serious about pursuing this goal, they should stop focusing on the SDR and start developing stable and liquid financial markets that are not subject to official manipulation. Only then will the international community embrace the renminbi as a proper international and reserve currency. The events of the last month suggest that China still has a long way to go.

Project Syndicate

16 | Business Daily

September 14, 2015

Closing Tianjin starts appraising apartments damaged by blasts

German carmakers party under China cloud

The Tianjin government has started appraising apartments damaged in last month’s massive blasts, local authorities said yesterday. The municipal government has selected Fangda Real Estate Appraisal Company to assess apartments in seven residential compounds, where more than 17,000 units were damaged by the August 12 blasts. The company will suggest whether an apartment requires rebuilding or buyback, said Huang Jisheng, general manager of the company. The appraised value will be compared with the contract value of the apartments, and the higher price will be used for buyback, he said. In addition, another 30 percent of value will be provided to residents as compensation, he added.

Flush with cash and confidence after years of rising sales, German carmakers are used to reaping industry-leading returns. But with Chinese demand abruptly slowing, the profit engine has begun to sputter, overshadowing the glitz of the Frankfurt auto show which opens tomorrow. For the home team of BMW, Daimler and Volkswagen, as well as European rivals such as PSA Peugeot Citroen, China’s downturn also threatens to weigh on already weak emerging markets and put a damper on recovering demand at home. Days before the show, IHS Automotive cut its full-year Chinese market forecast by 700,000 vehicles, from 4.4 percent to 1.4 percent growth.

China banks’ capital outflow may persist Central bank reserves declined by a record US$94 billion in August and authorities this week instructed banks to bolster management of foreign exchange transactions

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hinese banks saw net capital outflows of US$109 billion in the first quarter of 2015 and weak incentives to hold renmimbi positions indicate capital may keep trickling out, a BIS report said yesterday.

In its quarterly review, the Bank for International Settlements said that international banking statistics showed the money had flowed from banks inside China to overseas banks, putting downward pressure on the currency.

“These results offer clues as to what may happen in the third quarter, during which China changed its exchange rate policy,” BIS said China devalued the yuan - or renmimbi - on August 11 and has been spending heavily to hold the currency steady onshore as fears have grown that the economy is in worse shape than previously thought.

Central bank reserves declined by a record US$94 billion in August and authorities this week instructed banks to bolster management of foreign exchange transactions and

Yuan-denominated deposits held by the rest of the world at Chinese banks fell, amounting to a net outflow of almost US$109 billion

pay attention to suspicious transactions.

BIS said pressure on the yuan had been building since the first quarter as a cut in deposit rates and a slight depreciation in mid-March reduced incentives to hold the local currency.

“As a result, optionimplied currency volatility rose. In short, the interest rate differential narrowed and the cost of insuring against further

depreciation increased, reducing incentives for the long-renminbi position,” BIS added.

It explained that companies wishing to reduce yuan exposure had likely boosted hard currency deposits at Chinese banks - indeed central bank data shows such deposits grew by a net US$49 billion in the first quarter.

Meanwhile yuandenominated deposits held by

the rest of the world at Chinese banks fell, amounting to a net outflow of almost US$109 billion, the report added.

While yuan deposits partially recovered in the second quarter, thanks to exchange rate stability, the BIS said incentives to hold yuan were reduced again in the third quarter as authorities cut deposit rates and implemented a devaluation.

It added there was evidence of some offshore renminbi deposits being liquidated.

“At the height of the recent equity and exchange market turbulence, the offshore renminbi interbank interest rates in Hong Kong reached the unprecedented levels of 10.1 percent for the one-week and 8.6 percent for the one-month tenor, reinforcing reports of renminbi selling,” the report added.

Beijing considers special fund for ASEAN Internet cooperation

China issues state-firm reform plans

Russia draws in hordes of Chinese with ‘red tourism’

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hina will set up a special fund for Internet and telecommunications infrastructure to link China and ASEAN members, said Lu Wei, minister of the State Council’s Cyberspace Administration of China (CAC).

Lu made the remarks yesterday during the China-ASEAN Information Harbour Forum in Nanning, capital city of south China’s Guangxi Zhuang Autonomous Region, to discuss building IT infrastructure to connect China and Southeast Asia.

Lu said the fund will boost the technology levels in the region and promote the 21st Century Maritime Silk Road.

According to China’s plan, a base for the ChinaASEAN Information Harbour will be established in Nanning, consisting of 34 projects worth 20.9 billion yuan (US$3.3 billion).

There is still a huge digital gap between developing Asia and the Western world. A total of 700 million Chinese and 400 million people in Southeast Asia today have no access to the Internet, Lu Wei said. Accelerated infrastructure construction will bring about closer and more efficient cooperation for sharing information on finance, education, scientific research, health care and disaster prevention and relief, he said.

Xinhua

hina issued some details yesterday on plans to reform state-owned enterprises (SOEs), including the introduction of “mixed ownership” by bringing in private investment, and said it expected decisive results by 2020.

The guidelines, jointly issued by the Communist Party’s Central Committee and the State Council, China’s cabinet, will help improve corporate governance and asset management, the official Xinhua news agency said.

It will also help prevent the loss of state assets.

The government will not use forceful means to push the “mixed ownership”, nor it will set a timetable, giving each firm the go-ahead only when conditions are mature, it said.

State firms will be allowed to bring in “various investors” to help diversify their share ownership, and more state firms will be encouraged to restructure to pave the way for stock listings, Xinhua said.

China will push firms to merge and sells shares as part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades, according to documents seen by Reuters.

Reuters

Reuters

rawn by its Communist past and a visafree regime, Chinese tourists are flocking to Russia in droves as it develops new routes touting “red tourism”.

Nearly 410,000 Chinese came to Russia last year putting them on top of the list of foreign tourists, according to the federal tourism agency.

Their number has swelled 10 percent since 2013, when Germans topped the list of overseas visitors.

In the first half of this year alone, more than 200,000 Chinese tourists visited Russia.

Chinese tourists flock to Saint Petersburg chiefly to soak in the city’s revolutionary history as the scene of three revolutions.

In July Moscow and Beijing officially launched an ambitious “red circuit,” a tourist route tracing the life of Bolshevik leader Vladimir Lenin in four Russian cities.

The eight-day journey starts in Moscow, where tourists can gape at hammers and sickles on Soviet-era buildings and in the sprawling metro network.

Chinese tourists spent some US$1 billion in Russia last year, according to a recent estimate.

AFP