Riviera Events country manager unveils the secrets of the local MICE sector Interview Pages 6 & 7
Monday, August 28 2017 Year VI Nr. 1370 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro State firms
Schools and hospitals to be transferred from China’s stateowned companies Page 5
GDP
External demand leads MSAR growth Page 5
Coloane
www.macaubusiness.com
Government secures damaged shipyards Page 2
Tourism
MGTO pauses package tours Page 5
Self-reflection
Weather department to examine insufficiencies Page 5
Dealing with the chaos
Typhoons
The city is trying to overcome the havoc brought about by two typhoons and get back to normal life. After almost getting utilities back to a normal functioning status, the last remains of the chaos were dealt with during the weekend. Page 4
Tense relations
Industry answers
Operators have implemented measures to help workers and residents deal with the aftermath of the typhoons. Melco, MGM and Galaxy all issued press releases announcing relief measures.
Workforce Sands needed to manage a tense situation with workers complaining about excess hours of work during the typhoons. Local authorities were required to mediate to reach a solution. Page 3
Typhoon Pahkar tests the MSAR
Weather Another typhoon hit the city yesterday, testing the response of authorities to the disaster. With the memory of Hato still fresh, the weather bureau head acted promptly to prevent major problems. Page 2
China’s resilience shines again Casinos Page 3
HK Hang Seng Index August 25, 2017
27,848.16 +329.56 (+1.20%) Worst Performers
China Life Insurance Co Ltd
+4.17%
China Construction Bank
+3.41%
China Merchants Port Hold-
-2.08%
CK Infrastructure Holdings
-1.47%
PetroChina Co Ltd
+3.73%
Bank of China Ltd
+3.29%
China Mengniu Dairy Co Ltd
-1.84%
Galaxy Entertainment Group
-1.46%
Bank of Communications
+3.65%
AAC Technologies Holdings
+3.27%
Hengan International Group
-1.74%
China Overseas Land &
-0.90%
Bank of East Asia Ltd/The
+3.59%
BOC Hong Kong Holdings
+3.25%
China Resources Power
-1.60%
Want Want China Holdings
-0.77%
Industrial & Commercial
+3.47%
Hong Kong Exchanges &
+3.08%
China Resources Land Ltd
-1.49%
Power Assets Holdings Ltd
-0.73%
24° 27° 19° 27° 18° 22° 17° 20° 21° 23° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Secondary sector Industrial firms in the Mainland maintained a profit surge, underscoring the economy’s resilience even amid slowing factory output and investment, the nation’s statistics bureau said yesterday. Page 16
2 Business Daily Monday, August 28 2017
Macau Typhoon
Unwanted encore As the city continues to recover from the damage inflicted by Typhoon Hato, a second typhoon struck the MSAR yesterday Nelson Moura nelson.moura@macaubusinessdaily.com
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acau was hit by Typhoon Pakhar yesterday - only four days after the destruction caused by Typhoon Hato - with Signal 3 raised at five o’clock on Sunday morning and Signal 8 raised at 10.30am. The typhoon reached its closest distance from Macau at 8am, 40 kilometres southwest of the city, and arrived in Taishan in mainland China at 9am, with Signal 8 being raised shortly after. Typhoon Pakhar didn’t reach the intensity of Typhoon Hato - which caused 10 fatalities and more than 200 injured - with wind gusts
of almost 110 kilometres per hour and an average wind speed of 85 kilometres per hour on the bridges connecting Taipa to Macau Peninsula, the Meteorological and Geophysical Bureau (SMG) indicated. Ferry connections between Hong Kong and Macau were once again suspended, with ferry operators Turbo Jet and Cotai Water Jet gradually reinstating ferry services after 2pm yesterday. Chief Executive Fernando Chui Sai On held an emergency inter-department meeting at the Civil Protection Operations Center (COPC), with representatives from the energy, water and security departments of the MSAR, and even the Sub-Chief of the People’s Republic of China
Garrison, Coronel Gao Zhijun. In the meeting, the CE asked the service departments to pay more attention to preventing further damage to the areas seriously affected by Typhoon Hato, and urged them to resume cleaning and repair works after the Signal 8 was lowered. The Signal 8 was lowered to Signal 3 at 1pm, however the MSAR government maintained a yellow Storm Surge warning - which indicates a risk of flooding to half a meter high - until 3pm.
The waters return
Typhon Pakhar caused flooding in the same area affected in the Macau Peninsula previously, such as the underground passage near the Gongbei Border bus terminal,
A traffic signal warns Hong Kong road users of gale force winds during the passing of tropical storm Pakhar, yesterday. Source: Lusa
Sai Van Bridge near the Barra neighbourhood, the tunnel next to Sai Van Lake Square, a section of the under construction Light Rail Transit station in Barra and at the access point to Sai Van Bridge and the Jai Alai silo. In Taipa and Coloane flooding was registered near the Airport access road, at Estrada da Baía de Nossa Senhora da Esperança, Rotunda do Istmo and the section between the Coloane Thermal Power Station and the Airport avenue.
Assistance subsidies
A meeting was held yesterday between the President of the Macao Foundation, Wu Zhiliang, and the President of the Association of Electrical and Mechanical Engineers of Macao, Wu Chou Kit, to discuss specialised efforts to rebuild the city and provide subsidies for residential repairs. Last week, the Macao Foundation announced it would allocate MOP1.35 billion to help Macau residents affected by the typhoon. According to the association, due to the high number of residences damaged by Typhoon Hato, it is difficult to undertake all integral repair works in
The arrival of Typhoon Pakhar led to the halting of the clean-up efforts to help remove the mountains of garbage and debris resulting from the heavily flooded districts battered by Typhoon Hato. Just on Saturday, 2,600 tonnes of debris were collected. With some areas still lacking water supply, the changing rooms at four public swimming pools were opened to accommodate residents with no water supply.
‘record time’, with works concerning damaged doors and windows to be done by the Project of Special Assistance to Damages Caused by the Passage of Typhoon Hato. ‘Residents wishing to apply for a subsidy for these works must keep their payment receipts accompanied by the respective photographs justifying the damages suffered and the works carried out,’ the release announced. The Macao Foundation also said that due to the high number of requests received, a specialised group would be created to analyse and evaluate received requests and follow up on the subsidies for repair works.
Heritage
Shipyards on stand by The Cultural Affairs Bureau is assessing the damage to the shipyards in Coloane, pledging it will carry out structural tests and reinforcement works again once the winds calm down and the area is safe Sheyla Zandonai sheyla.zandonai@macaubusines.com
The complete destruction of one of the shipyards in Lai Chi Vun in Coloane village was officially confirmed to Business Daily by the Cultural Affairs Bureau (IC) last Friday. In a written response to our enquiries, the bureau informed that the shipyard which ‘collapsed completely’ under the strength of typhoon Hato last Wednesday was the one located on the highest ground at Lai Chi Vun. ‘All the other shipyards suffered damage to different degrees, some more severe than the others. However, the basic structures of the majority of the shipyards are still standing,’ the bureau told us. Last Friday, Business Daily published a story about the collapse of the shipyard and the imminent danger affecting at least two other structures “of falling anytime,” according to information provided to us at that time by the President of the Lai Chi Vun Villagers Association, David Pinto Marques. According to our source, IC staff had visited the site on the day after Hato hit Macau. IC also told us that after conducting an initial inspection, the bureau ‘immediately arranged emergency construction works to be performed as soon as possible to prevent further damage,’ with a task force
being mobilized on Friday to ‘do the most needed and timely repairs and enforcements.’ The bureau’s actions included first cleaning up the debris and loosened parts of the shipyards, in order to ‘eliminate potential human injuries,’ and then proceeding with the cleaning up of the parts and debris that had fallen on Estrada Lai Chi Vun. IC also claimed that further inspection of the site would be necessary when ‘conditions and safety are suitable,’ and that it would carry out structural tests and reinforcement works again only when ‘conditions allow and safety guarantees.’ That will now depend on further damage, if any, caused by a second typhoon, Pakhar, which hit the city on this past Saturday night and Sunday morning under signal no. 8. On Saturday, Business Daily received information from the ground that volunteers were working on the site to clean up the area before the arrival of Pakhar. Previously, the strengthening of the shipyard structures had been conducted by IC in mid-July when it ‘completed the installation of metal fences around [them] and provided temporary reinforcement of the structures in 10 of them,’ with the purpose of guaranteeing ‘the safety of the villagers’ as well as to ‘prevent the worsening of the facilities,’ IC explained.
Business Daily Monday, August 28 2017 3
Macau Casinos
Distributing wealth Gaming operators have announced several repair funds and measures to assist employees and the city’s recovery in the aftermath of Typhoon Hato Nelson Moura nelson.moura@macaubusinessdaily.com
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everal gaming operators announced a number of donations and initiatives to mitigate the damage caused by Typhoon Hato to residents and employees. Melco Resorts & Entertainment announced on Friday it would create a MOP30 million (US$3.7 million) cash relief fund to support employees, residents and restoration efforts. The gaming operator also halted the construction of its new property in Cotai, Morpheus, relocating 2,000 construction workers to assist in government-led repairs, while a group of 2,500 volunteer employees will also assist in cleaning debris and distributing water to residents. As with most gaming operators in Cotai, Melco also announced that its properties would conserve energy, with the usually brightly-lit areas remaining at minimum lighting in the nights after the typhoon. According to CEM, gaming operators were asked to conserve energy until the energy supply from mainland China was restored, with no mandate to do so after the supply was reinstated. “Melco has been working closely with the Government since the storm passed through the city earlier this week, including implementing power
conservation measures throughout all properties,” the Chairman and CEO of Melco, Lawrence Ho announced. Meanwhile, MGM Resorts International, MGM China Holdings Limited and its Executive Director, Pansy Ho, also announced a MOP30 million relief fund to repair the city. “Our company has experienced and overcome similar challenges in the past and I pledge the resources of the entire MGM family to work for a complete recovery,” the Chairman and CEO of MGM Resorts, Jim Murren, stated.
Supporting employees
In a letter issued yesterday by Galaxy, Dr. Lui Che Woo, Chairman of Galaxy Entertainment Group Limited, announced a ‘MOP60 million contribution including MOP30 million from the GEG Foundation plus a MOP30 million matching contribution from the Lui family to support the relief efforts of the people of Macau as well as our GEG team members during this challenging and stressful period including materials and resources of K Wah Construction Materials.’ ‘The community is rallying around each other and together we will all move forward with a very bright future,’ he added in the letter. Galaxy Entertainment Group also announced that with the company’s team members having faced many challenges at home due to personal
and family emergencies, and difficulties to meet their work schedules, the group would provide a Special Typhoon Allowance of MOP1,000 for all Operations Team Members, in addition to the current typhoon allowance of MOP100 and transportation allowance of MOP100. A paid absence for employees who couldn’t make it to work between August 23 and August 25 would also be provided, with no deductions made to their salaries.
“While GEG regrets that not everything was handled perfectly as there were emergency situations and many difficulties when Hato was hitting us strong, the company is also trying the best in order to provide assistance to its Team Members,” the company release stated. The group also gathered employees wanting to volunteer to provide water and food to residents in heavily damaged areas of the city.
Workforce
A night at the casino Workers from Sands China complained about shift scheduling that led to dealers being asked to sleep in the property and have a rest period between shifts of just or less than 10 hours, the issue requiring the intervention of local authorities and Sands China management Nelson Moura nelson.moura@macaubusinessdaily.com
A group representing employees from all Sands China Ltd.’s properties complained to the casino management about their work shift schedule during the days that Typhoon Hato and Pakhar hit Macau. In information revealed to Business Daily by three employees of The Venetian, dealers and supervisors stated that due to their inability to get out of the property during the typhoon period, they kept working overtime. In one case, an employee at The Venetian worked for 16 continuous hours, with a 10-hour rest period to go home and come back for his next shift. “I started working at 10pm [of August 26]. The property knew there would be a typhoon on the morning [of August 27] so they asked me to sleep in one of the ballrooms in the casino, giving me only one bad mattress to sleep on. I couldn’t fall asleep and had to start work at 8am [yesterday], finished at 3pm to have to work again at 10pm,” one of the employees that asked to remain anonymous told Business Daily. According to this employee, in previous typhoons, if dealers worked more than six hours of overtime they were provided with one
day of leave after. However, during Typhoon Hato and Pakhar, this policy wasn’t followed. Another employee told Business Daily that he started working at 11pm on August 26 until 2pm yesterday, with the property asking him to rest for only 10 hours.
Mediating discussions
The employees informed Business Daily that a group of workers complained about the issue and requested to discuss the issue with Sands China management. With the discussions not reaching a conclusion, Legislator Jose Pereira Coutinho was asked to mediate the meeting that even involved representatives of the Gaming Inspection and Co-ordination Bureau (DICJ), the
Judiciary Police (PJ) and the Labour Affairs Bureau (DSAL). “It was a labour argument with the Sands China management about the workers having the right to choose between going home to rest or having less hours of rest in return for a bonus (…) It’s very important for dealers to be able to rest, because in their function any mistake dealing cards can be discounted from their salary,” Mr. Coutinho told Business Daily. According to the Legislator, before the intervention, workers were “mandated” to come to work yesterday morning due to their shift scheduling, with the intervention allowing the workers to choose between going home or receiving a bonus.
“Most of the workers chose to go home since most of their residences or cars were damaged, or they had to take family members to the hospital,” the legislator told Business Daily. According to what employees told Business Daily, the issue led to the Chairman of Sands China, Wilfred Wong Ying-wa, intervening in the negotiations, with the bonus proposed by Sands China being valued at MOP1,000.
Sands responds
After BD contacted the company to receive their feedback, Sands China Ltd. said it regretted that some team members had expressed discontent regarding shift arrangements during the typhoon period. ‘Our overtime payment
and benefits are generous, exceeding the requirements of the Macao Labor Law. We pay a double hourly rate for the whole shift during typhoon periods, and team members also receive additional paid leave days as further compensation. We also ensure that team members receive at least a 12-hour break between shifts in order to allow sufficient time to rest,’ the company stated to BD, adding that ‘understanding the additional stress load on team members during these hectic periods, the company accordingly provides them with special transportation and accommodation arrangements, shower rooms, hot meals, water distribution, and other arrangements as needed.’ ‘With the unfortunate occurrence of two backto-back typhoons within a few days of each other, we witnessed team members’ tremendous effort and hard work. As a special token of our gratitude, we have decided to reward each of them with an additional MOP1,000 in pay,’ Sands China says. The statement concludes by saying that ‘this arrangement was made after direct dialogue between management and staff, and after the clarification of facts and any misunderstandings.
4 Business Daily Monday, August 28 2017
Macau Opinion
Sheyla Zandonai*
Restoration
Pouring in efforts to restore the city The super storm has brought together the society in efforts to repair the city
No fun That was a week to remember. Two typhoons in less than five days, a trail of destruction highlighting a sense of unpreparedness and impotence against the mighty power of nature, and the apathy of those in command. There is conjecture in town about the reasons as to why Typhoon Hato struck the city so harshly. Nature does operate within a degree of unpredictability for humans to foresee. But technological devices are in place to help mitigate unnecessary harm. Whereas they cannot guarantee the saving of all lives or avoiding some degree of material damage, they enable the triggering of preventive measures. But those, in turn, still require decision-making. Deficient information, a lack of a sense of urgency, and a slow response on the part of public bodies after Hato devastated the city, do not make for a flattering image. It also shows how poor coordination and the absence of a proper contingency plan have high costs, human and material. People are distressed. Disease may spread soon, if it has not started already. Exposure to natural catastrophes and disasters affects people on the ground regardless of colour, passport, or creed. But some people may be more protected than others due to favourable socioeconomic conditions. No wonder that the Inner Harbour and Coloane village were in tatters. If it were not for the civic action which formed on social media platforms, mostly through WeChat, residents of the area – where they also usually run small businesses – would still be much behind in their efforts of recovery after the violent tropical storm. As volunteers teamed up to help those most in need, solidarity brought some light to a scenario of loss and desolation. On Saturday, dozens of people could be seen hands on the job in the wrecked, dirty, and reeking streets of the low areas of the Inner Harbour, packaged with garbage and debris until that evening, when Pakhar, another typhoon, was already making its way to town. The Police, IACM, and the Red Cross were also there. This is a cruel, sharp contrast considering all the hype befalling the international city of entertainment and leisure. Nobody is having fun now. *Journalist.
Cecilia U cecilia.u@macaubusinessdaily.com
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T
he condition between the first day and the second day after the typhoon is completely different,” Hong Chi Ieng, deputy director of the international volunteer committee of Macao New Chinese Youth Association said to Business Daily. The Association has set up some 10 groups in accordance with different districts, to gather volunteers to help repair the city, as well as to offer help to those in need. With assistance from the Chinese soldiers stationed in Macau and the clearing of many main roads, the deputy director said the volunteer groups switched their attention to delivering resources to those in need on the second day. “We have received resources granted by named or anonymous firms and individuals,” reported Hong. “We are also arranging vehicles to remove garbage and to deliver resources.” Aside from households and the elderly, centres and schools had also approached the group for assistance, revealed the deputy director. Hong said that currently the main Wechat group has exceeded the limit of 500 members and around 200 members for each smaller Wechat group.
“We set this up on the Internet at the beginning, but then many people noticed us working on the street and asked to join the volunteer work,” said Hong. When asked about the challenges, Hong indicated that a shortage of trucks is the major issue. “There are too many areas which were severely affected by the storm, we might have enough people but we don’t have enough trucks to move the rubbish and resources,” Hong told Business Daily. Meanwhile, the deputy director disclosed that limited time for people to help is another difficulty.
Helping hands from the central gov’t
The central government approved a request and sent 1,000 Chinese soldiers stationed at the garrison to assist the city to clear roads blocked by garbage and trees, starting on last Friday. The Chief Executive (CE) made a request to the central government in accordance with the MSAR Basic Law and the Troops Garrison Law for obtaining assistance from the Chinese soldiers stationed in Macau. Government Spokesperson, Mr Chan Chi Ping said yesterday
“There are people asking whether they can volunteer after they finish work or during the night,” revealed Hong. “But since not all areas in the city have power restored, it would be quite dangerous to do the volunteer work during night time with limited light.” Instead, the group is doing smaller scale tasks such as giving out bottled water at night time. “During the first day, we were more like the main organiser in doing the volunteer work, but as the government is taking the lead to help restore the city, we are assisting more than leading the work,” said Hong.
that “the Government strongly condemns all baseless and irresponsible comments on the Internet criticising typhoon relief efforts by the People’s Liberation Army (PLA) Macao Garrison,” the official information service GCS said. GCS also said that the Judiciary Police had initiated an investigation of such comments. “Internet users should not spread such rumours,” stated the Commissioner-General of the Unitary Police Service, Mr Ma Io Kun, who also commands the city’s coordinated relief effort.
People’s Liberation Army (PLA) Macao Garrison in cleaning works on Friday
Tourism
MGTO calls to pause package tours In order to free-up resources to help the city recover after being hit by Typhoon Hato, the Macao Government Tourism Office (MGTO) has called for a halt to package tours to the city starting from last Friday until next Thursday August 30. MGTO held a meeting with travel agencies last Friday to request the temporary suspension of tour group arrangements to the city.
Given the instability of the city’s water and power supply, as well as the damage to facilities and the blockage of roads, the Office is urging visitors to reconsider their upcoming trips to the city. Some 20 hotel establishments were affected by the typhoon, including properties of the six gaming operators such as Grand Lisboa and MGM Macau.
On the other hand, the Tourism Office also scrutinized local hotel room prices but did not find any cases of unreasonable room price escalation, however some online booking websites were found to have raised their room prices. Penalties will be imposed on those who enact irregularities in the setting of hotel room prices, pledged MGTO.
Press
Hong Kong journalists refused entry Four Hong Kong journalists wanting to report on the Typhoon Hato aftermath were denied access to the MSAR on Saturday, newspaper South China Morning Post reported. According to the newspaper, one
of its photographers was stopped and detained by Macau authorities, on the grounds that he “posed a risk to the stability of internal security”. In a statement sent to Business Daily, the Macau Portuguese and English Press
Association (AIPIM) said it found the explanation by the Macau authorities to be ‘incomprehensible and unsatisfactory’ adding that the decision ‘tarnishes the international image of the SAR regarding press freedom’. N.M.
Business Daily Monday, August 28 2017 5
Macau
Typhoon
SMG deputy head: will review insufficiencies The deputy head also discussed the conditions when the typhoon hit the city and the system for forecasting storms Cecilia U cecilia.u@macaubusinessdaily.com
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e will h av e a full review of our insufficiencies,” said Leong Ka Cheng the deputy director of Meteorological and Geophysical Bureau (SMG) during a press conference on Friday at the Civil Defense Action Centre. Th e d e p u t y d i r e c t o r
admitted that there was a lot of room for improvement in regards to how the bureau dealt with Typhoon Hato, which hit the city on Wednesday. The super typhoon had caused 10 deaths in Macau at the time this story went to print, and the city has suffered from chaotic conditions, including damage to buildings and blackouts of power and water supply. Many residents have denounced the SMG for not
giving sufficient warnings and for the late hoisting of higher typhoon signals. When asked by the press about the reason for the time gap in hoisting signal 8 between Hong Kong and Macau, Leong explained that it was due to the different geographical locations between the two cities. “Most of the typhoons including Typhoon Hato and the coming Pakhar are both coming from the sea near the Philippines, from east
to west,” said Leong. “Hong Kong is located on our east, and they have a bigger sea surface [...] Most of the previous typhoons affected Hong Kong more because these typhoons usually strike Hong Kong first.” Leong further explained that SMG had decided to hoist signal 8 at 9 am on Wednesday when the information collected on the bridge (Ponte de Amizade) showed the wind force had reached the criterion of a signal 8 level.
“At 7 am there was still a significant distance of the wind force level between signal 3 to signal 8,” said the deputy director. “We don’t just depend on the bridge, we did inform the public at 7 am that we would hoist signal 8 at 9 am” The SMG deputy head pledged that more attention will be given to the alarm system, as well as ways of informing the public, in particular the content, frequency and approach.
Economy
Continuing rise The second quarter of this year saw the MSAR’s gross domestic product go up by 11.5 per cent yearly Nelson Moura nelson.moura@macaubusinessdaily.com
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acau’s gross domestic product grew 11.5 per cent yearon-year in real terms in the second quarter of the year, according to data published by the Statistics and Census Bureau (DSEC). ‘The economic growth was attributable to the increases in exports of services and private consumption’ reads a comment by the DSEC on the double digit growth. External demand continued to expand, pushing up exports of services by 18.8 per cent, of which exports of gaming services and other tourism services grew by 19 per cent and 22.1 per cent yearly, respectively. Meanwhile private consumption expenditure saw the largest increase, with stable economic conditions, easing inflation and favourable
employment leading to a 3.4 per cent year-on-year increase, higher than the 1.6 per cent rise in the first quarter. Second quarter household final consumption expenditure in the domestic market and abroad increased yearon-year by 2.5 per cent and 5 per cent, respectively. However, government final consumption saw a decline, going down by 2.4 per cent between April and June of this year when compared to the same period last year. This decrease was caused by an 11 per cent yearly fall in net purchases of goods and services, while compensation paid to employees went up 2.7 per cent year-on-year.
Slow investment
The level of investment registered a slight slow down, with the ‘completion of large-scale tourism and entertainment facilities, gross fixed capital formation and the gauge of
investment’ leading to a 2.4 per cent yearly decrease. Despite the slowdown, government investment rose considerably by 73.1 per cent yearly, due to an 84.1 per cent ‘surge’ in public construction investment. With private construction investment and equipment investment going down by
7.3 per cent and 20.2 per cent, respectively, private investment dropped 8.8 per cent yearly.
More visitors, more money
The hike in visitor arrivals and higher visitor spending between April and June drove the year-on-year growth rate
of total exports of services up by 18.8 per cent yearly, with service imports going up 15.1 per cent year-on-year. In the first half of this year, the Macau economy grew by almost 11 per cent yearly, with imports and exports of goods increasing by 5.5 per cent and 3.8 per cent, respectively.
6 Business Daily Monday, August 28 2017
Macau Events
Be my guest With large and very good venues and facilities, the events industry is bound to continue flourishing in Macau. Striking a good balance between local experience and international credentials is the mandate of Riviera Events, a company with 12 years of experience in the Chinese market, and with an office just recently opened here. The Country Manager Macao for Riviera, Nicolas Porembny, a Polish-French man who grew up in South America, talked to Business Daily about prospects for development and growth, and the thrill of being in constant search for creative solutions and tailor-made designs. Sheyla Zandonai sheyla.zandonai@macaubusines.com
H
ow long have you been in China and how did you get involved with Riviera Events? I came to China about three and a half years ago with a German hotel chain called Kempinski, and as Riviera Events was organizing an event for the chain, I got in touch with the company and was immediately interested in what they were doing. So I entered the company and have been working for them for three years so far. I was in Beijing before, as Area Manager of the Beijing office in charge of the North China area. It was a very interesting experience as Beijing is a very dynamic city, with a lot of corporate clients, and event activation. The team was very strong too, we did a lot of business, and the team grew very quickly. After that, they gave me the opportunity to come to Macau, and take over the Greater South China area, so I’m now in charge of the Guangzhou, Shenzhen, and Macau offices, having overseen the opening of the office in Macau. We just opened it four months ago in Macau, and we are
now fully operational. [The office in] Guangzhou was opened many years ago, and Shenzhen was opened last year. Were you trained in the hospitality and events management field? I did a hotel management school, in one of the most renowned schools in Spain, a Swiss school which has a branch in Spain. Obviously, in hospitality, you do a lot of events, so I learned and specialized in event management during my studies. I was interested in the event industry from a long time ago. I was working in hotels and, of course, hotels are also venues for events, and you are all the time working or connected with events. I spent three years in Spain, mainly with Kempinski. Before that, I did management trainees in Poland, in Monaco, and finally I decided to come to China, with Kempinski, which was developing a lot of hotels in China. I had fallen in love with Asia a long time ago. When I came, I found another industry. Even though I’m interested in hospitality, I wanted to expand my knowledge and to do something creative, and events is a creative industry. So I went for it, took the
chance, and here I am, very happy to have taken that opportunity. Why did you decide to establish the office in Macau and not in Hong Kong? Because Hong Kong is a city that is very competitive, which is good in a way, but for us it did not make too much sense. First, Hong Kong is expensive, and there are lots of events agencies in town, specialized in different kinds of markets, including our market. In Macau, there are not that many agencies as ours. There are a few events companies that are local, well, that are managed by locals, and they do most of the events for the government, they have the connections, but there are none or maybe only one or two event management companies that are more international. So, we saw the opportunity to open something in Macau and, obviously, we know that Macau is a very dynamic city, where the MICE industry is also growing. We had analysed it a bit in advance. For instance, this year, I think that for the first quarter there were some 360 MICE events in town, which is 50 more than last year. It is a growing market, and I think that Macau has the venues and hotels with
very good MICE facilities, so it is an ideal place for corporate clients to come and do events. Being a new company, how do you come here and develop a market for yourself? The good thing is that, and we all know, Macau has a lot of hotels. And as we are a company now which is 12 years old and we specialize in the luxury and travel industry, which comprises hotels, we have a lot of contacts within the hospitality industry. Those people in the hospitality industry move every second, but they like to stay in the same region. They might stay in Asia for ten years or more, but they will keep moving, so we have contacts with most of those international companies from previous work in mainland China. What was the first event you organized here? The first event we did here in Macau was the Hotelier Awards, which happened in the Parisian, last year in December, a very successful event. The Parisian team was incredible, and we knew that the Parisian had opened just a few months before, so the facilities were amazing. And the crowd that attended the event was very interesting too, a lot of key people in the hospitality industry. The second event we did was the MECC, the Macau European Chamber of Commerce Gala dinner, which happened in the Grand Lisboa Hotel, and was attended by the members of the European Chambers of Commerce. How do you develop your marketing strategy? We have a lot of contacts, as I mentioned before, and our marketing strategy is quite broad including online marketing and a large database, in addition to a portfolio with case studies of different markets, including hotels, travel industry, but also corporate, institutional. After 12 years, we have good credentials, and know many people. We can reach out to them through newsletters, we have a very good database on WeChat, also some followers on Facebook, Linkedin. So our online market is quite good and our website is also very attractive. What are the main challenges you have encountered in opening the office and working here, compared to other places you have worked before? We have 12 years of experience in mainland China, so we know how it is to open an office there, whereas in Macau, it has its own structure and own ways of doing things, so it hasn’t been extremely challenging, and rather interesting, but it still is a different place. You need to adapt yourself, you need to understand how it works, you need to ask questions, deal with all the paperwork, be patient. The whole process of opening the office took maybe a month. You have to pass through lawyers, then apply for all the paperwork, open a bank account, and after that you have to start recruiting the staff.
Nicolas Porembny, the Country Manager Macao for Riviera
What about the staff, how many people do you have in-house on a fixed basis? At the moment, we have three staff
Business Daily Monday, August 28 2017 7
Macau plus one trainee. We are getting an additional staff at the end of the month, so we will have four fulltime staff plus one trainee, who are basically the operational staff. They are the ones that go to talk to the clients, and deliver events in a reactive way, on site. But you cannot do an event properly with only an operation team. You also need the designer and creative departments, marketing, Human Resources, and so on, and those non-operational teams are based in Shanghai. I mean, it is still our company, our staff, but we get their help. We are more of a satellite office. The headquarters are in Shanghai. However, as the Greater South China area [Guangdong, Shenzhen, and Macau offices] is developing very fast, and we are creating a design hub here in the south, we will be able to not rely only on the design and creative team in Shanghai. We also have satellite designers in each office, not in Macau, because we just started, but we do have a graphic designer in the Guangzhou office, which is about 15 plus staff. Another good thing is that, as we are an ‘area,’ we can combine forces. If we need operational help for an event in Macau, we can easily get help from our team in Guangzhou or our team in Shenzhen. Your in-house staff is in charge of contacting existing and potential clients and promoting what you do? That’s right. Sales and management, talking to clients, and discussing with them what are the requirements and the needs for the events, building proposals. And the project team is in charge of finding vendors, and then the show team is in charge of the event’s execution. So during the events, to co-ordinate that everything goes smoothly as per the schedule that all the artists or any
performers are on time, to manage all this. The project management team is in charge of finding those vendors. We do need to use vendors from Macau for the production, if we need to build some backdrops, or a stage, or some decorations, if we require audiovisuals, so we need to get vendors from Macau that are able to support us with this.
“When you go to an event as a guest, you expect to see something interesting. And usually to see something interesting, you need to see something new” Would you say it is important to be working with people who know the ways things work here? Exactly, even though we are a company who comes from mainland China, our office is composed of locals, we work with them, and we do have the local experience. So we could be considered as a local event company as well. Our company has been registered as a Macau company as well. So basically we are a local company with international background, because it is composed of a good mix or a good balance of foreigners and locals. In regards to the casinos, do they often have their own events teams or do they sub-contract services? That’s something very interesting in Macau. The venues and the casinos,
and the hotels, and their venues and facilities are so large, and their need for events is so regular and important, because they need to entertain their guests, they have their own events team, who organize those events, find vendors themselves, and so on. But sometimes they do require help from event agencies. Who would be your main client-base target in Macau? We have three targets. We have first local companies, for instance, the chambers of commerce, any corporate clients, from medium size to large size. Our business model is made in such a way that we are able to deliver small and medium-sized and even larger events. Maybe many of these renowned international events agencies only deliver large-scale events. We can do smaller events too. So, that’s one market, the local one. We are also trying to reach out to hotels and casinos. Even though they have their own event teams, I believe it could be beneficial for them if they use us, because we are constantly developing new ideas. That’s our second target. And the third target would be all the corporate companies from abroad coming to Macau and using the facilities here, that would need an agency for their events. Because the events teams in all those casinos, they might be able to help all those corporate clients coming to deliver events here in Macau, but usually they are more in charge of their internal events. So those international corporate clients most likely need an event agency and having the knowledge, having the local experience, as we now do, but still having our international and high quality background and expertise, we can easily help those larger international corporations with their events. Where are the most interesting trends coming from nowadays in
the events industry? When you go to an event as a guest, you expect to see something interesting. And usually to see something interesting, you need to see something new. That’s why it is important to deliver new things in an event. You have to have a team that is searching for those new ideas. Obviously now with the technology and the Internet, we can easily access ideas, or browse those ideas online, but you still need to have a creative team that does not only copy and paste, but that can tailor-make new things. We have our creative director in Shanghai, and his team is constantly looking for new trends and new concepts, and every time we have a new project, they will be involved in creating a new theme, and tailor-making it. We tailor-make basically every event. Finally, we also have a passion for digital integration. China is a leader when it comes to digital innovation. For us, having companies based in China, it helps us to be all the time tuned into the latest trends. We still do not have a creative designer in Macau, but everybody in the company is supposed to be looking for new trends as well, or supported to be looking for new trends. It is something that the company itself is pushing forward all the time, to search for new things. Each one of the employees are involved. What are the prospects for growing here and what is your focus right now? Now the focus is to make ourselves known in the market as we are a new company, and then grow as an area, so make sure that we can share resources between all the areas, the Greater South China, and look for opportunities, including surrounding areas like Hong Kong, which we can easily access by ferry. advertisement
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8 Business Daily Monday, August 28 2017
Greater China Reform
State firms to shed hospitals and schools in bid to streamline Reform of SOEs to reduce inefficiencies and create a competitive state sector remains a central part of the current administration’s efforts to upgrade and rebalance China’s economy
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ospitals and schools run by China’s governm e n t- o w n e d firms will be revamped, closed or transferred to local authorities by the end of next year, regulators said late on Friday, as part of efforts to reform the country’s state sector. The State-Owned Assets Supervision and Administration Commission (SASAC) said in a notice that hospitals and schools operated by state-owned enterprises (SOEs) should be transferred to local authorities by the end of 2018. Stripping SOEs of the services would help “lighten the social burden of SOEs” as well as increase efficiency of China’s education and medical services, SASAC said. Normal schools from preschool to universities should be transferred to local authorities to be run, and schools facing difficulties should be
merged, the notice said. Vocational schools could still be run by SOEs and the establishment of an education group to organise the management of these schools would be encouraged. Hospitals should also be transferred to local governments unless they are uncompetitive, in which case they should be closed; any hospitals continued to be run by SOEs should be operated as non-profits, SASAC said. The country’s heavily indebted state-owned firms, most of which have been carved out of state bureaus, have been under pressure to ditch schools, hospitals, retirement homes, fire fighting services and other “social functions” in order to cut costs and focus on their core businesses. China’s state firms have traditionally been obliged to provide lifelong employment and cradle-to-grave social
welfare as part of the “iron rice bowl” system. But with thousands of companies tottering on the brink of bankruptcy in the 1990s, the government embarked on reforms in order to reduce their burden.
Reform of SOEs to reduce inefficiencies and create a competitive state sector remains a central part of the current administration’s efforts to upgrade and rebalance China’s economy. But progress has been
hindered by concerns that trimming operations of SOEs will disgruntle thousands of workers who expected their positions to set them up to receive healthcare, pensions and schooling for them and their families for life. Reuters
Education
School dropouts a growing concern for economy in transition Seventy-six per cent of China’s labour force did not attend high school, based on figures from the country’s last census in 2010 Sue-Lin Wong
Every day after lunch, Qu Yexiu used to potter around her house in north west China doing housework and looking after her two-year-old grandson. Now, every day after lunch, Qu and her grandson visit the newly opened early-childhood development centre in their village of Huangchuan in the mountains of Shaanxi province, where he can play with other toddlers. “Things are better now that we have this village centre,” said Qu, 56. She looks after her two grandchildren while their parents work and live in nearby Anhui province. The other grandchild attends a preschool. “My grandson has other kids to play with and I can chat to the other grandparents.” Early-childhood development centres like the one in Huangchuan may be the answer to one of China’s biggest challenges - reducing the number of children who drop out of school in rural areas. Children in rural areas, where around half of the population lives, have far lower cognitive and social skills compared to their urban counterparts, setting them on a path of dropping out of school before they can even say their own name. Poor education was not such a problem for previous generations of Chinese who spent their lives on the farm or in factories but it could now have far-reaching consequences. The government wants to
push the country up the value chain, so the world’s second-largest economy needs a higher-skilled labour force if it wants to transition to a higher-value economy. “This is the biggest problem that China faces that no one knows about. This is an invisible problem,” said Scott Rozelle, co-director of the Rural Education Action Program (REAP), a research and policy organisation based at Stanford University, which p a rt n e rs w i th Chi n es e universities. “China has the lowest levels of human capital (out of all the middle income countries in the world today). China is lower than South Africa, lower than Turkey. We think that’s related to when they were babies, they didn’t develop well,” Rozelle said. China’s National Health and Family Planning Commission is working with economists like Rozelle and his colleagues to provide early childhood development opportunities to babies and toddlers in rural China. Seventy-six per cent of China’s labour force did not attend high school, based on figures from the country’s last census in 2010, according to an academic paper co-authored by the Asian Development Bank and published last year in the China Quarterly, an academic journal. The gap between rural and urban China is also big. Only 8 per cent of rural Chinese in the labour force in 2010 had attended any high school, compared to 37 per cent of urban Chinese, according to
the China Quarterly article. The disposable income of a person living in rural China was RMB6,562 in the first half of 2017, compared to RMB18,322 for someone in an urban area, according to China’s statistics bureau. Data from China’s Ministry of Education shows 94.1 per cent of students graduated from middle school and 92.5 per cent of students graduated from high school in 2015. The Ministry of Education declined to comment immediately when asked about the differences between their statistics and those based on the 2010 census data. One factor slowing down a toddler’s development is the absence of their parents,
education experts say. Millions of rural Chinese parents migrate to cities to live full time because they can earn much more than they could by staying in their home villages. That’s where early development centres in China could help. Under the programme, there are 50 pilot centres in villages and towns in rural China where children from six months to three years old can experience books, play and interact with other children. REAP thinks 300,000 centres are needed across China and the most appropriate entity to head this up would be the government. Cai Jianhua, a government
official at China’s National Health and Family Planning Commission, wants the government to allocate 0.1 per cent of its GDP - RMB70 billion - to roll out these centres across the country. Cai says the government has not made a funding commitment, but it has stepped up investment in its youngest citizens in recent years with, among other things, free health checks and immunisations for babies. Unless China has a significant number of Chinese with “broad experiences and deep knowledge,” China’s economy will struggle to develop. “The reality is we need smart people if we’re going to be competitive in the 21st century,” said Cai. To be sure, there are many reasons for low numbers of students attending high school in China, according to the same academic paper published in the China Quarterly. These include restrictions on population flows because of China’s residency permit system, children who leave school early to work and support their family, and poor investment in rural healthcare, according to the paper. Closing the education gap between urban and rural China will help close the inequality gap, say economists who study education. If the gap isn’t reduced, it will be more difficult for President Xi Jinping to achieve his goal of eradicating poverty and turning China into a “moderately prosperous society” by 2020. Reuters
Business Daily Monday, August 28 2017 9
Greater China Expansion
In Brief
JD.com invests in Indonesia’s Go-Jek amid SE Asia push Julie Zhu
JD.com Inc has invested in Indonesian ride-hailing startup Go-Jek, people familiar with the matter told Reuters, in the latest move by China’s second-largest e-commerce firm to tap growth in Southeast Asian mobile-based services. Go-Jek, whose investors include global private equity firms KKR & Co LP and Warburg Pincus LLC as well as venture capitalist Sequoia Capital, has raised about US$100 million from JD.com, one of the people said. The startup is raising up to US$1 billion from existing and new investors in its latest funding round and has a pre-money valuation of about US$2.5 billion, the person said. The people declined to be identified as the financing plans are not public. JD.com and Go-Jek declined to comment. Indonesia currently accounts for almost all of JD.com’s investments outside China, which include an e-commerce platform and travel startup Traveloka. JD.com’s investment in Go-Jek follows that of Chinese social media and
online entertainment firm Tencent Holdings Ltd , which is also an investor in JD.com. Reuters reported last month that Tencent had invested US$100 million to US$150 million in Go-Jek.
Key Points JD.com invests about US$100 mln in Go-Jek -source Go-Jek pre-money valuation about US$2.5 bln -source Tencent also in talks for further Go-Jek investment - sources The people said Tencent is also in talks with Go-Jek for further investment as a strategic investor. Tencent did not immediately respond to a request for comment. Investment in Southeast Asia by some of China’s largest tech firms point to ambitions to boost their presence in a region that many expect to produce the next batch of high-valued tech startups. Alibaba Group Holding Ltd and Didi Chuxing, China’s largest ride-hailing firm, have also been investing in
Southeast Asia, home to more than 600 million people and some of the world’s fastest-growing economies. Didi, along with Japan’s SoftBank Group Corp (9984.T), last month led a US$2.5 billion financing round of Singapore-based Grab, one of GoJek’s biggest rivals in Southeast Asia. Go-Jek, which began as a ride-hailing app for motorcycle taxis, mainly operates in Indonesia, the region’s most populous country, which has grown to be a large potential market for Grab and Uber Technologies Inc. Amid fierce competition in ride-hailing, Go-Jek is also developing food delivery business that a separate person said yields a much higher margin than car-hailing. Its mobile payment business, Go-Pay, is growing rapidly as it is complementary with other Go-Jek offerings, the person said. People close to the matter previously told Reuters that Go-Jek aims to close the current funding round in the third quarter. Online technology newspaper The Information first reported JD.com’s Go-Jek investment earlier on Friday. Reuters
Foreign Minister
Confident “silver fox” steps into diplomatic limelight Wang’s reputation for standing up for Chinese interests has won him a growing profile on social media “Support Minister Wang’s performance! I hope China can produce even more politicians of that caliber,” wrote one poster called “Storm Destroyer”. There is even a page on Douban, a site better known in China for movie reviews, for people to express their admiration for his looks. State media, often kept on a tight rein in making personal comments about Chinese officials, has been known to call him “shuai da shu”, or “handsome uncle”, equivalent to the term “silver fox” in English for attractive older men. Neither the Communist Party’s Organisation Department, which oversees personnel decisions, nor the State Council Information Office, responded to questions about Wang’s promotion prospects.
Ben Blanchard and Christian Shepherd
He has been likened to a “silver fox” in China’s state media. Online, his looks and staunch defence of Chinese interests has won him a loyal following. Foreign diplomats say he can be suave and charming, as well as tough. Foreign Minister Wang Yi, 63, China’s public voice on international affairs, cuts a colourful figure next to China’s usually staid diplomats, speaking out on the South China Sea and defending Beijing’s position on North Korea. He has been taking an increasingly high profile as Beijing becomes more assertive on the global stage. Diplomatic sources believe the well-briefed and confident Wang is destined for bigger things, and could take over later this year as China’s top diplomat from State Councillor Yang Jiechi, 67, Wang’s predecessor. Yang outranks Wang but tends to avoid the spotlight and is widely expected by foreign diplomats to retire around the time of this autumn’s Communist Party congress. “He’s China’s star,” said a senior Beijing-based Asian diplomat, who has met Wang several times. A career diplomat, Wang had been seen as another low-key Chinese official until a 2013 encounter with Australia’s foreign minister, Julie Bishop. In front of reporters in Beijing, he accused Canberra of “jeopardising bilateral mutual trust” in a dispute over the East China Sea, the type of message for a fellow diplomat usually shared behind closed doors. A senior Australian official later described it as the rudest thing he’d encountered in 30 years of diplomacy, Australian media reported. Wang, who with his salt-andpepper hair stands out among aging Chinese officials who often favour jet-black dye jobs, has been on a roll since then, raising eyebrows with his bluntness. “Owing to China’s traditional economic ties with North Korea, it will mainly be China paying the price for implementing the resolution,” Wang said this month after the United Nations imposed new sanctions on Pyongyang.
Wang Yi, China’s of Foreign Minister
A former ambassador to Japan, Wang speaks Japanese but is less confident in English. He won plaudits in domestic media last year for standing up for China after losing his temper during a visit to Canada when pressed by a reporter about human rights, saying the question was unacceptable and calling her arrogant and irresponsible. “Other people don’t know better than the Chinese people about the human rights condition in China,” he said. In Beijing, he presides over occasional promotional events for Chinese provinces at the Foreign Ministry, inviting members of the diplomatic corps to hear about China’s advances in places like Inner Mongolia. A western diplomat said the briefings were meant to show he also had China’s domestic interests at heart. “He’s very well briefed and can talk in detail about issues without referring to notes. But he can also be very tough,” added the diplomat, who has been in closed-door meetings with Wang about North Korea, the South China Sea and other subjects. Wang’s reputation for standing up for Chinese interests has won him a growing profile on social media. After his outburst in Canada, he got hundreds of supportive posts on Tianya, a popular online bulletin board.
Man about Manila
Wang also appears unafraid to talk to reporters, rare in a country where many officials refuse to answer questions at media briefings. At the Association of South East Asian Nations meeting in Manila this month, Wang took centre stage, engaging with journalists in multiple daily appearances. At the meeting, he wooed - or shunned - other diplomats to hammer home China’s positions on North Korea and the South China Sea, giving time to his North Korean counterpart, while a meeting with his Vietnamese opposite number was unceremoniously cancelled. Wang spoke to reporters five times on his first day of bilateral meetings in Manila. He gave public briefings on both days of the event and was quick to weigh in on breaking developments. Asked why Wang was going to such lengths to speak to the media, one Chinese official said it was a matter of reputation: “We need to make sure China’s voice is heard.” After meeting Foreign Minister Taro Kono of Japan, Wang said that his Japanese counterpart’s comments on the South China Sea had “disappointed” China. “I told him he had very done a good job of accomplishing the task the United States set him,” he told reporters dryly. Reuters
Courier casualties
Shanghai police warn delivery companies Chinese police in Shanghai have warned food delivery companies that they need to do more to ensure couriers follow traffic regulations after 76 were killed or injured in the city in first half of 2017, state media said on Saturday. Services ordered via smartphone apps have shot up in China in recent years as the country’s web giants jostle for a lead in burgeoning on-demand industries, making everything from haircuts to cinema tickets easily available online. Meals ordered online and delivered by courier are a key battleground, with the industry due to reach RMB300 billion (US$45 billion) in 2018, according to Meituan-Dianping. Sanctions
Beijing bans new business with North Korea China’s commerce ministry late on Friday banned North Korean individuals and enterprises from doing new business in China, in line with United Nations Security Council sanctions passed earlier this month. New joint venture enterprises, new wholly owned businesses and the expansion of existing entities involving North Korean individuals or companies are prohibited in China, according to a notice released on the ministry’s website. Applications for Chinese new or expanded investment in North Korea by Chinese companies would not be approved, the ministry said. The new measures take effect immediately. Results
CITIC Securities H1 profit slips CITIC Securities Co Ltd , China’s biggest brokerage, said on Friday its first-half net profit fell 6 per cent, hurt by lacklustre trading. Net profit for the six months to June fell to RMB4.9 billion (US$735 million) from 5.24 billion a year earlier, the company said on Friday. That roughly matched preliminary results released in July. Brokers in China have been struggling after a stock market boom came to a turbulent end in 2015. Depressed trading on the Shanghai and Shenzhen markets has prompted some brokerages to compete in cutting commissions and staff benefits have been scaled back to keep costs in check. Reform
Regulator hints at no more special treatment after Unicom deal China’s securities regulator said that company ownership reform plans must strictly abide by existing regulations, hinting there will be no repeat of the special treatment given to China Unicom in its US$11.7 billion restructuring. The China Securities Regulatory Commission (CSRC) said in a statement on Friday that it would “continue to support mixed-ownership reforms” of state-owned firms. However, it warned major shareholders that “any items related to the capital markets must strictly stick to existing laws, regulations and rules published by the securities regulator”.
10 Business Daily Monday, August 28 2017
Greater China M&A
R&F Properties roars back into the spotlight on Wanda deals Partnering with luxurious hotel management groups such as Hyatt Hotels and InterContinental Hotels, R&F owned 34 high-end hotels across China prior to the deal with Wanda Clare Jim
O
nce the leader of the elite group of developers known as the “Five South China Tigers”, Guangzhou R&F Properties gradually became overshadowed by bigger beasts, but it’s now back in focus even as many rivals shy from the limelight. The developer, with a market value of HK$52.5 billion (US$6.7 billion), has grabbed international headlines over the past few weeks with two property deals linked to one of China’s richest men, Wang Jianlin, and his Dalian Wanda Group. On Tuesday, R&F said it had teamed up with China’s CC Land to buy Nine Elms Square in London in a 470 million pound (US$606 million) deal. R&F stepped in after Wanda scrapped plans to buy the property, the latest setback for Wanda as Beijing tightens controls on overseas investment. The purchase came just weeks after R&F bought 77 hotels from Wanda for RMB19.9 billion (US$3 billion), as part of a US$9 billion restructured deal. The pair of deals has prompted some analysts to suggest the Hong Kong-listed company is a white knight of billionaire Wang’s property to cinemas conglomerate. Wanda has become a target in China’s clampdown on capital outflows, and sources say Chinese banks have been told to stop providing funding for several of its overseas acquisitions in order to curb its appetite for offshore deals. “Wang Jianlin and I are long-time friends,” R&F Chairman Li Sze Lim said at an earnings conference in Hong Kong on Tuesday. “We bumped into each other in an event in Beijing, and struck the deal after 20 to 30 minutes,” he said, referring to the hotel purchase in July. Buying the hotels at a 40 per cent discount showed Wang’s trust in R&F,
he added. If indeed it took less than 30 minutes to strike a US$3 billion deal, the pair must certainly be well-acquainted. Sources have told Reuters Wanda approached R&F about taking on some of the assets from the initial deal with Sunac China in order to speed up full payment. Wanda has declined to comment further on R&F, but Wang has told a press conference last month the hotel deal is a win for all parties, being a “rare chance in a hundred years” for R&F to acquire the portfolio at a discounted price.
Hotel powerhouse
A mathematics graduate, Li comes across as a modest and mellow businessman. Traditionally a low-profile tycoon, the 60-year old was born and grew up in Hong Kong. He made his fortune from China’s real estate market in the 1990s when he first ventured into the urban redevelopment projects and construction of low-end apartments in southern China’s Guangzhou city.
Key Points R&F involved in two property deals with Wang’s Dalian Wanda Wang and R&F’s Li Sze Lim “long-term friends” - Li Wanda targeted in Chinese clampdown on overseas investment R&F now world’s largest owner of luxury hotels Hong Kong was still a British colony when Li started the company in 1994 with his mainland Chinese partner Zhang Li, who is now co-chairman and CEO of R&F. Together with Country Garden, China Evergrande Group, Agile Group
and Hopson Development , the five Guangzhou-based property developers are commonly known as the “Five South China Tigers” for their aggressive business style. In 2007, R&F ranked No.4 in terms of sales nationwide, but it slipped to 25th place in the first half of this year, trailing cross-town peers Country Garden and Evergrande, which ranked No.1 and No.3. R&F’s active investment in commercial property, in contrast with the other four, had helped the company expand by diversifying its income base during the boom years. But when the financial crisis hit in 2008, these assets weighed on R&F’s cashflow as their cash turnover is much slower than residential property. Partnering with luxurious hotel management groups such as Hyatt Hotels and InterContinental Hotels, R&F owned 34 high-end hotels across China prior to the deal with Wanda. Now, with 111 hotels in total, it has become the world’s biggest luxury hotel owner. “The London deal could be more related to Wanda rather than its overseas expansion strategy, because it had rarely talked about plans to flex its muscles overseas”, said RHB
Research analyst Toni Ho. “The hotel deal with Wanda was a surprise to the market too, though it’s a good buy given its long history and asset size in hotel business. The deal would help its expansion and profitability.” Indeed, Li told reporters on Tuesday overseas business accounts for only “single digits” of the group to keep risk contained. The developer, which is awaiting a dual-listing in mainland China, has developments in Malaysia and Australia which accounted for 4 per cent of R&F’s total contracted sales in the first six months of this year. R&F added its footprint in the U.K. earlier this year after snapping up Nestle Tower in south London for around 60 million pounds and Vauxhall Square for 157.77 million pounds. On Tuesday, the developer posted a 22 per cent rise in core profit in the first six months to RMB2.1 billion (US$315.40 million), and it raised its full-year sales target to RMB80 billion, 31 per cent higher than the sales achieved last year. Moody’s Investors Service described the results as weak, highlighting persistently high debt leverage as consistent with its negative outlook on the company’s credit rating. Reuters
Results
Shenhua’s H1 profit rises to highest in four years Smaller rivals China Coal and Inner Mongolia Yitai each released their strongest results in years earlier last week China’s top coal miner China Shenhua Energy Co Ltd on Friday delivered its strongest interim results in four years on the back of soaring coal prices. Shenhua’s net income leapt 147.4 per cent from the same period last year to RMB24.3 billion (US$3.66 billion) under China accounting standards, the highest since the first half of 2013, and in line with the company’s forecasts. Under IFRS accounting standards, the group’s half-year net income rose to RMB26.3 billion versus RMB10.8 billion a year ago. The results put Shenhua on track to become one of the most profitable public commodity companies in the A share market in Shanghai in the first half, outperforming oil giant PetroChina and Baowu Steel, based on a Reuters analysis of firsthalf earnings. Shenhua’s total sales rose to RMB120.5 billion from only RMB78.7 billion in the first six months of 2016. In the second half of this year, Shenhua expects steady growth in coal and power demands, and an increase in coal supply, as some capacity is said
to be released. Shenhua said it had reduced its commercial coal output target to 278 million tonnes and sales target to 396 million tonnes for 2017. In China, government-enforced mining capacity cuts as part of the war on smog, supply-side reform and strong demand from utilities
due to a drop in hydro power have fuelled a spectacular rally in prices since the summer of 2016. Thermal coal prices soared in the second quarter, extending the run-up to record highs, as people cranked up air conditioners due to a prolonged heat wave, hydropower cuts in southern China and a crackdown
on mine safety. That defied most analysts’ expectations that last year’s rally would run out of steam.
‘Shenhua said it had reduced its commercial coal output target to 278 million tonnes and sales target to 396 million tonnes for 2017’ Domestic coal sales prices of Shenhua rose to RMB425 a tonne in the first half, up from RMB271 a tonne in 2016. The Shenhua results come amid speculation of a merger between its parent, Shenhua Group, and energy producer China Guodian Corp. Reuters
Business Daily Monday, August 28 2017 11
Asia Trial
Thailand’s ex-PM Yingluck flees to Dubai Police estimate that up to 3,000 supporters had gathered outside the court in Bangkok on Friday where Yingluck was due to hear a verdict Amy Sawitta Lefevre and Pracha Hariraksapitak
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hailand’s former Prime Minister Yingluck Shinawatra has fled to Dubai, senior members of her party said on Saturday, a day after she failed to show up for a negligence ruling in which she faced up to 10 years in prison. Puea Thai Party sources said Yingluck left Thailand last week and flew via Singapore to Dubai where her brother, former prime minister Thaksin Shinawatra, who lives in self-imposed exile to avoid a 2008 jail sentence for corruption, has a home. “We heard that she went to Cambodia and then Singapore from where she flew to Dubai. She has arrived safely and is there now,” said a senior member of the Puea Thai Party who declined to be named because he was not authorised to speak to the media. Deputy national police chief General Srivara Rangsibrahmanakul said police had no record of Yingluck, 50, leaving the country and were following developments closely. A Reuters reporter was stopped by security at the
A supporter holds a photograph of former prime minister Yingluck Shinawatra after she failed to appear to hear her verdict at the Supreme Court’s Criminal Division for Persons Holding Political Positions in Bangkok, Thailand, 25 August 2017. Source: Lusa
exclusive Emirates Hills community in Dubai, where Thaksin has a home. A Thaksin spokesperson in Dubai did not respond to attempts by Reuters to contact Thaksin. Police estimate that up to 3,000 supporters had gathered outside the court in Bangkok on Friday where Yingluck was due to hear a verdict in a negligence trial against her involving a rice buying policy of her administration.
But Yingluck did not show up at the appointed hour and the court quickly issued a statement saying she had cited an ear problem as the reason for her no-show. The court rejected the excuse and moved the verdict reading to September 27. It later issued an arrest warrant for Yingluck. Immigration police said they would arrest Yingluck on the spot if she is found. Deputy Prime Minister Wissanu Krea-ngam said
the government “should not comment” on Yingluck’s case and her whereabouts. “It’s a matter for police to proceed with the arrest warrant,” Wissanu told reporters, adding that her whereabouts “will be clear soon”. National police spokesman Dechnarong Suticharnbancha said on Saturday police were still investigating reports that Yingluck had either fled to Singapore or Dubai and said police had no new information on the matter. Winthai Suvaree, a spokesman for the junta or National Council for Peace and Order, said there had been no security meeting to address Yingluck’s disappearance. “You must understand that the border is long … What we know about Yingluck’s escape is only what is being reported by the media,” he added.
Not surprised
Overthrown in 2014, Yingluck had faced up to 10 years in prison if found guilty. Her former commerce minister was jailed in a related case for 42 years on Friday. Political parties led or backed by the Shinawatras have dominated Thai politics, winning every general election since 2001.
The Shinawatras have been accused of corruption and nepotism by the Bangkok-based establishment who loath Thaksin. The family command huge support in the poorer, rural north and northeast. The rice buying scheme, a flagship policy of Yingluck’s administration, proved popular with rural voters but the military government says it incurred US$8 billion in losses. Yingluck pleaded innocent to the charges against her and said she was the victim of political persecution. The military government has used sweeping powers to silence critics, including supporters of the Shinawatras, since 2014. The mood in the northeast, a Shinawatra stronghold, was sombre on Saturday. Leaders of the red-shirt United Front For Democracy there said they weren’t surprised Yingluck fled. “Most people I know feel glad that Yingluck has left the country,” said one red shirt leader, who declined to be named for safety reasons. “For now there will be less activity from the red shirts because of military suppression.” Reuters
Perth summit
Global leaders commit to eradicating modern slavery The Global Slavery Index estimates that 45 million people around the world are victims of modern slavery Global business tycoons and politicians from 48 countries committed to ending human trafficking, forced labour and modern slavery on Friday at a landmark gathering of high-profile leaders in the Australian city of Perth. The forum, launched last year to expand public-private partnership to eradicate these crimes, saw participation from the heads of U.S. retail giant Wal-Mart Stores Inc, Japan’s Mitsui and China’s JD.com, among others. “It’s about accepting standard for good labour practices throughout the supply chain,” said Indonesian Foreign Minister Retno Marsudi. The forum is also working to raise awareness on ethical business practices and establishing a “spatial mechanism” to ensure immediate identification, processing and assistance for victims of human trafficking, Marsudi added. “I propose that during the next Bali meeting next year, the industries, the private sector, will be able to showcase the best practices that have been taken by industries on initiatives resulted from this forum,” Marsudi said.
While the forum made general commitments it fell short of concrete action plans. The Global Slavery Index estimates that 45 million people around the world are victims of modern slavery. It is estimated that two-thirds of these people were from the Indo-Pacific region.
and a co-chair of Friday’s forum. Forrest urged governments across the Indo-Pacific region to adopt a Modern Slavery Act as a mean to tackle the problem. Australia has instigated two parliamentary inquiries into the adoption of a Modern Slavery Act and the
government is waiting for the reports, said Foreign Minister Julie Bishop. Bishop said the Australian government is looking to introduce the legislation “as soon as possible” but did not put a specific date on it. The laws will be inspired by the UK’s Modern Slavery Act 2015. Reuters
“It’s about accepting standard for good labour practices throughout the supply chain” Retno Marsudi, Indonesian Foreign Minister
“It is true that business and government, if we come together for the first time, have the power to end it. This has never been done before,” said Andrew Forrest, chairman of Australia’s Fortescue Metals Group
Australian city of Perth hosted the meeting
12 Business Daily Monday, August 28 2017
Asia Bribery
Samsung leader Jay Y. Lee given 5-year jail sentence Lee denied wrongdoing, and one of his lawyers, Song Wu-cheol, said he would appeal Joyce Lee and Yuna Park
T
he billionaire head of South Korea’s Samsung Group, Jay Y. Lee, was sentenced to five years in jail for bribery on Friday in a watershed for the country’s decades-long economic order dominated by powerful, family-run conglomerates. After a six-month trial over a scandal that brought down the then president, Park Geun-hye, a court ruled that Lee had paid bribes in anticipation of favours from Park. The court also found Lee guilty of hiding assets abroad, embezzlement and perjury. Lee, the 49-year-old heir to one of the world’s biggest corporate empires, has been held since February on charges that he bribed Park to help secure control of a conglomerate that owns Samsung Electronics, the world’s leading smartphone and chip maker, and has interests ranging from drugs and home appliances to insurance and hotels. Lee, who emerged stony-faced from the Seoul courtroom in a dark suit, but without a tie, and holding a document envelope, was escorted by justice ministry officials back to his detention centre. “This case is a matter of Lee
Jae-yong and Samsung Group executives, who had been steadily preparing for Lee’s succession ... bribing the president,” Seoul Central District Court Judge Kim Jin-dong said, using Lee’s Korean name. Kim said that as the group’s heir apparent, Lee “stood to benefit the most” from any political favours for Samsung. Lee denied wrongdoing, and one of his lawyers, Song Wu-cheol, said he would appeal. “The entire guilty verdict is unacceptable,” Song said, adding he was confident his client’s innocence would be affirmed by a higher court. The case is expected to be appealed all the way up to the Supreme Court, likely next year. The five year-sentence - one of the longest given to a South Korean business leader - is a landmark for South Korea, where the family-run conglomerates - or chaebols - have long been revered for helping transform the once war-ravaged country into a global economic powerhouse. But they have more recently been criticized for holding back the economy and stifling small businesses and start-ups. Samsung, a symbol of the country’s rise from poverty following the 1950-53 Korean War, has come to advertisement
epitomize the cosy and sometimes corrupt ties between politicians and the chaebols. “The ruling is a turning point for chaebols,” said Chang Sea-jin, a business professor at Korea Advanced Institute of Science and Technology. “In the past, chaebols weren’t afraid of laws because they were lenient. Now, Lee’s ruling sets a precedent for strict enforcement of laws, and chaebols should be wary.” Under South Korean law, sentences of more than three years cannot be suspended. Leadership vacuum The third-generation de facto head of the powerful Samsung Group, Lee has effectively directed operations since his father, Lee Kun-hee, was incapacitated by a heart attack in 2014. Some investors worry a prolonged leadership vacuum could slow decision-making at the group, which has more than five dozen affiliate companies and assets of 363.2 trillion won (US$322.13 billion). Its listed companies make up about 30 per cent of the market value of South Korea’s KOSPI stock index. Many tycoons, including Lee’s father, were convicted of crimes in the past, ranging from bribery, embezzlement and tax evasion, only to get presidential pardons, as both the government and the public feared going too hard on them would hurt the economy. But South Korea’s new liberal president, Moon Jae-in, who won a May election, has pledged to rein in the chaebols, empower minority shareholders and end the practice of pardoning tycoons convicted of white-collar crime. The presidential Blue House said in a statement that it hopes the ruling will serve as an opportunity to “end the nexus of business and politics that has held back the country.” In a June interview with Reuters, Moon said he did not believe Samsung’s operations depended just on Lee. “When Lee was taken into custody, the share prices of Samsung went up,” Moon said. “If we were to succeed in reforming the running of the chaebols and also increasing transparency, I believe this will not only help the economic power of Korea but also help to make the chaebols themselves more competitive.” Investors say shares in chaebol companies trade at lower prices than they would otherwise because of their opaque corporate governance - the so-called Korea Discount.
Shares of Samsung Electronics dropped more than 1 per cent, and other group companies, including Samsung C&T and Samsung SDS, also turned lower after the verdict. The court said Samsung’s financial support of entities backed by a friend of Park’s, Choi Soon-sil, constituted bribery, including 7.2 billion won (US$6.4 million) in sponsoring the equestrian career of Choi’s daughter. In return, prosecutors say, Samsung sought government support for the 2015 merger of two of its affiliates, which helped Lee tighten control of the conglomerate. His lawyers had argued that the merger was done for business reasons. Some criminal lawyers had expected Lee to be found innocent of the major charges, as much of the evidence at the trial has been circumstantial. The appeals court and the Supreme Court might put a greater emphasis on prosecutors to provide direct proof of quid pro quo, the lawyers said. Park supporters outraged Park, who was forced from office in March, faces her own corruption trial, with a ruling expected later this year. Prosecutors have argued that Park and Lee took part in the same act of bribery - so Lee’s conviction would appear ominous for the former president. Hundreds of Park’s diehard supporters who rallied outside the court on Friday reacted with outrage to the ruling. “Our ultimate goal is Park’s acquittal and release,” Kim Won-joon, a 62-year-old former construction worker said. “We worry how today’s guilty verdict for Lee would affect Park’s ruling.” Such supporters are a minority compared with the huge crowds that turned out in Seoul every week to call for Park’s ouster after the bribery scandal surfaced late last year. Public approval of Lee’s prosecution may underscore growing frustration in Asia’s fourth-largest economy that the wealth amassed by conglomerates has not trickled down. “I think it was difficult for a court to ignore public opinion, given that the scandal rocked the country,” said Chung Sun-sup, chief executive of research firm Chaebul.com. “The five-year sentence was low given that he was found guilty of all the charges. I think the court gave him a lighter sentence, taking into account Samsung’s importance to the economy.” Reuters
Lee Jae-yong (R), vice chairman of Samsung Electronics Co., leave after his verdict trial at the Seoul Central District Court in Seoul, South Korea, 25 August 2017. Source: Lusa
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Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, August 28 2017 13
Asia Inflation
In Brief
Japan’s July consumer prices rise for 7th straight month Price and wage growth remain stubbornly weak with firms still wary of passing on profits to employees Leika Kihara
Japan’s core consumer prices rose 0.5 per cent in July from a year earlier to mark a seventh straight gaining month, a sign the economy is making steady but painfully slow progress toward meeting the central bank’s 2 per cent inflation target. The increase was largely driven by higher fuel bills as subdued wage growth discouraged consumers from increasing their spending, underscoring the challenge the Bank of Japan (BOJ) faces in achieving its ambitious price goal. The rise in the nationwide core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, matched a median market forecast and followed a 0.4 per cent gain in June. “Inflationary pressure isn’t building up as companies remain extremely cautious of raising prices. The boost from energy costs will peak around October, so consumer inflation may slow after that,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “The BOJ will likely be forced to cut its price forecasts again, so it would be hard to justify raising interest rates even as economic growth gathers momentum.” Core consumer prices in Tokyo, available a month before the nationwide data, were up 0.4 per cent in August from a year earlier, against a 0.3 per cent gain projected in a Reuters poll. “The slow grinding rise in Tokyo inflation...is encouraging,” ING said in a research note, adding that the 2 per cent inflation target “remains, as it always was, a hugely over-optimistic and not very credible goal”. Japan’s economy expanded at the
fastest pace in more than two years in the second quarter as consumer and company spending picked up. But price and wage growth remain stubbornly weak with firms still wary of passing on profits to employees, raising doubts over whether the second-quarter’s bounce can be sustained. Slightly over half of the items in the index saw prices rise in July, while 34 per cent saw prices fall. Given that labour costs are rising in a tight job market, few analysts expect widespread price-cutting to lure back consumers. But retail giant Aeon said on Wednesday it will cut the prices of 114 food and grocery items at 2,800 outlets to attract consumers, and make up the cost by streamlining operations. “I don’t think many companies will start cutting prices as there are limits to how much you can squeeze costs through streamlining. But there’s a risk they will hold off on price hikes for as long as possible,” Dai-ichi Life’s Shinke said. While food and energy prices rose,
cellphone costs fell as intensifying competition forced big carriers to slash charges. The government will consider reflecting charges from start-up discount smart-phone carriers in CPI data from next January at the earliest, a government official told reporters, a move that could further weigh on consumer price inflation. The BOJ has had to push back the timing for reaching its price target six times since it deployed a massive stimulus programme in 2013. It now expects inflation to hit 2 per cent in the fiscal year ending in March 2020, arguing that a tightening job market and solid economic growth will gradually push up prices. ING said the efforts of Prime Minister Shinzo Abe and BOJ Governor Haruhiko Kuroda to achieve the 2 per cent target were “at least dragging inflation in the desired direction, and as such, their efforts are unlikely to be slackened any time soon”. Reuters
Trade
India restricts imports of gold, silver from South Korea India restricted imports of gold and silver from South Korea from Friday, the government said in statement The move comes as traders have been taking advantage of a recent tax change that enabled them to avoid customs duty. India, the world’s biggest gold consumer after China, imposes a 10 per cent import duty on gold and silver, but this does not apply to countries with which it has Free Trade Agreements, like South Korea. To avoid duty-free imports from those countries, India previously imposed a 12.5 per cent excise duty. However, this was scrapped along with other local taxes when a goods and services tax was introduced on July. Results
Qantas eyes ‘last frontier’ of commercial flights Qantas Airways Ltd, upbeat after reporting near-record profits that vindicated a threeyear turnaround strategy, laid out plans on Friday to develop the “last frontier” of non-stop flights - 20 hours from Sydney to London. It also announced a new cost-cutting target of A$400 million (US$315 million) in savings each year as well as a share buyback, helping its stock surge to a 10-year high. For the past three years, Joyce has slashed staff numbers and driven the “Flying Kangaroo” fleet harder, driving up fares to withstand competition on international routes and offset a soft business travel market at home. Commodities
C.bank governor
Philippines not in midst of foreign exchange crisis He said the Southeast Asian nation’s economic fundamentals remain strong Neil Jerome Morales and Karen Lema
The Philippine central bank is in firm control of the peso and is confident that the country is not facing a foreign exchange crisis, its governor said on Friday, as the currency hovered around 11-year lows. “We allowed the peso to adjust moderately and gradually but I can assure you the BSP (central bank) is in firm control of the exchange rate,” Nestor Espenilla told a business forum.
Key Points Says confident won’t see freefall situation with peso Central bank in firm control of exchange rate Peso trading near 11-year lows vs dollar “We remain confident that we are not talking about a freefall situation. Definitely we are not in a foreign exchange crisis.” Espenilla said the Southeast Asian nation’s economic fundamentals remain strong, inflation is under control and the country has ample foreign exchange reserves. The central bank on Monday warned traders that it would intervene in the currency market to curb any speculative activity as the peso has slid to its weakest levels since 2006. “Speculation will always be there. It’s a constant battle to be able to maintain orderly conditions,”
Espenilla said on Friday. It is Asia’s worst performing currency so far this year, having weakened 2.7 per cent even as other emerging Asian currencies have strengthened in the face of a weaker dollar. Much of the pressure has been attributed to expectations that the Philippines could post its first current account deficit in 15 years this year. The government has forecast a deficit of US$600 million, compared with 2016’s US$601 million surplus. Espenilla, who took the helm at the central bank in July, has also said the currency’s drop “reflects the nervousness of the world. All these nervousness, on a day-to-day basis, is translating to the volatility of the exchange rate.” But he said the exchange rate “needs to be flexible to allow market supply and demand to balance off in a
controlled way.” Imports of capital goods - mostly infrastructure related - have surged as President Rodrigo Duterte’s administration embarks on a six-year, US$180 billion spending spree to modernise and build new airports, roads, railways and ports. The construction boom has made the Philippines the second-fastest growing economy in Asia after China, with the government targeting expansion of 6.5 to 7.5 per cent this year. But Espenilla said despite rising imports, he doesn’t see the current account deficit topping more than 1 per cent of gross domestic product (GDP) “We are not talking about a blowaway current account deficit,” he said. The country’s main share index has surged 17 per cent so far this year. Reuters
Central bank Governor Nestor Espenilla (C). Source: Lusa
Philippine lawmakers seek to ban mining in watershed areas Philippine lawmakers have filed a bill seeking to ban mining in watershed areas and exports of unprocessed ores and will require miners to get legislative approval before operating, in line with President Rodrigo Duterte’s pledge to overhaul the sector. The Philippines is the world’s top nickel ore supplier but Duterte says miners pay too little tax and not enough to compensate mining communities that suffer environmental damage. The bill seeks to ban mining in all watershed areas, a policy enforced by Regina Lopez, the former environment minister. Markets
Sime Darby on track to list plantation, property businesses Malaysia’s Sime Darby Bhd, the world’s largest oil palm planter by land size, on Friday said it was on track to spin-off and list its plantations and property businesses by year-end, after restructuring that would create three standalone units. Restructuring would involve reorganising borrowings and transferring assets within the group, Sime Darby said in a statement. Sime Darby Plantation’s loans owed to Sime Darby Bhd will be capitalised via an issuance of new Sime Darby Plantation shares amounting to 500 million ringgit (US$117 million), while Sime Darby Property will issue new shares for 4.4 billion ringgit.
14 Business Daily Monday, August 28 2017
International In Brief Demand
Rise in U.S. business spending bolsters economic outlook New orders for key U.S.-made capital goods rose slightly more than expected in July and shipments surged, pointing to an acceleration in business spending early in the third quarter. The Commerce Department’s upbeat report on Friday also suggested the economy continued to gather momentum after growth slowed at the start of the year. Strength in business investment bolsters the case for the Federal Reserve announce next month a plan to start unwinding its massive bond portfolio. “Growth continues on a solid footing,” said Andrew Hollenhorst, an economist at Citigroup in New York. Monetary policy
Draghi urges patience on ECB’s ultra-easy money The European Central Bank’s ultra-easy monetary policy is working and the euro zone’s economic recovery has taken hold even if more time is needed to lift inflation to the bank’s 2 per cent target, ECB President Mario Draghi said on Friday. Draghi said he was confident inflation would eventually reach the target as output rises and the labour market tightens, though he urged patience on that front. While ECB stimulus has pushed euro zone growth to over 2 per cent, the fastest since 2011, inflation is expected to undershoot the bank’s target at least through 2019.
Monetary meeting
At Fed conference, Trumponomics draws a not so subtle rebuttal Economists and central bankers agreed they had ignored for too long how difficult the adjustment would be for workers Howard Schneider and Jonathan Spicer
P
resident Donald Trump’s name was rarely mentioned as top central bankers and economists spent Friday mulling the fate of the global economy at a mountain lodge here. But his presence loomed large at a Federal Reserve symposium, and even without citing the man in the White House, the presentations from Fed chair Janet Yellen, European Central Bank President Mario Draghi and a host of researchers - amounted to a broad rebuttal of many of the ideas that carried Trump to office. It was a day when the president’s calls for financial deregulation and “America First” economic nationalism were countered by Yellen’s reminder of how a deep financial crisis wrecked the economy a decade ago, and economic research arguing that China and Mexico are less to blame for job losses than forces like technology. “For some, memories of this experience may be fading - memories of
Diplomatic offensive
Trump slaps sanctions on Venezuela U.S. President Donald Trump signed an executive order that prohibits dealings in new debt from the Venezuelan government or its state oil company on Friday in an effort to halt financing that the White House said fuels President Nicolas Maduro’s “dictatorship.” Maduro, who has frequently blamed the United States for waging an “economic war” on Venezuela, said the United States was seeking to force Venezuela to default — but he said it would not succeed. The order is Washington’s biggest sanctions blow to date against Maduro and is intended to punish his leftist government for what Trump has called an erosion of democracy. Oil industry
Ecuador commissions audit of sector projects Ecuador is commissioning a foreign auditing firm to review the technical and financial terms of five key oil sector projects that have shown serious operational failures despite heavy investments, the ministry of hydrocarbons said on Friday. Among the projects to be audited is the 110,000 barrels-per-day Esmeraldas refinery, which is facing significant operational problems less than two years after a US$2 billion overhaul meant to modernize the facility. “An international, specialized auditing firm will review the technical and financial terms of the five projects,” the ministry said in a statement, which did not identify a firm.
just how costly the financial crisis was and of why certain steps were taken,” Yellen said in arguing for only modest changes to existing regulations. Yellen is still in the running to be reappointed by Trump to a new term. Draghi, traveling from Frankfurt and representing a group of U.S. allies that the administration has sparred with over climate change, trade and other issues, gave a broad call for free trade and stronger multilateral institutions of the sort Trump has criticized. “A turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy,” Draghi said in a lunch address that included a defence of the World Trade Organization, the Group of 20 and other global groups he felt should be strengthened. The rise of Trump, the vote by Britian to leave the European Union and the spread of opposition to globalization have worried central bankers and many mainstream economists who feel that the problems associated with globalization have overshadowed the benefits and morphed into broad opposition to it. Remedies for these issues may be outside the immediate sphere of monetary policy, but they are concerned that new waves of protectionism or reckless deregulation could threaten an economic system that is currently stable and that has returned to growth across the world.
Scepticism about Trump approach
Fed chair Janet Yellen is still in the running to be reappointed by Trump to a new term
In a panel on trade, there was more direct scepticism of Trump’s approach, even as economists and central bankers here agreed they had ignored for too long how difficult the adjustment would be for workers. “We have lost the rhetoric on trade
in terms of explaining to those who benefit why they do, such as cheaper products, while all of the focus has been on those who have lost,” said Gita Gopinath, professor of international studies and economics at Harvard University and financial advisor to the chief minister of the Indian state of Kerala.
“For some, memories of this experience may be fading - memories of just how costly the financial crisis was and of why certain steps were taken” Janet Yellen, Fed chair
But they also agreed that Trump’s seemingly singular focus on trade agreements won’t fix the problem. “Renegotiating NAFTA and protectionist measures against China will not save jobs,” University of Pennsylvania professor Ann Harrison said, arguing that the decline in manufacturing jobs was due to labour-saving management and technologies. Policy, the economists here said, should be aimed at improving job skills, local capital investment and safety net programs for displaced workers, the sort of micro-level efforts that can be hard to organize and finance and take time to show results. “It is so much easier to bash China,” Harrison said. Reuters
Forecast
Brazil’s FinMin sees annualized growth at 2 pct by year-end He said a revision of Brazil’s bankruptcy protection law will create mechanisms allowing companies to borrow during their restructurings Brazil’s economy could be growing at a pace of 2 per cent in annualized terms by year-end, reflecting drastic corporate debt-reduction efforts and slowing inflation that is spurring spending, Finance Minister Henrique Meirelles said on Saturday. Speaking at an event sponsored by B3 SA Bolsa Balcão Brasil in the resort town of Campos do Jordão, Meirelles said efforts by large and small companies alike to reduce debt and downsize their businesses will be key to helping resume growth. Those moves, coupled with increased household spending over the past weeks, should ensure that “the economy returns to normal,” Meirelles said. “Some sectors are showing evidence that a recovery is under way, which will surprise many out there.” His remarks reflect optimism that President Michel Temer’s strategy of curtailing state action and allowing private investors to take up the slack has borne fruit. Meirelles said such a tack has allowed the private sector
to take space in the economy from the government for the first time in 30 years.
‘The Finance Minister said that the odds of a congressional approval of Temer’s proposed reform to the pension system remain “real” despite recent delays’ As part of a series of policy announcements, Meirelles said a revision of Brazil’s bankruptcy protection law will create mechanisms allowing companies to borrow during their restructurings. Currently, so-called
debtor-in-possession loans are hard to structure during bankruptcy proceedings. He also told attendants at the B3 event that the odds of a congressional approval of Temer’s proposed reform to the pension system remain “real” despite recent delays - which stemmed from political turmoil in the wake of accusations of involvement by Temer in Brazil’s corruption scandal. Temer has repeatedly denied the allegations. Plans to make state-controlled power utility Centrais Elétricas Brasileiras SA a company with dispersed share ownership will be more transformational for the country than, for instance, the 1997 milestone privatization of Brazil’s telecommunications industry, Meirelles said at the event. Last Monday, the government floated a proposal to cede control of the utility known as Eletrobras, which has struggled for years with high debt, operational inefficiencies and a scant ability to invest. Reuters
Business Daily Monday, August 28 2017 15
Opinion Business Wires
The Korea Herald Despite the global economy seeing positive growth this year, Korea’s economic bounce back appears to be marred by continuous political disruptions with the North Korean regime’s nuclear threats, as well as China’s war against the deployment of THAAD, data showed. According to data recently released by the Bank of Korea, escalating economic hurdles caused by North Korea’s missile threats and China’s blackballing of Korean goods and products amid continued disputes regarding the government’s deployment of the Terminal High Altitude Area Defense system, Korea‘s economic growth remains slow in the currently healthy global economy.
Philstar The Bangko Sentral ng Pilipinas (BSP) is set to extend anew the validity of a program that encourages mergers and consolidations of rural banks to further strengthen the country’s banking industry. On the side-lines of the economic forum organized by the Economic Journalists Association of the Philippines (EJAP), BSP Governor Nestor Espenilla Jr. said they are now talking with state-run Philippine Deposit Insurance Corp. (PDIC), Land Bank of the Philippines and the Countryside Financial Institutions Enhancement Program (CFIEP) for the extension of the Consolidation Program for Rural Banks (CPRB).
Who’s China’s new best friend in the oil market? America Julian Lee a Bloomberg Gadfly columnist
T The Times of India India is now the largest two wheeler market globally, by volume, for Japanese automobile major Honda. Honda Motorcycle & Scooter India’s (HMSI) volume contribution globally hit 32 per cent in the first quarter of this financial year -its highest ever so far. According to top HMSI officials the company’s two wheeler sales grew 20 per cent in the April-July period -compared to 9 per cent growth clocked by the industry -with scooters growing 19 per cent and motorcycles growing 20 per cent including domestic sales and exports. With this India has become Honda’s largest motorcycle market globally in FY16-17 dethroning Indonesia.
Bangkok Post The (Thai) government will let domestic and foreign investors join with government agencies in building housing projects through the publicprivate partnership (PPP) scheme for low-income earners and the lowermiddle class under the Pracha Rat Home scheme. Deputy Prime Minister Somkid Jatusripitak authorised the state-owned GH Bank and the National Housing Authority (NHA) to design the housing development plan for low-income and lower-middle earners nationwide. The two organisations are required to complete the plan within six months. Mr Somkid said demand for housing projects remains high in Thailand.
here’s a new kid on the block, muscling in on crude sales to China. America is rapidly carving out a niche for itself, stepping in to fill the gap left by falling supplies from OPEC countries. As recently as last year U.S. crude-oil exports to China were puny. On average in 2016, companies shipped just 10,000 barrels a day to China -- that’s less than two supertankers during the whole year. The U.S. ranked 32nd in the list of Chinese import sources in 2016, according to data from the Chinese customs authorities. That’s below Mongolia and Sudan, and only just above war-torn Yemen. But all that has changed dramatically this year, with U.S. crude exports to China leapfrogging sales from OPEC countries such as Libya and China’s neighbors Vietnam, Kazakhstan and Australia. The upward march extended through the first seven months of 2017. Sales averaged 131,000 barrels a day in the period, but over the last four months the daily average figure exceeded 200,000 barrels. That is enough to move the U.S. up to 11th place in the ranking of crude oil suppliers to China, putting it just behind OPEC heavy weights Venezuela, Kuwait and the U.A.E. OPEC’s bid to push up prices by restricting output, combined with China’s apparently insatiable thirst for imported oil, have certainly helped open up a market for American suppliers. So too have low shipping costs and widening discounts for U.S. crude benchmark WTI against both North Sea Brent, which is used as a pricing reference for West African grades, and the Oman/Dubai average, used for pricing Middle Eastern exports to Asia. Expect the U.S. ranking to gain further ground as producers look for outlets for rising volumes of production, even while the U.S. itself remains a net importer of crude. That may be sweet music
“
to the ears of President Donald Trump, with rising oil sales helping to reduce the trade deficit with China. But it will not be so comfortable for OPEC countries, who have long seen China and other emerging Asian countries as their core markets. Nor is it helping to drain global stockpiles. While the volume in storage in the U.S. is coming down, the volume held in China is still rising. Commercial stockpiles of crude and refined products in China have risen by 16.5 million barrels, or 5 per cent, since the beginning of the year. Strategic stockpiles, which are not reported, have also almost certainly increased too. Not exactly the rebalancing OPEC is trying to achieve. With oil demand stagnating in the developed world, OPEC producers have turned to Asia, tying up markets with investments in refining and storage capacity in the region. It is no coincidence that initial output cuts by Saudi Arabia and other Persian Gulf OPEC countries back in January were targeted at buyers in Europe and North America, while supplies to Asian customers were largely unaffected. Saudi Arabia has already ceded its position as China’s biggest oil supplier to Russia, and this year has also seen fellow OPEC member Angola move into second place. And it’ll be hard to regain that top spot: Russia looks set to consolidate its position as China’s biggest crude supplier once the second string of a pipeline connecting oil fields in East Siberia to Chinese refineries comes into operation in January. That line will allow Russian producers to ship another 300,000 barrels a day of Siberian crude directly to China. U.S. oil flows to China remain vulnerable to any increase in freight costs or a narrowing of the price differential to other global benchmarks. But while OPEC continues to restrict supply, neither of those looks like a big risk. Bloomberg Gadfly
Saudi Arabia has already ceded its position as China’s biggest oil supplier to Russia, and this year has also seen fellow OPEC member Angola move into second place
”
16 Business Daily Monday, August 28 2017
Closing Markets
Tian Ge seeks to resume trading
Chinese mobile and online game operator Tian Ge Interactive Holdings said it had applied to resume trading today after a twoweek halt, which was triggered by a research report that caused a sharp fall in its shares. The company also said its board had approved on Friday a programme to repurchase up to HK$600 million (US$77 million) of shares from the open market, or 7.97 per cent of the existing issued share capital based on the Aug. 17 closing price. Tian Ge’s shares have been suspended from
trading since Aug. 17, a day after research firm Emerson Analytics issued a report saying the company had exaggerated its user base and inflated its revenue. In a filing yesterday, Tian Ge said Emerson’s allegations were “absurd, false, groundless, misleading”, and that its business operations had not been affected since the release of the report. Shares of the Hangzhou-based Tian Ge, with a market value of HK$7.4 billion, had fallen as much as 9.2 per cent to HK$5.60, the lowest since July 5, prior to the suspension. Reuters
Official data
China industrial profits rise tests resiliency Performance in the industrial sector is in line with July economic data
E
arnings growth for China’s industrial firms cooled in July after accelerating for three straight months, reinforcing expectations the economy will slow over coming quarters as higher lending costs and property market curbs bite. Profits earned by China’s industrial companies in July rose 16.5 per cent from a year earlier to RMB612.7 billion (US$92.18 billion), slower than the previous month, the statistics bureau said yesterday. That was the slowest rate of growth since profits rose 14.0 per cent in April. Profit growth slowed in July because some companies halted production due to especially high temperatures, He Ping of the National Bureau of Statistics bureau said in a statement along with the data release. For the first seven months of the year, the firms notched up profits of RMB4.25 trillion, a 21.2 per cent jump from the same period last year and a touch slower than the 22.0 per cent annual growth in the January-June period. Earnings for the industrial sector were boosted by a year-long, government-led construction spree, which fuelled demand and prices for building materials. Government efforts to shut older, heavily polluting mines and factories have given commodity prices fresh impetus in recent weeks. Strong earnings, in turn, have
opened the way for fresh investment, and given the country’s long ailing “smokestack” industries more cash flow which could, in theory, be used to start paying down a mountain of debt. Aluminum Corp of China Ltd (Chalco) reported on Aug. 17 that its six-month net profit rose more than tenfold year-on-year as it cashed in sky-high aluminium prices. A day later, China’s top state-run aluminium smelter said it will be making further investment in raising output in the second half of the year. The manufacturing sector, which
accounts for 88 per cent of industrial profits, saw profit growth of 18.1 per cent in the first seven months, trending down only slightly from 18.5 per cent in the first half.
Stalling out
But analysts say economic growth is starting to slow as measures to cool heated property prices and clamp down on riskier forms of lending put the brakes on activity. Beijing’s efforts to reduce debt have pushed up lending rates, signalling tighter margins and tougher operating conditions for firms as debt servicing
costs go up - a sign of slowing earnings growth over coming months. In addition to slower profit growth, yesterday’s data showed profit margins and account receivables days outstanding weakened slightly in July after improving for the last two months. Industrial firms’ net profit margin fell to 6.09 per cent in July from 6.11 in June.
Key Points July profits grow 16.5 pct, slowest growth since April Statistics bureau says slower growth due to hot weather Weaker performance in the industrial sector is in line with July economic data that was mostly weaker than expected, after forecast-beating GDP growth of 6.9 per cent in the first half. At the end of July, industrial firms’ liabilities were 6.6 per cent higher than a year earlier, compared with a 6.4 per cent increase at the end of June. Profits at China’s state-owned firms were up 44.2 per cent at RMB927.4 billion in January-July, compared with a 45.8 per cent rise in the first six months. The data covers large companies with annual revenue of more than RMB20 million from their main operations. Reuters
Election
Researcher
Brexit
Angola’s opposition Unita Party rejects partial result
China needs clear boundaries between state and markets
U.K.’s labour backs single-market membership
Angola’s main opposition party, the National Union for the Total Independence of Angola, or Unita, said that provisional results that gave the ruling party a majority of the votes in an election earlier last week weren’t valid. “The country doesn’t yet have valid electoral results,” Isaias Samakuva, the leader of Unita, said at a press conference in Viana, on the outskirts of the capital Luanda. “The country still doesn’t have a president elect.” The ruling People’s Movement for the Liberation of Angola, or MPLA, which has ruled Angola since independence from Portugal in 1975, led a provisional vote count with 61 per cent with 98 per cent of ballots cast counted, the National Electoral Commission said on Aug. 25. Unita got 27 per cent of the votes, while the Broad Consensus for Angolan Salvation-Electoral Coalition party, or Casa-CE, the second-biggest opposition group, got 9.5 per cent of the votes. Final results are expected to be announced on Sept. 6, according to the electoral commission. Samakuva, whose party fought and lost a 27-year civil war against the ruling MPLA that ended in 2002, said the results from the Aug. 23 election were “not official.” Bloomberg News
China needs clear boundaries between the government, markets and companies to avoid distortions and “chaos” in financial markets, the head of research at China’s central bank said according to remarks published yesterday. Implicit guarantees of lending to local government financing platforms, continued support of “zombie” firms and the lack of financing for private firms were examples of poor governance and contributed to distortions in financial markets, said Xu Zhong, the head of the People’s Bank of China’s research department. “The first institutional problem that leads to financial chaos is unclear boundaries between government and the market”, Xu was quoted as saying on the official Wechat account of the China Finance 40 Forum, a well-known think tank. China is in the midst of a deleveraging campaign as it looks to control rising debt, while regulators are also encouraging a more market-driven approach to lending practices and economic development in general. Xu pointed at that although China implemented depositors’ insurance in 2015, not a single financial institution has gone under, compared with over 500 that failed during the financial crisis in the United States. Reuters
The U.K.’s opposition Labour Party wants Britain to stay in the European Union’s single market for an extended period after it leaves the bloc, a shift in its position that could undermine Prime Minister Theresa May’s efforts to deliver her vision of Brexit. The proposal, which would mean no additional customs or migration controls in March 2019, would allow more time to finalize details of the U.K.’s departure, and give government and business time to prepare, Labour’s Brexit spokesman Keir Starmer said. It would also eliminate the need to negotiate a transitional arrangement at the same time as a final deal. “There would be no need to set up complex alternative customs or trading relations,” Starmer wrote in the Observer newspaper yesterday. “It is a grown-up acknowledgment that bespoke transitional arrangements are highly unlikely to be negotiated, agreed and established in the next 18 months.” If Labour can force a parliamentary vote in support of its position, it will put pressure on Conservative lawmakers who oppose leaving the single market to fall in behind it. Legislation that seeks to prepare Britain for leaving the EU returns next month to Parliament, where May doesn’t have a majority, and lawmakers are expected to battle over amendments. Bloomberg News