Business Daily #1391 September 26, 2017

Prime Minister calls for snap election Japan Page 16

Tuesday, September 26 2017 Year VI Nr. 1391 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming

Golden Week bookings strong already, with VIP revenue in Q3 expected to see 37 pct y-o-y rise Page 5

Tourism

Air travellers to MSAR from Mainland expected to reach 34 mln by 2025 Page 4

www.macaubusiness.com

Gaming

Increased Chinese visitation to Manila casinos could counteract potential VPN blocking Page 7

Smartphones

iPhone cold reception impacting tech firms Page 9

Online Challenge traditional travel agencies Tourism

The growing popularity of online bookings for transport is driving down the revenue of travel agencies, with package tours making up the lion’s share of receipts in 2016, at MOP2 bln of the MOP6.53 bln made by the sector overall.

Online business for travel agents was also down 11 pct y-o-y, while rental of coaches and vehicles were both up. Page 4

MSAR management shine

Labour A survey shows that the skills of local managers are competitive with those abroad, scoring higher than Australia. The top area was ‘integrity and governance’, with finance and insurance linked managers performing best.

‘Organisational skills’ still came in below average. Page 2

With a second fire in six months, the investigation report from the first fire has still not been returned. Arson is suspected this time due to three fire points. Delays to the H2 2018 opening are not yet quantifiable, says executive director of SJM, while also lamenting the lack of a hotel license for Jai Alai.

Opening Page 3

HK Hang Seng Index September 25, 2017

Plastic surgery booms in Mainland Aesthetic An increasingly wealthier population in search of beauty is fuelling the sector. Nose and eyes surgery are the preferred choice among Chinese customers, mainly women and from all ages. Page 10

27,500.34 -380.19 (-1.36%) Worst Performers

Hengan International Group

+0.72%

HSBC Holdings PLC

-0.07%

China Resources Land Ltd

-7.05%

China Shenhua Energy Co

-3.28%

Hang Seng Bank Ltd

+0.49%

Power Assets Holdings Ltd

-0.07%

China Overseas Land &

-6.78%

Sun Hung Kai Properties Ltd

-3.22%

CLP Holdings Ltd

+0.25%

Lenovo Group Ltd

-0.24%

AAC Technologies Holdings

-6.66%

China Mengniu Dairy Co Ltd

-2.77%

CNOOC Ltd

+0.21%

Hong Kong & China Gas Co

-0.27%

Geely Automobile Holdings

-5.57%

China Merchants Port Hold-

-2.51%

MTR Corp Ltd

+0.11%

China Resources Power

-0.43%

Henderson Land Develop-

-3.40%

Galaxy Entertainment Group

-1.81%

26° 32° 27° 32° 27° 32° 27° 30° 27° 30° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Grand Cotai Palace opening delay uncertain

2 Business Daily Tuesday, September 26 2017

Macau In Brief Training

Practicing e-commerce The MSAR Government has authorised Chinese teaching institution Huaqiao University to initiate an e-commerce bachelor degree in the city starting from November, an Official Gazette release announced yesterday.

The degree will be managed in partnership with the Macau Post Work Continuous Education Centre at Rua de Roma in NAPE, an education centre run by the Macau Federation of Trade Unions (FAOM).

The course will include classes in topics such as consumer behaviour, micro- and macro- economics, online management systems and online marketing. N.M.

Personnel

City’s managerial abilities on par with neighbouring cities Although significant improvements have been made, the survey suggested further improvement of the management sector of local firms

Law

Reducing tax Starting from January 1 of next year, the monthly service fees charged by registration and notary services and deposited with the Legal Affairs Bureau (DSAJ) Coffer of Legal Affairs, will be a reduced to 10 per cent, according to an Official Gazette release yesterday.

The decision will reduce the current service tax of 45 per cent, in place since January 1 of this year.

The Coffer of Legal Affairs is an autonomous fund that supports the installation and operations of registry and notary services and of the Legal and Judicial Training Centre, as well as different DSAJ activities.

There are currently 54 private notaries and three public notary offices authorised to work in the MSAR, according to DSAJ data. N.M.

Cecilia U cecilia.u@macaubusinessdaily.com

of products or services when facing competition.

he managerial ability of local firms compares well to those in other territories, according to the results of a survey conducted by the Macau Management Association (AGM).

The results of the survey show that the level of ability of the managerial sector of local firms this year scored 76.0 out of 100, compared to Hong Kong (71.6), India (75.5) and Australia (68.6).

The survey evaluated the performance of those in the sector in terms of 10 different managerial abilities, among which ‘integrity and governance of corporates’ saw the highest score for the MSAR, hitting at 80.8.

Other positive areas of performance included ‘performance leading’, ‘ financial management’ and ‘external relations’, scoring above the average, at 76.8, 76.9 and 78.8, respectively.

The survey further revealed that the city’s managers generally performed less satisfactorily in ‘organisational skills’, with the sector scoring 73.6, below the average score.

As such, AGM suggested that local firms examine and lay out policies for human resources after studying aspects in which staff can improve.

AGM stressed that good organisational skills of managers would result in better productivity and quality

Finance and insurance the best

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Industry-wise, the survey found that managers working in sectors related to finance or insurance performed well in all of the 10 managerial abilities under evaluation, meaning that managers working in finance or insurance are performing better than those engaged in other industries.

AGM hence advised firms engaged in other industries to examine and improve their current management systems, and to provide related training for workers in order to increase their abilities in other managerial areas.

Meanwhile, the survey shows that the majority of personnel involved in the managerial sector are women, but the general performance of men in the sector was better in comparison to women.

CEOs continue good performance

According to the survey, managerial positions such as chief executive officer (CEO), general manager, or the chairman of the board have better scores in all 10 managerial abilities compared to other lower positions, similar to the results of the last survey.

For instance, staff that are positioned in managerial posts scored an average of 79.2, while staff in other posts such as ‘directly reporting to

others’ or those who have ‘not served in any managerial posts’ scored 71.6.

AGM explained that the difference in scores obtained between the managerial sector and other positions is due to the different views and opinions when resolving problems. The association added that the divergence would likely create conflicts or uncoordinated situations.

The survey was conducted between March and July of this year, with 401 responses received.

Suggestions

In light of the development of the ‘One Belt, One Road’ project, as well as the Greater Bay Area, AGM suggested that the MSAR Government allocate more resources to personnel training, while also advising local firms to cooperate with other tertiary education institutions and business associations from other Greater Bay cities, allowing the exchange of experiences and creating a ‘butterfly effect’.

Meanwhile, the association suggested local firms learn via benchmarking. Firms could create customer value and improve business by comparing good practices of other firms, and by pinpointing the differences between their current operating processes and the best practices of businesses. Consequently, firms could improve their business by laying out the most suitable practices and implementing them.

Banking

No more representation Tai Fung Bank has seen its authorisation to establish a representative office in Shanghai revoked starting from today, a release yesterday from the Office of the Secretary for Economy and Finance announced.

The decision comes after the local bank was granted authorisation in February of 2015 to establish a representative office in Shanghai.

Banks’ representative offices are allowed to look after the interests of the credit institutions they represent and to inform clients about the operations in which they intend to participate, but are not allowed to provide the same services as banking institutions.

In June of this year, Tai Fung Bank opened its first branch in Shanghai, to provide deposits, loans, and insurance, especially for small enterprises in mainland China and Macau, the Shanghai Daily reported at the time. N.M.

BO

Smoking lounge regulations laid out The Secretary for Social Affairs and Culture has released a dispatch about the regulations for setting up smoking lounges in the airport and gaming venues.

According to the dispatch in yesterday’s Official Gazette, the location of smoking lounges should be separate

from other facilities, and the lounges should be effective in holding smoke while also preventing contamination of nearby areas.

Smoking lounges in resorts with casinos should only be set up in gaming areas. In addition, lounges should be conspicuously signposted.

Regarding the internal setup of smoking lounges, materials used for the lounges’ ceilings, walls and floors should be effective in preventing smoke from escaping.

Smoking lounges should have one entrance or exit, which operates as an automatic sliding door. When the door of the smoking lounge is open, the air flow speed should be at least 0.1 m/s, and the negative air pressure should be above 5 pascal while the door is closed.

An alarm system with light and buzzer should be installed at the entrance of the lounge and will be set off when the air pressure inside the lounge is unstable and when the door is open for longer than one minute.

Moreover, smoking lounges should not be opened for usage until two hours after cleaning.

The new smoking ban will be implemented in 2018, while gaming and airport operators should prepare smoking lounges pursuant to the new regulations within a year after the law’s implementation.

Business Daily Tuesday, September 26 2017 3

Macau Gaming

Angela Leong: fire’s impact on Grand Lisboa Palace opening date unclear The group has yet to receive the results of the investigation into the first fire, which broke out at the property earlier this year Cecilia U cecilia.u@macaubusinessdailycom

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ociedade de Jogos de Macau’s (SJM) Grand Lisboa Palace, the group’s debut property on the Cotai Strip, will have its opening delayed after a fire broke out late last Saturday night, according to Angela Leong On Kei, the executive director of the local gaming operator, during an event held yesterday at JA Avenue, in the group’s Jai Alai complex.

The gaming operator had been planning to unveil the new Cotai property by the second half of 2018.

“I believe everything relating to the typhoon or the fire will have a certain level of impact [on the opening], but for now we still haven’t evaluated the level of damage so there is nothing I can concretely say on the matter,” Leong told the press.

With the case currently being investigated by the Judiciary Police (PJ), Leong said there is as yet no update about the fire, but she acknowledged that the fire had reached the fifth floor of the property.

Leong stated that the length of delay in completing the property will depend on the evaluation made by the constructors, but stated that that the property might be partially opened in time to meet the

previously announced date.

“We might open partially, like here [Jai Alai], but it is not our wish for it to be like this, we hope to open it in its entirety,” said Leong.

The PJ have revealed that they suspect the cause of the fire could have been arson, having found three burning points. A security guard and a firefighter were injured, and in total, 88 workers were taken off the site and one trapped worker was saved by firefighters. The fire was detected at about 6’o clock in the morning and put out before noon.

Despite being the second fire to occur on the property within a year, the SJM executive director did not speculate on potential causes, stating they still have not received the investigation results of the first fire, which took place in March.

Leong said a meeting among directors would be held in the near future to discuss the matter after related reports are received.

“I think Mr. So [Chief Executive Officer of local gaming operator SJM Holdings Ltd., Ambrose So Shu Fai] will soon have news for you all,” said Leong.

Jai Alai Hotel opening still pending

When asked by the press about the hotel license of Jai Alai, the executive director lamented that she “also

wants to ask why the Jai Alai Hotel hasn’t opened yet”. “[The situation is] very helpless! If I knew that there was news coming, I would happily tell you all. Because of this, the business isn’t good,” remarked Leong.

More brands to enter JA Avenue

Yesterday, JA Avenue welcomed CANVAS, an Organic Aromatherapy brand based in Australia. The SJM executive director Angela Leong On Kei officiated yesterday’s soft opening ceremony. Speaking to the press after the ceremony, she expressed

The casino area in the Jai Alai building commenced operations in December of last year, while the retail area in the building opened its doors last April. The 132-room Jai Alai Hotel is still awaiting permission from the government.

the wish that more brands be introduced to JA Avenue.

The retail segment of the group’s most recently-opened property was also holding a charity event in collaboraiton with CANVAS, from which the profits will be delivered to the Macau Special Olympics and the Macau Association of the Hearing Impaired. advertisement

4 Business Daily Tuesday, September 26 2017

Macau Opinion

Albano Martins*

Particularities 1. My forecasts pointed to inflation in August of between 1.15 and 1.17 per cent. It stood at 1.16 percent!

However, this inflation indicator does not reflect the reality of Macau.

July should have been the low point of inflation this year, but data revealed in the past forced me to review my projections.

August was not the turning point, nor is September likely to be.

Who believes that the “cumulative rates of change in input rents for housing”, which weighs 19.7 percentage points on the household expenditure basket, was negative by 2.01 percentage points?

With housing prices continuing to rise monthly to double digits, it is hardly acceptable that rents are not recovering faster, even if there is a lag of a few months!

2. This is indeed a land of many particularities.

Take the case of the blacklisting of individuals who are barred from entering the city.

Are they journalists and personalities linked to the pro-democracy wing of Hong Kong.

Is it chance?

It swears to seventh heaven that this type of list does not exist.

We are a second system, which consecrates certain freedoms, but in recent times the system has been afraid of the poor guys who come to report on a typhoon or to visit Macau with family or friends.

Terrorists, terrorist candidates, drug gangsters, bandits of every kind and species, pedophiles, rapists, pro-independence people - of course I realize these are not well received.

But the rest is simply stupid!

3. A former Prosecutor was convicted without the right to appeal.

Even the world’s greatest bandit is entitled to a second instance. Nobody has seen him worried about the “poor” Secretary who was also convicted without appeal!

God is Machiavellian!

Our Legislative Assembly works very badly.

It approved amendments in 2009 to the basic law of the judicial organization and did not address the issue of just such an appeal.

Today, some speak loudly, but they did the same with the Land Law, which ended up plundering entrepreneurs who did a lot for Macau, and the fault was not theirs, as their projects could not be developed because the government simply did not proceed with the agreed reordering for the respective zones on time.

Being a lawmaker part-time is effectively a conflicting activity in regards to effectiveness and good service to Macau and China! * an economist and contributor to this newspaper

Tourism

Losing transport Increased receipts for package tours and room reservations in the MSAR led to a slight 0.5 per cent annual rise in travel agencies’ receipts in 2016, up to MOP6.53 billion, despite the loss in revenue on transport tickets due to the increased popularity of online bookings Nelson Moura nelson.moura@macaubusinessdaily.com

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eceipts of travel agencies amounted to MOP6.53 billion (US$813.82 million) last year, up slightly by 0.5 per cent year-on-year, according to the Travel Agencies Survey 2016 - released yesterday by the Statistics and Census Service (DSEC).

Receipts from Package Tours increased by 2.5 per cent to MOP2.00 billion, representing 30.7 per cent of total receipts, with receipts for Room Reservations going up 2 per cent to MOP1.11 billion.

However, Passenger Transport Ticketing in 2016 suffered a decrease of 6.2 per cent from the previous year, down to MOP1.78 billion, continuing the fall in the travel agency service after a 18.1 per cent annual decrease was registered in 2015.

This decrease was attributed by the DSEC to the growing popularity of online bookings of transport - including air, ferry, train, and bus tickets - through other travel websites.

However, this growing popularity in online transport bookings wasn’t registered in the total receipts from travel agencies’ online business, which fell by 11.1 per cent in 2016 to around MOP156 million.

The amount of receipts derived from the Rental of Coaches with Driver increased by 15.6 per cent in 2016 to around MOP977 million, but receipts for the Rental of Vehicles decreased by 9.6 per cent to MOP184 million.

Receipts for the purchase of tickets

to amusement parks & entertainment performances saw the largest annual increase, going up 27.9 per cent in 2016 to some MOP113 million.

Numerous travel agencies

The official data also indicates that for the whole year of 2016 there were a total of 256 travel agencies operating, six more than in the previous year, with the number of people engaged in the industry falling by 239 to 4,246.

Gross Value Added - measuring the sector’s contribution to the economy

- amounted to MOP944 million, a fall of 1 per cent year-on-year during the period.

The Gross Surplus of travel agencies decreased by 11.4 per cent year-on-year to MOP299 million, due to a slight 0.9 per cent increase in the sector’s expenditure, which reached MOP6.30 billion in 2016.

Of the total expenses, Purchase of Goods & Services and Commission Paid represented 75 per cent of the total, with MOP4.73 billion registered in 2016.

Tourism

Filling the skies A report from Sanford C. Bernstein estimates that outbound international passengers flying from mainland China to the MSAR are estimated to reach 34 million in 2025 Nelson Moura nelson.moura@macaubusinessdaily.com

The amount of airline outbound international passengers going from mainland China to Macau is estimated to grow from 22 million this year to 34 million by 2025, brokerage firm Sanford C. Bernstein stated in a report.

According to the report, outbound

international passengers from China - excluding Hong Kong or Macau will grow from 72 million in 2016 to 175 million in 2025, with passenger numbers traveling to Hong Kong reaching 51 million in 2025.

‘China will be the largest growth market in aviation by far, adding more passengers to the global market during that time frame than the rest of

Asia combined. By 2025 the centre of gravity in aviation, will have passed from North America, to Europe, on to China,’ the report stated.

Of the 100 million additional passengers departing from mainland China, 10 million are expected to head to Europe, with Bernstein analysts estimating the China-Europe airline passenger transport business will grow at a compound annual growth rate of 12 per cent for the next 8 years.

‘In our view, the majority of that growth (up to 75 per cent) will be captured by Chinese carriers, and only 25 per cent by European carriers – most likely Air France-KLM and Lufthansa Group,’ noted the report.

The report considers that any global airline hoping to grow in the future will have to ‘think long and hard’ about how it will gain exposure to the Chinese market.

This future strategy would have to take into account how the airline can deploy its capacity to China, given regulatory, infrastructure and political constraints; how to build viable partnerships, alliances or even joint ventures with the Chinese airlines; and how it could protect its market share in the traffic flows to China.

Starting from 25 July of this year, Chinese airline Beijing Capital Airlines started operating four weekly flights between Macau and Beijing, in order to connect with its direct flight between Beijing and Lisbon.

Business Daily Tuesday, September 26 2017 5

Macau Casinos

A Golden October Analysts expect strong bookings for this year’s nine-day Golden Week in October, while VIP revenues for the third quarter of this year are expected to see a 37 per cent yearly increase to reach MOP33.32 billion Nelson Moura nelson.moura@macaubusinessdaily.com

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nalysts at Morgan Stanley state that gross gaming revenues in September have fared well so far, while advance bookings for the ‘longer than usual’ Golden Week in October are expected to be ‘strong’.

The firm believes the considerable property damage caused by Typhoon Hato led to incremental costs related to overtime during the storm, as well as increased staffing for clean-up activities and other unforeseen impacts, such as Wynn Palace’s maintenance cranes being so severely damaged that the property had to rent cranes from Hong Kong.

‘However, these issues appear temporary and insurance should pay for most of the damage,’ the note concluded.

Morgan Stanley is predicting gross gaming revenues in September to reach MOP21.19 billion (US$2.63 billion), a 15 per cent year-on-year rise, with average daily revenues estimated at MOP706 million.

The firm also estimates that the third quarter of this year will see a 22 per cent year-on-year increase in revenue, reaching MOP66.8 billion, with expected daily revenues of around MOP726 million.

In terms of mass market gaming revenues, Morgan Stanley analysts estimate July and August saw 12 per cent and 9 per cent year-on-year increases, respectively, with the firm believing the sector will finish the quarter with MOP29.94 billion in revenue, 9 per cent more than the same period last year.

Regarding VIP, analysts expect the third quarter will see the largest yearly increase of 2017, rising 37 per cent to MOP33.32 billion.

The firm also considers that the recent opening of more VIP rooms by smaller junkets - such as the 10-table VIP room opened by local junket operator David Group at Galaxy last week - will drive VIP growth above 20 per cent

year-on-year in the ‘next few months of the year’.

David Group has also opened VIP rooms this year at Melco Resorts’ Studio City and at the Macau Jockey Club Casino in the Macau Roosevelt Hotel.

Opening

Royal Dragon Casino opening this week The Royal Dragon Casino, as well as the Royal Dragon Hotel, the latest additions to the peninsula’s hospitality and gaming offerings, are scheduled to open at noon on Wednesday, according

to information disclosed by GGRAsia. The publisher notes that the Gaming Inspection and Coordination Bureau (DICJ) had yet to confirm the date, but that it had received an application to operate the

venue under the license of local gaming operator Sociedade de Jogos de Macau (SJM).

The head of the DICJ, Paulo Martins Chan, had previously stated that no new

tables would be allocated to the property, with tables instead needing to be transferred from another gaming venue. The application for this had been received by the Bureau, a response to

the publication notes, but had yet to be granted as of last Friday. In response to how many tables would be in the new venue, the local oversight group did not respond. advertisement

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6 Business Daily Tuesday, September 26 2017

Gaming Gaming development

Suncity Group confirms service provision for Van Don casino project, Vietnam Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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subsidiary of Suncity Group Holdings Limited has entered into an agreement with a company incorporated in Vietnam to provide consultancy, advisory, and technical services for an integrated resort project slated to open March 31, 2019, in Vietnam’s Quang Ninh Province, according to a filing by the company with the Hong Kong Stock Exchange.

Under the agreement, Suncity Group Management and Consultancy (Van Don) Limited, a firm incorporated in Macau and an indirect wholly-owned subsidiary of the company, agrees to provide pre-opening services in relation to the development, set up and preparation for the opening of the project in Van Don District, as well as relevant design guidelines and engagement of consultants and layout plans.

According to the terms, the project owner, Van Don Sun Joint Stock Company, is to pay a total of US$500,000 (MOP4.02 million) in service fees to the service provider, to be disbursed in two installments of US$250,000 each.

In case the agreement extends beyond April 2018, Suncity Group Management and Consultancy will be entitled to a monthly fee of US$41,667.

According to previous reports, Suncity Group was confirmed last April as the sole company authorized to develop and operate a casino in the Van Don Entertainment Zone,

in the northern Province of Quang Ninh, after it was reported in March that the zone would host another casino development by FLC Group Joint-stock Co.

AML

Big Chinese cash bets put Vancouver casino in laundering probe River Rock Casino Resort reported 54,187 large cash transactions during the two-year period but only filed 1,194 suspicious transaction reports and 1,209 prohibition bans Natalie Obiko Pearson and Sandrine Rastello

A casino south of Vancouver favoured by wealthy Asian gamblers is under scrutiny for potential money laundering as large amounts of cash flow through the Pacific Coast city’s thriving real estate and gaming industries.

The British Columbia government released on Friday a previously confidential July 2016 report that had investigated the River Rock Casino Resort after it accepted C$13.5 million (US$11 million) in C$20 bills in just one month in July 2015, capturing the attention of B.C.’s Gaming Policy and Enforcement Branch.

“I received a series of briefings that caused me to believe that our province could do more to combat money laundering at B.C. casinos,” B.C.’s new Attorney General David Eby, whose New Democratic Party-led

government took office in July, told reporters. “I am making that report public today.”

Great Canadian Gaming Corp., the owner of River Rock, said in a statement late Friday that it strictly adheres to all regulatory requirements.

The report, conducted by an independent investigator, examined cash transactions and play records over a two-year period starting September 2013 at the luxury resort overlooking the Fraser River, about 12 kilometres (7.5 miles) south of downtown Vancouver. High-limit rooms were staffed by employees whose first language was either Cantonese or Mandarin. At times, patrons would drop single cash buy-ins of more than C$500,000 at the gaming tables without disclosing the source of funds, according to the report.

“Reasonable grounds to suspect money laundering activity through

the use of unsourced funds has been confirmed,” the report said. “While the patron may be bona fide, the unsourced cash being accepted by the casino may be associated with criminal activity.”

‘Asian VIPs’

Most of the cash flowing through the casino was from clients referred to among staff as “high roller Asian VIPs,” many of them non-residents or business people with interests in Vancouver and China, the report said.

Cash believed to be connected to illicit activity would be delivered to patrons via late-night drop-offs at the casino or just outside the property.

The revelations come amid growing concerns that Vancouver -- a city that’s home to multi-million dollar mansions, glittering casinos and one of the nation’s worst opioid crises -has become a haven for hot money.

The number of suspicious transaction reports involving Vancouver real estate have spiked lately, Gerald Cossette, director of Canada’s anti-money laundering watchdog, the Financial Transactions and Reporters Analysis Centre known as Fintrac, told reporters in Montreal this week.

The watchdog has been working with local realtors to identify red flags, he said. “For instance, how do you justify a student who buys a C$5 million mansion?,” Cossette said. Last year, when Eby was still an opposition lawmaker, he identified C$57.1 million worth of residences bought by students reporting no income in Vancouver’s upper-crust district of Point Grey.

Currency controls

The report on the casino also noted the likelihood that Chinese patrons were using funds facilitated by underground banks in order to evade currency controls at home. Gamblers would call a local contact for cash delivery that would later be repaid through cash holdings in China, the report said. Chinese citizens have an annual foreign-exchange quota of US$50,000 and in the past year Chinese officials have imposed a series of measures to crack down on capital outflows and violations.

The casino “fostered a culture accepting of large bulk cash transactions,” the report said. Such venues are mandated to file reports on cash transactions of more than C$10,000, but following up with suspicious transactions reports or banning high-risk patrons is more discretionary. River Rock reported 54,187 large cash transactions during the two-year period but only filed 1,194 suspicious transaction reports and 1,209 prohibition bans, according to the report.

Eby pledged Friday to appoint an independent expert to review money laundering in the province in coming weeks. Bloomberg

Business Daily Tuesday, September 26 2017 7

Gaming

Gaming offer

Another Suncity VIP operation in Manila: brokerage The local junket is launching operations in Okada Manila in Q4 2017, while an increased number of Chinese visitors are travelling to the Philippines

Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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ocally-based junket operator Suncity Group is opening a new operation in Okada Manila in the fourth quarter of 2017, according to a report on the Philippines gaming market released by Morgan Stanley, an investment bank, during the weekend.

In the report, the brokerage claims Okada Manila – a property of Tiger Resorts Leisure and Entertainment Inc., a subsidiary of Universal Entertainment Corporation – is ‘gaining momentum’ after it added one junket in the third quarter of 2017, and as its mass floor opened with 250 tables and some 2,500 slots.

Suncity operates VIP rooms in other properties in Manila, including City of Dreams (CoD) Manila, a Melco Resorts joint-venture with Belle Corp., and Solaire Resort and Casino, run by Bloomberry Resorts Corporation.

The brokerage further noted that market gross gaming revenue remains strong, up 27 per cent yearon-year to August, ‘with balanced growth between VIP and mass,’ although tracking below the 35 per cent forecast by Morgan Stanley for the year.

VIP revenue only grew at a sluggish 1 to 1.5 per cent during the month analysed.

Revenue drivers indicated by analysts Praveen Choudhary and Alex Poon include junket operations with video streaming, strong visitor arrivals, an improved macroeconomic outlook, and rising local mass market penetration.

According to the bank, risks arise

mainly from mainland China since the Philippine government seems to ‘maintain favourable policies towards tourism and entertainment.’

In that regard, a key concern raised in the report is the potential impact on video streaming ensuing from VPN blocking in mainland China effective February 1, 2018.

But the analysts believe it may not have a large impact on gross gaming revenue, given that all operations are being carried out in the Philippines, and that VIP revenue generated in the country through video streaming is less than US$500 million (MOP4.02 billion) a year, according to their estimates.

On the bright side

The bank believes that strong Chinese visitor arrivals and increasing local penetration could outweigh the potential downside of a proxy betting clampdown.

‘We saw higher foot traffic in Entertainment City compared to our last visits in February and March,’ the analysts wrote.

Chinese visitor arrivals in the Philippines rose 33 per cent yearon-year in the first half of 2017, attributable to less political tension in relations between China and the Philippines and the fact that the Philippines government granted visas on arrival to Chinese visitors, such as tour groups and businesspeople, starting August 17, points out the bank.

In a prior note, Morgan Stanley said they believe the policy might be eventually extended to all Chinese visitors.

Undercapacity converted

I m p r o ve d i nfrast ru ct u re a nd

increased hospitality and tourism offerings have also been noted by Morgan Stanley as drivers for larger penetration of the mass market segment and increasing revenue.

The institution pointed out, for instance, that only half of the hotel rooms in properties in Entertainment City, such as Melco’s and Blomberry’s, are complimentary, as compared to rates as high as 80 to 90 per cent in Macau.

Table utilization could reach 50 per cent, up from 30 per cent currently, and the minimum bet could also rise, added Morgan Stanley.

The bank further noted that a ‘growing cluster’ of tourism venues

in Entertainment City is likely to drive higher local penetration in the next few years.

These include Okada Resort, fully opening in 2018; a 6-million square foot Ayala mall, located between CoD and Solaire – also slated to be opened in 2018 – as well as other residential projects.

Finally, better infrastructure development, including the completion of the NAIA Expressway in December 2016, has enabled more locals from 20 kilometres away, in the south of the metropolitan area of Manila, to reach the location, as driving time has been cut down to less than 30 minutes. advertisement

8 Business Daily Tuesday, September 26 2017

Greater China Investment

Beijing is said to plan closer oversight of state company funds China will create a centralized financing company to oversee some US$304 billion of funds held by the country’s state-owned enterprises’ finance units, people familiar with the matter said

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he plan, approved by the State Council or Cabinet, will increase the government’s ability to supervise the non-financial central SOE finance companies’ investments, giving the entity a fuller picture of how these companies are using funds, according to the people, who asked not to be named because the plans have not been made public.

Non-financial, central SOEs have their own finance units that currently offer various products and services such as deposits and loans, and the new entity could facilitate those efforts. The plan would assist regulators by directing some RMB2 trillion of funds held by the non-financial SOEs through the new company, meaning they could monitor the flow through only one financing company rather than dozens.

Many details about the new entity were not immediately clear, such as who would control it, how much regulatory and oversight authority it would have, and how it might conduct external financing on behalf of the SOEs.

The aim is to boost efficiency in the US$20 trillion state sector in line with a government campaign to reduce the companies’ debt, according to the people. While the centralized finance company would have a regulatory oversight role, the SOEs would retain control over the funds, the people said.

China Chengtong Holdings and China Reform Holdings, two companies facilitating the nation’s plan to overhaul the state sector, have been tasked with setting up the centralized company, two of the people said. It would coordinate business cooperation between companies, cut costs, reduce debt and promote other financial ties between state firms in and outside of China, they said.

Reduce risks

The plan applies to companies regulated by the State-owned Assets Supervision and Administration Commission but not to banks and brokerages that are overseen by other agencies.

There was no immediate reply to faxes sent to China Chengtong and

the State Council Information Office seeking comment. An email sent to China Reform’s press office also went unanswered.

‘The aim is to boost efficiency in the US$20 trillion state sector in line with a government campaign to reduce the companies’ debt’ The move, which is intended to make it more efficient for SOEs to borrow money and to cut operational costs, coincides with Beijing’s efforts to crack down on debt in the state sector to reduce risks to the broader

Some of the SOEs, such as China Mobile Ltd. and PetroChina Co., are among the world’s biggest companies

economy. At a key financial meeting in July, President Xi Jinping said deleveraging at SOEs was of utmost importance.

Some of the SOEs, such as China Mobile Ltd. and PetroChina Co., are among the world’s biggest companies. State-owned enterprises command about 40 per cent of China’s industrial assets and create nearly 20 per cent of urban employment.

Nearly all state companies, from China Petrochemical Corp. to China Baowu Steel Group, have their own finance companies. State companies have hundreds of subsidiaries across the country and dozens of listed entities in Hong Kong and Singapore with tens of billions of dollars in market value.

Cut costs

The more than 240 finance companies controlled by central and local governments across the country, which serve 60,000 firms in 17 industries spanning oil, power, petrochemicals and auto, cut a combined RMB70 billion in costs in 2015 alone, helping their conglomerates combat slower growth, according to data from the industry association.

Lower funding costs promise to bolster profitability of state-owned enterprises that remain a key driver of the world’s second-largest economy and reduce leverage in a bloated sector that accounts for 60 per cent of corporate debt to the nation’s financial industry, according to UBS Group AG. The new centralized financing company initially will function as a facilitator and coordinator for the SOE’s finance companies, the people said. Those entities pool internal financial resources by methods including taking deposits from and making loans to members of their respective conglomerates, and conduct external financing such as raising funds from bond markets and borrowings from the inter-bank market. Bloomberg News

Debt

Authorities says growth of key ratio clearly slowing, stabilising The Bank of International Settlements warned last September that China’s excessive credit growth was signalling a banking crisis in the next three years The growth of China’s overall leverage ratio has been clearly slowing and is now stabilising, the state planner said yesterday, days after S&P downgraded the country’s sovereign debt rating.

China will focus on lowering leverage ratios among state-owned firms and winding down of “zombie firms” to reduce leverage ratios and control debt risks, the National Development and Reform Commission said in a statement on its website.

S&P Global Ratings cut China’s credit rating last week, which followed a similar move by Moody’s Investors Service in May. Both firms cited the risks from China’s rapid build-up in debt and high overall debt levels as a major long-term concern.

S&P said China’s attempts to reduce debt risks so far this year are not working as quickly as expected and credit growth is still too fast.

The NDRC cited the latest data from the Bank of International Settlements (BIS) which showed China’s overall leverage ratio is still growing, but at a slightly slower pace.

BIS data published last week showed China’s total non-financial debt was 257.8 per cent of gross domestic product (GDP) at the end of the first quarter, up from 250.4 per cent in the same period a year earlier, but only a slight increase from 257.0

per cent at the end of 2016.

China’s non-financial corporate leverage ratio declined sequentially for the third straight quarter to 165.3 per cent in the first quarter, BIS data showed.

The BIS warned last September that

China’s excessive credit growth was signalling a banking crisis in the next three years, while the International Monetary Fund warned this year that China’s credit growth was on a “dangerous trajectory” and called for “decisive action”.

One way the government is looking to lower leverage ratios is by converting some of the debt into equity.

257.8 per cent of GDP China’s total non-financial debt Bank of International Settlements

The NDRC said yesterday that debt-for-equity swap deals worth RMB1.3 trillion (US$196.46 billion) and involving 77 firms had been signed through Sept. 22, though details of many of the announced deals have been scant. Reuters

Business Daily Tuesday, September 26 2017 9

Greater China Technology

In Brief

IPhone disappointment hammers suppliers, fuels Taiwan outflows Overseas investors pulled a net US$677 million from the island’s stock market last week Jeanny Yu

Apple Inc.’s latest products are getting a thumbs down, at least by investors in the company’s Asian suppliers.

Hon Hai Precision Industry Co., which assembles the iPhone and other Apple devices, has fallen 10 per cent in Taipei since Apple unveiled its collection of new gadgets for the holidays this month. Other suppliers across the region, including Taiwan’s Pegatron Corp. and South Korea’s LG Innotek Co. have plunged more than

12 per cent.

Taiwan’s US$1.1 trillion equity market is particularly exposed to the swinging fortunes of Apple products, due to the dominance of parts manufacturers. Hon Hai and Taiwan Semiconductor Manufacturing Co., Apple’s main chip-maker, together make up a quarter of the Taiex total weighting, while exports account for more than half of the island’s gross domestic product.

“Orders of the new IPhone have disappointed the market and foreign

Customers queue outside a U.S.-tech giant Apple store during the launch of the new iPhones 8 at Dubai Mall in Dubai, UAE, 23 September 2017. Source: Lusa

investors may continue net selling Taiwan stocks,” said Alan Tseng, Taipei-based vice president at Capital Investment Management. “The retreat of Apple suppliers has pulled down the benchmark index and could drag the index even lower in the coming month.”

Overseas investors pulled a net US$677 million from the island’s stock market last week, the biggest outflows in three months. Earlier optimism that the iPhone would bolster Taiwan earnings had sent the Taiex to a 17-year high as inflows swelled.

The Taiex slid 1.1 per cent the close, its lowest in a month.

Apple iPhone 8 pre-orders are “substantially lower” than iPhone 7 and iPhone 6 levels, Rosenblatt Securities analyst Jun Zhang wrote in a note last week. Initial feedback suggests iPhone 8 volume is below predecessors in the U.S. and even more so in China, according to Zhang.

Hon Hai fell 2.8 per cent in Taipei, while Pegatron slumped 4.4 per cent.

TSMC dropped for a third day. AAC Technologies Holdings Inc., another supplier, retreated 6.7 per cent in Hong Kong, and GoerTek Inc. capped its biggest loss since July 3 in China’s Shenzhen. Bloomberg News

Trade

Slipping export crown could be saved by technology lift After decades of relentless gains, China’s share of global exports is now edging down. Whether that continues hinges a lot on how fast it can shift into higher-technology shipments China’s portion of the global export pie has shrunk from a high of almost 17 per cent reached in December 2015, International Monetary Fund data show. The pullback is driven mainly by the growth of shipments from commodity-exporting nations like Brazil and Australia amid rising prices for staples like iron ore and bauxite, according to economists from Oxford Economics and TCW Group Inc. Another factor is global demand tilting more to advanced machinery and cars, segments where China is just beginning to emerge as a competitor, says HSBC Holdings Plc. Beijing’s drive to create national champions, subsidize emerging industries, and force technology transfers from foreign firms in the country has prompted U.S. Trade Representative Robert Lighthizer to say it’s an unprecedented threat to the world trading system. Despite the smaller share of global exports, the “Made in China 2025” policy blueprint envisions global competitiveness by that year across 10 key industries from robots to medical devices.

“Declining export market share of late is more likely a blip, rather than the start of a lasting trend,” said Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong. “As China’s share in global gross domestic product continues to rise, it’s likely that its share of global exports will expand as well, with products stretching from mass manufacturers to increasingly more sophisticated products as well.”

A rebound in global car demand has lifted German and Japanese exports, while China runs a large semiconductor trade deficit, says Neumann.

That will reverse as industrial policy pushes for more advanced manufacturing, taking share from developed economies, he says.

It’s in low-end industries like

textiles and furniture where market share is pressured most. That’s in keeping with the nation’s policy of shifting to higher value-added industries from electric vehicles to robots. A recent pollution crackdown has raised costs for industries such as dyeing companies and paper producers, pressuring their competitiveness.

Low-end manufacturers also face rising wages, a shrinking workforce, and rising competition from lower-wage nations like Bangladesh and Vietnam in cheaper products such as T-shirts.

Although China remained the world’s biggest textile exporter of last year, accounting for 37 per cent, shipments fell 3 per cent to US$106 billion, World Trade Organization data show. Nations like Vietnam and Pakistan are winning larger shares, with Vietnam breaking into the top 10 exporters with 7 per cent of global textile shipments last year, the WTO says.

Some market-share losses are being offset because more components of exports are made at home, not imported, said David Loevinger, an

analyst at TCW Group Inc. in Los Angeles and a former China specialist at the U.S. Treasury Department. The domestic value added of gross exports has risen to 71 per cent in 2014 from 62 per cent a decade earlier, according to the most recent data from the Organisation for Economic Cooperation and Development.

Because China is a manufacturing exporter, it’s not surprising that its market share peaked when global commodity prices were bottoming out, Loevinger said. “With commodity prices rising, commodity producers have been clawing back market share,” he said.

Meanwhile, the economy is also the victim of its own surging imports, which by definition increases the share of global exports for other countries, according to Andrew Polk, co-founder of research firm Trivium China in Beijing.

“China’s biggest problem is that it can’t export to the second biggest economy in the world -- itself,” says Polk. “The real beneficiary here has been other emerging economies, especially in Asia, and raw-materials exporters.” Bloomberg News

SE Asia

Lazada expands Alibaba’s Taobao marketplace Online retailer Lazada Group said it will sell select items from Alibaba Group Holding Ltd’s Taobao marketplace in three more countries in Southeast Asia, expanding the partnership between the two e-commerce firms. Taobao Collection will be offered in Indonesia, the Philippines and Thailand in the next few weeks through Lazada’s platform, it said in a statement yesterday. Lazada began selling Taobao products in Singapore and Malaysia earlier this year. In June, Alibaba invested an additional US$1 billion in Lazada to boost its stake to 83 per cent.

M&A

Medical devices maker to buy Argon for US$850 mln China’s Shandong Weigao Group Medical Polymer Co Ltd has agreed to acquire US-based and unlisted Argon Medical Devices Holdings Inc for US$850 million, as part of its overseas expansion drive. Weigao Group, mainly engaged in the production and sale of medical devices, orthopaedic and blood purification products, has been seeking opportunities to bolster its product portfolio, the company said in a filing to the Hong Kong Stock Exchange. The company has also been looking to diversify its revenue stream to increase the contribution of sales from overseas markets, and expects “significant growth opportunities” for Argon Medical’s products in China.

Environment

Shandong province to ban coal shipments by diesel trucks The eastern province will ban the use of diesel trucks to transport coal from ports around the Bohai Sea starting on Oct. 1, according to a report by state news agency Xinhua yesterday, citing a statement from local authorities. Companies operating ports on the Bohai Sea will not be allowed to renew contracts using diesel-powered trucks, in order to improve air quality, Xinhua reported, citing a statement from the Shandong Province Department of Transportation. Major Chinese ports in Shandong including Qingdao, Yantai and Rizhao will be included under the ban.

Debt

Oaktree CEO sees room to invest ‘more aggressively’ Oaktree Capital Group LLC sees opportunities to invest “more aggressively” in Chinese and Indian distressed debt as the legal and regulatory systems of the countries develop, Chief Executive Jay Wintrob said yesterday.

“These are countries where the legal system, the bankruptcy code, the sanctimony of the rule of law are still under development, in a very positive way, especially in China,” Wintrob said at a news conference. “As those institutions develop and the predictability of the outcomes, their willingness to uphold the priority of creditors vis-à-vis one another, you will see more opportunities to invest, to invest more aggressively.”

10 Business Daily Tuesday, September 26 2017

Greater China Aesthetic

Going under the knife in Mainland’s plastic surgery stampede The under-40s want to look more beautiful, the over-40s want to look younger Peter Stebbings / with Morgan Huang

C

hen Yan is 35 and fears middle age is upon her, so like all of her friends she sees cosmetic surgery as the solution: time to get a new nose.

Plastic surgery is booming in China, fuelled by rising incomes, growing Western influences, and the imperative of looking good on social media.

Some parents are even paying for teenage children to get work done to help their employment prospects.

“We Chinese think that after you’ve married, given birth to a kid and you’re past 30, they call you a middle-aged woman,” said Chen.

“I don’t want to be a middle-aged woman that early.”

The shop owner travelled from the central province of Hunan to pay RMB52,515 (US$8,000) in a quest for the perfect nose at Shanghai’s private Huamei Medical Cosmetology Hospital.

Spread over four floors and featuring a peaceful convalescent roof garden complete with tea house, the vast majority going under the knife are young women.

It offers an array of options including breast augmentation, ear shaping, bone shaving, pubic-hair transplants and a procedure that promises to reduce armpit odour.

Summer rush

Stepping inside the hospital is like entering a five-star hotel.

In the immaculate foyer, patients are greeted by bowing hostesses in striped blouses, short black skirts and high heels as soothing music plays. A sign outside entices teachers and students with a 20-per cent summer discount.

The surgeon Li Jian says 90 per cent of his patients are women aged 16 to 70.

The under-40s want to look more beautiful, the over-40s want to look younger.

The most requested procedures involve removing bulk from the face and body, and nose jobs -- Chinese women typically seek slimmer, more “Western-looking” noses.

This year 14 million Chinese are expected to have cosmetic surgery, a 42 per cent surge from last year, according to

SoYoung, a popular app on the industry that used data from several sources including international consultancy Deloitte.

Summers are especially busy at the Shanghai clinic because recent university graduates believe better looks lead to better employment prospects, particularly in the entertainment business.

Increasing numbers seek plastic surgery in their teens, although the hospital does not treat those under 16, while 16 and 17 year olds require parental consent.

“Most Chinese people believe the thinner the face or nose, the more beautiful they look,” Li said.

“Some people want to make themselves more beautiful when they take pictures of themselves. So they want themselves to become more European,” he added.

“As a plastic surgeon I don’t think that is beautiful, at least that is not Chinese style. So I refuse many girls who have that kind of opinion.”

Becoming addicted

Sun Yibing, now 22, had her first procedure at 17 and has since become something of a celebrity after going under the knife 12 more times.

‘So-called double eyelid surgery aimed at creating rounder, more Westernlooking eyes is one of the most popular in China’ Bullied at school because of her looks and weight, she had operations on her eyes, nose, jaw, temples and elsewhere, and now sports rounder eyes, as well as a sharper nose and jawline.

But as her appearance has morphed, so has her view of surgery.

“I got addicted to surgery and yet was never satisfied

with myself. I am not against plastic surgery but you have to be yourself instead of turning into others,” Sun, who is from the central province of Henan, told AFP. Sun partly blames minor celebrities who make their names on the internet in China -- often by live-streaming themselves singing or dancing and boasting about their surgery -- for hastening the stampede.

She now fears that the rush to cash in has brought growing numbers of unscrupulous and poorly trained surgeons into the industry.

“A couple of years ago people still were quite conservative about having cosmetic surgery,” she said.

“But I am afraid that the

plastic surgery industry is a mess now with good and bad clinics mixed so customers don’t know what is what,” she added.

‘I’m the last one’

Back at the hospital a woman in a waiting room peers out from beneath her bandaged eyelids. Another, in obvious pain after surgery, appears almost to be trying to hold her head together.

Chen had already done minor work to her nose and had a crease inserted in her eye lids -- so-called double eyelid surgery aimed at creating rounder, more Western-looking eyes is one of the most popular in China.

But it took her six years to summon the courage for a full

nose job, finally taking the plunge after all her friends did so.

“I got here later. I’m the last one to come,” she said.

Following surgery, she said that the hospital recommended a bone-shaving operation to narrow her jawline using a surgical drill.

Some Chinese women hanker for a more “V-shaped” visage, but the procedure comes with potential complications including infection or even facial paralysis.

“I just want to make myself look more beautiful,” said Chen, who is unsure whether to proceed.

She explained: “No matter how old a woman is, she should make herself more and more beautiful.” AFP

Business Daily Tuesday, September 26 2017 11

Asia Monetary drive

Singapore’s softer August inflation signals no change to policy Annual core inflation gauge rose 1.4 per cent in August after rising 1.6 per cent in July Fathin Ungku

S

ingapore’s annual headline consumer price index rose more slowly than forecast in August, reinforcing expectations the central bank will keep policy unchanged at its review in October despite brighter economic growth prospects this year.

The all-items CPI in August rose 0.4 per cent from a year earlier. That was slower than the median forecast in a Reuters poll of a 0.6 per cent rise. In July, all-items CPI rose 0.6 per cent from a year earlier.

Key Points August all-items CPI +0.4 pct yy vs +0.6 pct forecast Core CPI +1.4 pct yy vs +1.6 pct median forecast MAS likely to keep policy unchanged in Oct - analysts The moderation in all-items CPI inflation largely reflected a fall in private road transport inflation, the Monetary Authority of Singapore and the Ministry of Trade and Industry said in a joint statement yesterday.

That, together with a moderation in food and retail inflation, more than offset a smaller decline in the cost of accommodation, they said.

A night view of Singapore

Private road transportation inflation in August eased to 2.6 per cent from a year earlier, versus 3.5 per cent in July. The cost of accommodation fell 3.9 per cent in August, a smaller decline than the 4.1 per cent drop seen in July.

Singapore’s annual core inflation gauge, which excludes changes in the cost of accommodation and private road transport, rose 1.4 per cent in August after rising 1.6 per cent in July.

The median forecast in a Reuters poll called for a 1.6 per cent rise.

“It falls neatly within MAS expectations, there’s no big surprise here,”

said Francis Tan, an economist for United Overseas Bank, adding that MAS is likely to keep its monetary policy unchanged at its policy review due in October.

“It may be time that they start normalising in April next year, following other countries who are doing it,” he added.

Singapore and other Asian economies that are highly dependent on trade have gained a big boost this year from an improvement in global demand, particularly for electronics products and components such as semiconductors.

Still, there has been little sign of any broad pick-up in demand-driven inflationary pressures, and most analysts say the central bank is unlikely to be in any hurry to tighten monetary policy.

“The inflation data once again confirms that weak domestic demand is weighing on the pricing power of the corporate sector and that there is little reason for the Monetary Authority of Singapore to relinquish its currently neutral exchange rate policy stance,” Sanjay Mathur, chief economist for Southeast Asia and India at ANZ, said in a research note. Reuters

Bankers

Australia to push through tougher rules for executives Scandals have fuelled calls for a broad judicial inquiry into banking system Paulina Duran

Australia’s prudential regulator should be given powers as soon as October to cap bank executives’ salaries, delay their bonuses and drive them out of the industry if they were guilty of wrongdoing, Treasurer Scott Morrison said yesterday.

The government is pushing ahead with tougher rules for banks after a series of scandals undermined public confidence in the sector, including alleged breaches of money-laundering laws by Commonwealth Bank of Australia.

The proposals, first announced in May and set in motion on Friday, open another front in the government’s campaign to reign in the powerful banks, which are still reeling from a levy on deposits announced earlier this year and face mounting regulatory pressure to boost capital.

“I know the banks don’t want many of the elements of this legislation but I’m not about to give them three months to make the case as to why they shouldn’t be in there,” Morrison told the Australian Broadcasting Corporation (ABC).

“They are going in, I’m not mucking

around.”

He was responding to the banking lobby’s complaints that the government had failed to properly consult about the new rules.

“This is not good public policy making,” Australian Bankers Association Chief Executive Anna Bligh told the ABC, saying banks should not be singled out.

Australia’s biggest banks - CBA, National Australia Bank Ltd , Australia and New Zealand Banking Group and Westpac Banking Corp - have gone through a tumultuous period peppered with allegations of misleading financial advice, insurance fraud and interest-rate rigging.

Policy-makers have sought to reassure the public they are holding the banks to account, and on Friday unveiled new powers over executive pay to be handed to the Australian Prudential Regulation Authority (APRA) in October.

Cost of business

Atlas Funds Management Chief Investment Officer Hugh Dive, who invests in bank shares, said investors were not deterred by the prospect of greater regulation.

“It’s a consequence of operating in Australia where you have a oligopoly of four banks, and they are all are getting very good profits,” he told Reuters.

The scandals have fuelled calls for a broad judicial inquiry into Australia’s banking system, which could recommend greater regulation or even criminal charges. While the proposal has the backing of the opposition Labor Party, the conservative Liberal-led government says a so-called Royal Commission is unnecessary.

The major banks on Sunday scrapped an unpopular fee for non-customers who withdraw cash from their ATMs, a move seen by analysts as an attempt to win favour with the public after months of negative headlines.

“This move appears to be driven by a desire to improve public opinion of the bank sector,” Deutsche Bank analyst Anthony Hoo said in a note, adding the cost to the banks would be negligible. Reuters

12 Business Daily Tuesday, September 26 2017

Asia Forecast

Thai central bank seen keeping rates steady The finance ministry and business groups have called on the central bank to cut rates further for the same reasons

T

hailand’s central bank is expected to keep its benchmark interest rate unchanged near record lows tomorrow, despite calls for a cut to contain the strength of the baht.

The central bank has said monetary policy still supports the country’s economic recovery. Though inflation has remained weak, high household debt is limiting its room to lower borrowing costs further.

The baht has risen over 8 per cent against the dollar so far this year, the most among Asian currencies.

So far, exports seem to have weathered the stronger currency, with August

shipments jumping 13.2 per cent on-year, but the government is worried that exports and economic growth could take a hit in 2018 if the baht continues to climb.

All but one of 22 economists in the poll forecast the Bank of Thailand (BOT)’s one-day repurchase rate will be kept at 1.50 per cent - where it has been since April 2015 when its monetary policy committee meets on Sept. 27.

One predicted a 25 basis-point cut, citing a need to curb the baht’s appreciation to preserve export competitiveness.

The finance ministry and business groups have called on the central bank to cut rates further for the same

reasons.

Annual headline consumer prices rose just 0.32 per cent in August, below the BOT’s 1-4 per cent target range.

The BOT has said that has been driven by supply-side factors.

All but one of 13 analysts in the poll who gave a view on year-end rates expected no change for the rest of 2017.

Growth in Southeast Asia’s second-largest economy has picked up but still lags regional peers. The BOT predicts 2017 growth of 3.5 per cent after last year’s 3.2 per cent.

It may upgrade that forecast tomorrow following stronger-than-expected GDP data in April-June. Reuters

Energy

Gas export curbs loom as Australia’s east faces shortfall The commodity has become a hot political issue as soaring prices are hurting households and threatening jobs Sonali Paul

Royal Dutch Shell, ConocoPhillips and Santos face curbs on exporting gas from Australia’s east coast in 2018 if they fail to plug a projected local supply shortfall, Prime Minister Malcolm Turnbull warned yesterday.

Eastern Australia faces a gas shortfall of up to 17 per cent of market demand in 2018, the nation’s energy market operator and competition watchdog projected in reports submitted to the government yesterday that will be the basis for a decision by Nov. 1 on whether to limit exports.

The shortfall of around 110 petajoules (PJ) seen in 2018 is far worse than the market operator flagged in March.

“We are determined to ensure and we will ensure that

that shortfall, which we’ve been advised of today - three times bigger than we thought it would be six months ago is not going to occur,” Turnbull told reporters.

Turnbull said he would press the east coast LNG exporters - Shell at Queensland Curtis LNG, ConocoPhillips and Origin Energy at Australia Pacific LNG, and Santos at Gladstone LNG - for plans to plug the 110 PJ supply gap.

Gas has become a hot political issue as soaring prices are hurting households and threatening jobs at manufacturers like food, building materials and chemical producers, and at the same time driving up electricity prices, as gas-fired power is needed to back up wind and solar energy.

To deal with the crisis the

government passed a law earlier this year that would allow it to limit exports from any of the three LNG plants on the east coast to beef up local supply.

“Gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, and there remains a risk of a supply shortfall,” Australian Energy Market Operator Chief Executive Audrey Zibelman said in a

statement.

For 2018 the shortfall risk is between 54 petajoules and 107 PJs, the market operator said, in line with the gap that the competition commission found.

The three LNG exports plants, which were completed between 2014 and 2016, have long-term contracts to sell gas to customers in Asia, but have also been selling spot cargoes overseas instead

of locally due to high costs and access issues on pipelines in Australia.

“The expected shortfall could be reduced to a significant extent if the expected sales on international LNG spot markets were instead redirected to the domestic market,” competition chairman, Rod Sims, said in a statement.

Under the terms of the Australia Domestic Gas Security Mechanism, the LNG plant that has been seen most at risk of being forced to divert gas from exports to the domestic market is the Gladstone LNG plant, operated

by Santos Ltd. Shell, Origin and Santos have already announced plans to step up local supply, but the commission said that was insufficient. Reuters

Oil industry

Cosmo Oil to boost diesel output to meet demand from ships from 2020 The firm expects Asia’s oil benchmark Dubai to steadily rise to US$55-US$65 a barrel next year Florence Tan

Japan’s Cosmo Oil plans to increase diesel output at its Sakai refinery in Osaka, looking to capitalize on an expected jump in demand when a global mandate for ships to switch to cleaner fuels kicks in from 2020, its top executives said.

The company, wholly owned by Cosmo Energy Holdings, is considering adding units such as a desalter that will allow its 100,000-barrels per day crude distillation unit (CDU) to process more heavy oil and maximize diesel output from its delayed coker in Sakai,

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Cosmo Oil President Hisashi Kobayashi told Reuters on the side-lines of an industry event.

“All of our three refineries will not produce any vacuum residue by the end of 2019,” Kobayashi said as the oil industry gathers in Singapore this week for its largest meeting in Asia.

A desalter removes salt and water from crude before it is processed at a refinery.

The move will allow Cosmo Oil to comply with a third round of directives from Tokyo aimed at keeping the nation’s refining sector competitive, while helping meet an expected surge in

diesel demand when ships are required to use cleaner fuels under an International Maritime Organization mandate.

Besides processing vacuum residue from the expanded Sakai CDU, the delayed coker will also receive more feedstock from Cosmo’s refineries in Chiba and Yokkaichi, said Masashi Nakayama, director of Cosmo Oil’s supply unit.

The company plans to adjust operations at the 29,000-bpd coker to maximize its diesel output, he said.

He declined to say how much more diesel the unit could produce.

Cosmo Oil expects Asia’s oil

benchmark Dubai to steadily rise to US$55-US$65 a barrel next year on production cuts led by the Organization of the Petroleum Exporting Countries and strong global demand-growth, Kobayashi said. It was just below US$55 per barrel last week.

Still, Cosmo Oil expects the market to remain well-supplied until after 2020 as prices at above US$60 a barrel could draw new crude streams into the market, he said.

Cosmo Oil will continue to buy 30 per cent of its crude in the spot market, its executives said, and it could step up purchases of heavy crude from Latin America

and Canada, in addition to traditional supplies from the Middle East to feed its expansion.

“We expect residue fuel demand to tank and middle distillates to surge and that will widen the light-heavy crude price differential,” said Mitsuyasu Kawaguchi, general manager of Cosmo Oil’s crude and tanker department.

The company is on schedule to shut one of its CDUs in Chiba by mid-2018 once a pipeline connection to fellow refiner JXTG Nippon Oil & Energy Corp’s plant is completed, the executives said. Reuters

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Business Daily Tuesday, September 26 2017 13

Asia In Brief Bank of Japan

Governor: Not much room to push rates into minus territory Bank of Japan Governor Haruhiko Kuroda said yesterday central banks do not have much room to push interest rates deeply into negative territory. While Japan and Europe have adopted a negative interest rate policy, no central bank has pushed its policy rate deeply into negative territory, Kuroda said in a news conference after meeting with business leaders in Osaka, western Japan. He also said it was “premature” to unwind the BOJ’s massive stimulus programme or debate a strategy to exit from the bank’s ultra-loose monetary policy.

Forecast

S.Korea c.bank sees exports continuing improvement

Strategy

Jaguar Land Rover’s owner boosts cash hoard to expand Brokerages including Morgan Stanley and Ambit Capital cut their recommendations for Tata Motors after the company missed analyst’s estimates for the three months ended June 30 P R Sanjai

Tata Motors Ltd., the owner of luxury car brands Jaguar Land Rover (JLR), is building a war chest that will allow it to expand its business and acquire rivals.

Cash and equivalents at the Indian maker of the Tiago and Hexa cars surged 87 per cent to 397.6 billion

rupees (US$6.2 billion) as of June 30 from a year earlier, according to data compiled by Bloomberg. Reliance Industries Ltd., India’s biggest company by market value, had 721 billion rupees in cash in the period. The most among the nation’s companies.

Tata Motors, which has reported three straight quarters of sales advertisement

declines, gets 78 per cent of its revenue from the luxury brands and plans to use its record cash pile to add new products, technology and manufacturing capacity, according to C Ramakrishnan, group chief financial officer at Tata Motors. Jaguar Land Rover has said it will spend about 4 billion pounds (US$5.3 billion) to expand in the next three years.

“JLR also may have capital expenditure opportunities going forward while there are emerging areas like electric vehicles and autonomous cars where Tata may decide to dip their feet,” said Deepesh Rathore, director at Emerging Markets Automotive Advisors in London.

“JLR also may have capital expenditure opportunities going forward while there are emerging areas like electric vehicles and autonomous cars where Tata may decide to dip their feet” Deepesh Rathore, director at Emerging Markets Automotive Advisors in London Brokerages including Morgan Stanley and Ambit Capital cut their recommendations for Tata Motors after the company missed analyst’s estimates for the three months ended June 30. A one-time gain helped Jaguar Land Rover post a 49 per cent jump in profit before tax of 595 million pounds (US$806 million). The profit includes a one-time credit of 437 million pounds related to the company’s pension plans. Net income at Tata Motors climbed 42 per cent to 31.8 billion rupees.

“JLR operates in more than 170 countries with varying degrees of economic volatility and cyclicality and hence there is always requirement to maintain sufficient liquidity to take care of fluctuating working capital movements in a year, and any unexpected events,” Ramakrishnan said. Bloomberg News

South Korea’s exports will continue to gradually improve in the coming months thanks to strong global demand for memory chips and petrochemical products, the country’s central bank said in a regular report yesterday. An assessment from the Bank of Korea’s 15 regional offices nationwide noted that manufacturers have expanded facilities to meet soaring global demand for memory chips and petrochemical products. Exports from Asia’s fourth largest economy rose at a double-digit pace in August, marking the eight straight month of expansion - the longest growth in shipments since 2011.

Meeting

Japan, U.S. likely to hold economic dialogue Oct 16 Japan and the United States are likely to hold their second economic dialogue on Oct. 16 in Washington, a source familiar with the issue told Reuters yesterday. Japanese Deputy Prime Minister Taro Aso is expected to skip the Group of 20 finance leaders’ meeting and IMF meeting from Oct. 12 due to an expected general election in Japan, the source also said. Japanese Vice Finance Minister for International Affairs Masatsugu Asakawa is expected to attend those meetings. Aso, who also serves as finance minister, and U.S. Vice President Mike Pence held the first economic dialogue in April.

M&A

Unilever to buy Carver Korea for US$2.7 bln Unilever has agreed to buy cosmetics firm Carver Korea for 2.27 billion euros (US$2.71 billion) from Goldman Sachs, Bain Capital and the company’s founder as it expands its beauty and personal care business. The Anglo-Dutch company announced the deal yesterday, saying Carver was the fastest-growing skincare business in South Korea, through sales of its A.H.C brand. Unilever said the range includes “Eye Cream for Face”, along with essences, toners, moisturisers, masks, and sun protection. Bain and Goldman Sachs jointly bought a roughly 60 per cent majority stake in Carver for around US$500 million last year, a source familiar with the matter said yesterday.

14 Business Daily Tuesday, September 26 2017

International In Brief Ifo index

German business confidence unexpectedly drops The index weakened for a second month in September, in a sign that Europe’s largest economy may struggle to improve on its current brisk pace of expansion. The Ifo Institute’s gauge of business sentiment dropped to 115.2 in September. While that’s still near a record high, it’s down from 115.9 in August and compares with a median forecast by economists for an increase to 116. The Bundesbank said this month that third-quarter growth momentum will be “slightly” lower than in the first half. Ifo’s survey highlights the uncertainty facing German businesses as the economy grows near its capacity.

M&A

Siemens likely to pick Alstom for rail merger today German industrial group Siemens is likely to decide today to pursue a rail merger with French rival Alstom rather than Canada’s Bombardier, two sources familiar with the matter told Reuters. “I think Alstom will make it,” one of the people said yesterday. The second person said the Siemens supervisory board would decide the matter today, also describing Alstom as the frontrunner. Siemens is expected to hold just over 50 per cent of the shares in the intended joint venture, while the chief executive would come from Alstom.

EU

Macron’s reforms could be tough sell for Merkel coalition Today he will set out his EU reform proposals in a speech at the Sorbonne university in Paris Clare Byrne

F

rench President Emmanuel Macron has welcomed Angela Merkel’s election victory but he may have difficulties selling his European reform agenda to whatever coalition she manages to cobble together.

Macron was quick to congratulate his German counterpart on winning a fourth term in Sunday’s election, promising that the two key European partners would keep up their “essential cooperation”.

Merkel’s Christian Union CDU/CSU bloc scored 33 per cent, but her victory was bittersweet, as the anti-immigrant Alternative for Germany (AfD) surged to become the country’s third strongest party.

Merkel’s conservatives dropped more than two million votes in the first national election since she opened Germany’s doors to more than one million mostly Muslim migrants, many from war-torn Syria.

Her score puts her -- and also potentially Macron -- in a difficult position as she gets down to coalition talks, expected to be with the pro-business Free Democrats (FDP)

and the left-leaning Greens.

The consultations could take months and grind Macron’s hopes for a shake-up of the eurozone to a halt, putting strain on the EU’s power couple.

‘Cash pipeline’

FDP leader Christian Lindner has already poured cold water on some of Macron’s proposals for reforming the European Union, including giving the eurozone its own budget and finance minister -- an idea Merkel has cautiously greeted.

“If the idea of giving the eurozone its own budget is for a cash pipeline out of Germany to other European states, we won’t help make it happen,” Lindner told a rally days before the election.

“A transfer union like that wouldn’t strengthen Europe, but weaken it,” said Lindner, who has been sharply critical of the bailouts that have kept Greece in the euro.

Since his election in May on a passionately europhile platform Macron has gone out of his way to build ties with Merkel, visiting Berlin on his first foreign trip and rushing through labour reforms he sees as key to

S.Africa

Finance ministry says it made no pensions cash request South Africa’s finance ministry said yesterday it did not request a government pension fund to provide 100 billion rand (US$7.6 bln) to help it bail out struggling state firms, calling any reports to that effect “malicious and unconstructive”. Citing people familiar with the matter, Bloomberg reported on Friday that the Treasury needed at least 100 billion rand to rescue debt-laden state-owned power utility Eskom Holdings, oil company PetroSA and aerospace company Denel. The ministry said Finance Minister had “noted with concern” reports it “wanted to use R100-billion of the funds in the Public Investment Corporation to bail out State Owned Enterprises.”

Oil industry

Total sees production growth of 5 per cent until 2022 French oil and gas major Total extended its oil production growth target of 5 per cent per year until 2022 and plans to focus on projects with a low breakeven, while reducing its costs in a market dominated by volatile oil prices. The company told investors in a presentation that it aimed to achieve savings of US$3.6 billion by the end of 2017, and was increasing targeted savings on operations from US$4 billion in 2018 to US$5 billion in 2020. Total said it was relentlessly cutting costs and was targeting production costs below US$5.5 per barrel of oil equivalent (boe) in 2017, from US$5.9/boe in 2016 and US$7.4/boe in 2015.

German Chancellor Angela Merkel of the Christian Democratic Union (CDU) arrives for the CDU board meeting in Berlin, yesterday. Source: Lusa

restoring credibility with Berlin.

French Prime Minister Edouard Philippe travelled to Berlin on September 15 to try to nail down Merkel’s support for Macron’s proposals, which also include giving the eurozone its own parliament.

But while agreeing for the need to “strengthen eurozone governance” Merkel used Philippe’s visit to warn of the need to “back up the vocabulary used... with content”.

‘Cart before the horse’

The German government is particularly wary about Macron’s proposal for a eurozone budget amounting to several percentage points of the bloc’s GDP that would principally benefit weaker members.

Berlin estimates that this could amount to up to 300 billion euros, of which Germany -- the eurozone’s biggest economy and chief bailout bankroller -- would have to pay the lion’s share.

Macron’s idea of the eurozone being able to borrow money collectively is also acutely sensitive in Germany.

“The debate launched by the French president is being followed with some exasperation in the chancellor’s office,” the conservative Frankfurter Allgemeine Zeitung daily wrote at the weekend.

“He talks about solutions before the question has even been properly discussed,” the paper added, accusing him of “putting the cart before the horse”.

Merkel is nonetheless been keen to support her reform-minded French counterpart in the face of rising populism -- a fact that could be accentuated by the rise of the AfD. “There is a very strong realisation in Germany, in particular in Mrs Merkel’s party, of the urgent need to do something,” Helene Miard-Delacroix, a historian specialising in Franco-German relations at the Sorbonne, told AFP recently.

Merkel herself told Philippe she has “no doubt we will found common solutions with France”. AFP

Consumer risks

Bank of England asks banks to hold more capital Most economists expect the BoE to raise interest rates to 0.5 per cent from 0.25 per cent in November David Milliken and Huw Jones

British lenders need to hold around an extra 10 billion pounds (US$13.5 billion) in capital to guard against increased risks from rapidly rising unsecured consumer lending, the Bank of England said yesterday.

British consumer borrowing is growing at nearly 10 per cent a year, far faster than incomes, and the BoE’s Financial Policy Committee said it would tell banks by the end of the year how much extra capital to hold, based on the riskiness of their lending.

Policymakers also warned that Britain’s upcoming departure from the European Union in March 2019 posed big legal problems for about a quarter of derivative contracts, which businesses use to hedge against interest rate and currency risks.

Financial firms would need to redraft cross-border contracts to avoid disruption to markets, though a better solution would be for British and EU legislators to pass a law to allow existing contracts to run their course, the BoE said.

On consumer credit, the central bank said that in a crisis situation - with unemployment more than doubling and the BoE’s interest rate spiking to 4 per cent - British lenders should expect to write off 20 per cent of their loans.

This compares with 13 per cent last year, when banks’ loan quality was higher and the BoE tested it against a lower interest rate scenario.

Most economists expect the BoE to raise interest rates to 0.5 per cent from 0.25 per cent in November.

The extra 10 billion pounds is small in the context of the 280 billion pounds of core capital held by British lenders, but the BoE said it expected banks to take the greater risks into account in their future lending plans.

Unsecured lending to British consumers is growing at nearly 10 per cent a year, not far off an 11 year high of just under 11 per cent reached in late 2016.

The BoE said this represented “a pocket of risk” but that overall lending growth, including mortgages, was in line with historic norms. The central bank has previously dismissed

the idea that growth in British consumer demand is primarily based on rapidly rising borrowing.

British households have been squeezed by a sharp pick-up in inflation since the start of the year, which has eroded households’ incomes, and the BoE expects inflation to reach its highest in more than five years next month.

At its last meeting in June, the FPC brought forward a requirement for banks to explain how they would cope with heavy consumer lending losses, and also started to increase the risk buffers banks must hold against cyclical downturns.

Consumer lending growth slowed to an annual rate of 9.8 per cent in July, its weakest since April 2016, after reaching its highest level in 11 years at just under 11 per cent towards the end of 2016.

In March the BoE said it was concerned that increased competition among lenders was leading to potential risks from things like longer interest-free periods on new credit cards and bigger unsecured personal loans. Reuters

Business Daily Tuesday, September 26 2017 15

Opinion Business Wires

The Korea Herald Income polarization has deepened in South Korea during the past decades amid a growing number of high income earners coming from already rich and well-educated parents, a report said yesterday. The report written by professor Ju Byeong-ki of Seoul National University said income has been set not only by the efforts of individuals but also the economic clout and education of their parents. The report, which analysed the disposable income of selected households between 1998 and 2014, showed inequality of opportunity existed between those whose parents have college educations and high-skilled jobs ... and others whose parents had just middle school education and worked in low-skill jobs.

China could seize a chunk of the skies for itself

The Times of India The tax base or those registered for GST has gone up in August but the number of filings so far is lower than the previous month as businesses grapple with technology issues and take advantage of the government’s decision to waive penalty for late filing. So far in August, the second month of GST, around 35 lakh (1 lakh = 100,000) tax payers of the 67.73 lakh required to file returns have managed to pay tax and file returns, which is a little over half the population.

The Straits Times The Life Insurance Association Singapore (LIA) is reviewing policies around the recruitment of rival agents, and plans to issue new guidelines to its members in the near future. The move comes after the shock migration of 300 or so Great Eastern (GE) agents - nearly 10 per cent of its agency size - to rival AIA’s newly set up financial advisory arm, AIA Financial Advisers. Sources said that one of the new LIA guidelines will specify the number of months during which migrated agents have to be accompanied by managers at their client meetings.

Vietnam News As the importance of small- and medium-sized enterprises (SMEs) to the Vietnamese economy grows, experts are calling on the Government to reform the system of credit guarantee funds that are designed to increase SMEs’ access to long-term financing. Though SMEs account for 97 per cent of the country’s firms and 60 per cent of the total number of jobs throughout the country, they face a range of problems, including limited technology and management expertise and a lack of available financing—70 per cent of SMEs report they have been unable to access credit.

Adam Minter a Bloomberg View columnist

L

ast week, the Commercial Aviation Corp. of China Ltd. (Comac) announced that the C919, China’s first homemade large passenger jet, had chalked up its 730th pre-order.

Those numbers won’t necessarily make the Boeing Co. or Airbus SE quake; Boeing estimates Chinese airlines alone will require 5,420 new single-aisle planes by 2036. Ultimately, though, they could herald the end of global aviation’s great duopoly.

Most of the C919’s orders come from state-owned Chinese companies, some of whom probably wouldn’t have placed them if given a choice. The C919 is technologically out-of-date and has been repeatedly delayed; it’s unlikely to enter commercial service before 2020.

The plane is cheap, though -- reportedly 10 per cent less expensive than the competition -and designed to be good enough not just for China but other emerging markets where air travel is booming and regulations are less strict than in the developed world. The hope is that costconscious carriers in Africa and Asia will embrace a plane that they can afford and that does most of what they need, even if its technology isn’t cutting-edge.

Chinese manufacturers have a track record of winning market share with similar products, matched to the limited means and needs of developing-world consumers. In mature economies, China’s largely known as a contractor for some of the world’s most famous brands, such as Apple Inc. Elsewhere, it’s identified more with low-cost goods targeted to poorer consumers. Those Chinese brands have been beating out more expensive competitors for years despite their poor reputation for quality.

For example, between 2012 and 2014, China’s total share of Kenya’s imports increased from 12 to 23 per cent, leading to a 10 per cent overall drop in the unit price of manufactured goods in the country. Meanwhile, during the first quarter of 2017, Chinese smartphones claimed 51 per cent of the Indian market, besting better known but more expensive international brands such as Samsung Electronics Co. Ltd. and Apple. Many if not most of those phones wouldn’t sell in more developed markets with stricter standards and higher consumer expectations.

Chinese manufacturers have also begun to demonstrate a greater ability to innovate. For example, Sany Heavy Industry Co. Ltd., China’s

“

largest heavy-equipment manufacturer, spent much of the last three decades making and selling low-end excavators and cement trucks in China and other developing countries. Rather than challenge international competitors like Caterpillar Inc. on the basis of quality or technology, Sany built up market share on price, local connections and cheap financing -- all of which were aided by generous Chinese government subsidies.

That approach allowed Sany to grow fast, generate economies of scale and, ultimately, begin investing in R&D. Today Sany and other heavily subsidized Chinese equipment makers are narrowing the quality gap and winning customers in developed countries and among qualityconscious equipment buyers, including top mining companies.

That’s roughly the path that the Chinese government would like to see the C919 follow. Launched in 2008, the plane is part of a long-term effort to build out a Chinese aviation industry capable of competing with Airbus and Boeing. More broadly, the hope is to upgrade China’s role from manufacturer and assembler of products such as off-brand smartphones and tractors, to world-class innovator.

The stakes involved in making jets are much higher than with cement mixers and phones, of course. But Comac isn’t flying blind. The most important components in the C919, including the engines and most electronics, are made by non-Chinese companies with decades of aerospace experience.

While Comac doesn’t have Boeing’s long history integrating components into a jet, the C919’s many delays suggest the company’s taking the time to learn, rather than rush. As a flagship enterprise, Comac has the luxury of time -- and a very nearly blank check to keep spending until they get it right.

If Boeing and Airbus are likely to retain their preeminent positions, the developing world should provide enough demand for Comac to become a reasonable third alternative for many buyers.

According to the International Air Transport Association, global air passenger growth will nearly double over the next 20 years, with the bulk coming from Asia-Pacific. China and India alone will put more than 1.1 billion new fliers into the skies. And according to Boeing, flying them around will require more than 10,000 new planes.

For China, that’s the ticket to breaking into the global aerospace industry. Bloomberg View

If Boeing and Airbus are likely to retain their preeminent positions, the developing world should provide enough demand for Comac to become a reasonable third alternative for many buyers

”

16 Business Daily Tuesday, September 26 2017

Closing Environment

Funding Tesla ticks off automakers needing electric car credits

million in regulatory credits last year alone.

China and the European Union -- two of the world’s biggest auto markets -- are Tesla Inc. has generated nearly US$1 billion considering mandates and credit systems in revenue the last five years from an unlikely source: Rival automakers. Needless to say, the similar to California’s. For all the flack the state has taken from traditional carmakers for how other companies aren’t happy.

California requires that automakers sell electric its benefited Tesla, Chief Executive Officer and other non-polluting vehicles in proportion Elon Musk has also been a critic.

Musk, 46, last year said the Air Resources to their market share. If the manufacturers Board was being “incredibly weak” and called don’t sell enough of them, they have to its standards “pathetically low.” Rules should purchase credits from competitors to make be tougher and the credits should be worth up the difference. Tesla, which exclusively sells battery-powered models, sold US$302.3 more, according to the CEO. Bloomberg News

Politics

Japan’s Abe announces snap election The decision is largely seen as aimed at taking advantage of Abe’s recently improved support ratings and opposition disarray Linda Sieg

J

apanese Prime Minister Shinzo Abe said he would dissolve parliament’s lower house yesterday for a snap election, as he seeks a fresh mandate to overcome “a national crisis”.

Abe, in power for five years, said he needed a mandate to shift some revenues from a planned future tax hike to social spending such as education, besides seeking support for a tough stance toward North Korea’s repeated missile and nuclear tests.

“I will dissolve the lower house on Sept. 28,” Abe told a nationally televised news conference yesterday.

Earlier, the head of Abe’s junior coalition partner, Natsuo Yamaguchi, said he understood the election would

be held on Oct. 22.

Abe, whose ratings have risen to around 50 per cent from around 30 per cent in July, is gambling his ruling bloc can keep its lower house majority even if it loses the two-thirds “super majority” needed to achieve his longheld goal of revising the postwar pacifist constitution to clarify the military’s role.

A weekend survey by the Nikkei business daily survey showed 44 per cent of voters planned to vote for Abe’s Liberal Democratic Party (LDP) versus 8 per cent for the main opposition Democratic Party and another 8 per cent for a new party launched by popular Tokyo Governor Yuriko Koike.

The Nikkei poll was far more positive for Abe’s prospects than a Kyodo news agency survey that showed

his LDP garnering 27.7 per cent support, with 42.2 per cent undecided.

Abe’s image as a strong leader has bolstered his ratings amid rising tension over North Korea’s nuclear arms and missile programmes and overshadowed opposition criticism of the premier for suspected cronyism scandals that had eroded his support.

Some critics say Abe has risked creating a political vacuum at a time of rising geopolitical tension over North Korea.

And, given the unexpected results seen in other major developed countries, political analysts are not ruling out a “nasty surprise” for the Japanese leader.

“Abe’s big gamble could yield a big surprise,” veteran independent political analysts Minoru Morita said.

Japanese Prime Minister Shinzo Abe walks off after delivering a press conference at his official residence in Tokyo yesterday. Abe said he will dissolve the Lower House of the parliament on 28 September and call for a general election to be held on 22 October 2017. Source: Lusa

Censorship

“Political vacuum”

Abe told LDP executives at a meeting that he intended to dissolve the lower house on Thursday. The prime minister had been expected to face a grilling over the cronyism scandals during Thursday’s session, and opposition party officials saw the move as play to avoid difficult questions.

Sources have said Abe’s election platform will see him promise to go ahead with a planned rise in the national sales tax to 10 per cent from 8 per cent in 2019 but increase the proportion of revenue spent on child care and education, delaying a target of putting the budget in the black in the fiscal year ending March 2021.

Abe yesterday asked his cabinet to compile a 2-trillion-yen (US$17.8-billion) economic package by yearend to focus on child care, education and encouraging corporate investment, while maintaining fiscal discipline.

The Yomiuri newspaper said earlier the funding would cover the three years from April 2018 until sales tax revenue kicks in.

The main opposition Democratic Party is struggling with single-digit ratings and much depends on whether it can cooperate with liberal opposition groups.

Yesterday, just hours before Abe’s election announcement, Tokyo Governor Yuriko Koike said she

Official trip

would lead a new conservative, reform-minded “Party of Hope”, to offer voters an alternative to the LDP. “Our ideal is to proceed free of special interests,” Koike, a former LDP member, told a news conference.

Over the weekend, a junior LDP cabinet minister, Mineyuki Fukuda, said he would leave the ruling party to stand for election with Koike’s new group.

Key Points Abe may lose “super majority” but still form govt Korean tension boosts Abe’s leadership credentials Ruling party says “no political vacuum” during campaign Abe to order 2 trln yen package for child care, education Tokyo Governor Koike launches new “Party of Hope”

An LDP internal survey showed seats held by the LDP and its coalition partner Komeito could fall to 280 from the 323 they now hold, the Nikkei reported on Saturday. Reforms adopted last year will cut the number of lower house seats to 465 from 475. Reuters

Angola

Mainland cyber watchdog U.S. hopes for “good deliverables” imposes top fines on tech firms during Trump’s China visit

Improving peoples’ living conditions is essential - Eaglestone

China’s cyber watchdog has handed down maximum penalties to several of the country’s top tech firms, including Tencent Holdings Ltd, Baidu Inc and Weibo Corp, for failing to properly censor online content.

The rebuke comes as China is stepping up censorship and security efforts ahead of the 19th National Congress of the Communist Party, a major leadership conference held once every five years.

Notices posted by the Cyberspace Administration of China (CAC) yesterday said the firms would receive the “maximum penalty” for failing to remove fake news and pornography as well as content that “incites ethic tension” and “threatens social order”.

It is the first time that the CAC has levied the maximum fines against tech firms under a new law introduced in June, as it seeks to tighten its grip on the internet.

“The internet does not operate outside of the law... the CAC will seriously implement the new cybersecurity law and other regulations to increase territorial supervision and enforcement efforts regarding the internet,” said the CAC. Under the rules cited in the notice individuals in charge of the platforms and others directly involved face a maximum penalty of RMB100,000 (US$15,110) each. Reuters

The chief economist of the Eaglestone consultancy yesterday said that the new President of Angola will have to improve the living conditions of the country’s citizens, “otherwise he could have an unpleasant surprise such as losing his majority or even the next elections.”

Speaking to Lusa about the inauguration of João Lourenço this week, the economist stressed that the improvement of the business environment, the confidence of foreign investors and the living conditions of the population should be the main priorities of the successor of longstanding Angolan President, José Eduardo dos Santos.

“The people who are now starting to vote are very young and in five years probably the majority will have already been born with Angola in peace,” said Tiago Dionísio, adding that Santos “is recognised, valued and supported for having brought and maintained peace in the country.”

Sub-Saharan Africa’s second-largest oil producer has grown over 8 per cent per year over the last decade, “but last year there was zero growth or even a recession, and the outlook for this and the coming years is 1 to 1.5 per cent.” Lusa

The United States hopes there will be some “very good deliverables” when President Donald Trump visits China, U.S. Commerce Secretary Wilbur Ross said yesterday, striking an upbeat tone amid trade tensions between the two countries.

Trump will likely visit China in November as part of a trip that will take him to an Association of Southeast Asian Nations (ASEAN) summit in the Philippines and an Asia-Pacific Economic Cooperation (APEC) summit in Vietnam.

China’s relationship with the United States has been strained by the Trump administration’s criticism of China’s trade practices and by demands that Beijing do more to pressure North Korea to halt its nuclear weapons and missiles programmes.

Meeting in Beijing, Ross told Chinese Premier Li Keqiang he and his delegation had been greeted very warmly which augurs well for Trump’s forthcoming trip to meet Chinese President Xi Jinping.

“We are looking forward to a very good session including a lot of American CEOs and we hope there will be some very good deliverables,” Ross said, in comments in front of reporters.

Li told Ross that the two countries’ common interests far outweighed their differences. Reuters