Business Daily #1394 September 29, 2017

Greater Bay Area gaining competitive edge WEF Index Page 10

Friday, September 29 2017 Year VI Nr. 1394 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Transport

Typhoon

Mainland delivery workers facing authorities’ pressure Page 16

www.macaubusiness.com

Judicial

Disasters recommendations issued to avert more chaos Page 6

Results

Ng Lap Seng fights bribery verdict Page 10

Neptune anticipating soft figures in junket biz Page 10

Part-time Perks A Puzzle Labour law

Nobody seems to be happy with the new labour legislation.

As applied to part-time workers. Diminishing rights, no evident benefits for employers, and unforeseen consequences are clouding the prospects of the law. Page 3

The Master Plan has been revealed. Yesterday, MGTO Director Maria Helena de Senna Fernandes presented highlights shaping the tourist sector of the MSAR. Quality tourists, integrating the city into the Greater Bay Area, and promoting more locals to key positions are uppermost considerations.

Master plan Page 4

A dragon from far away

Casino Business Daily talks to the Chairman of Brova Idea. The company behind the design and development of the Dragon Pearl Casino Hotel. The projected floating casino is slated for set up in Macau by April 2020. Page 8

Mainland vehicle quota rebooted Auto industry Quotas are the order of the day. Gov’t requires most automakers to sell a minimum number of new-energy vehicles every year from 2019. Producers will be required to obtain an NEV credit score of at least 10 pct in that year. And 12 pct in 2020. Page 12

HK Hang Seng Index September 28, 2017

27,421.60 -220.83 (-0.80%) Worst Performers

Want Want China Holdings

+2.70%

Sino Land Co Ltd

+0.74%

Geely Automobile Holdings

-3.53%

Bank of China Ltd

-1.79%

Hengan International Group

+2.19%

Cathay Pacific Airways Ltd

+0.69%

Ping An Insurance Group Co

-2.62%

China Shenhua Energy Co

-1.71%

Hang Seng Bank Ltd

+1.34%

Galaxy Entertainment Group

+0.46%

China Unicom Hong Kong

-2.50%

China Life Insurance Co Ltd

-1.69%

Sands China Ltd

+1.25%

WH Group Ltd

+0.25%

PetroChina Co Ltd

-2.00%

China Resources Land Ltd

-1.64%

Hang Lung Properties Ltd

+1.01%

New World Development

+0.18%

China Petroleum & Chemical

Tencent Holdings Ltd

-1.60%

-1.87%

28° 31° 27° 31° 28° 31° 28° 31° 27° 32° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Wand waved over tourism wish list

2 Business Daily Friday, September 29 2017

Macau

Labour rights

Part-time code a full-time puzzle Representatives from both the worker and employer segments have doubts about the intention of the regulations for part-timers Cecilia U cecilia.u@macaubusinessdaily.com

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epresentatives from both workers and employers cannot see the exact positive outcome for the laying out of regulations for part-timers in the wake of the recent public consultation for the Labour Relations Law announced by the Labour Affairs Bureau last

Saturday.

Ella Lei Cheng I, legislator and Vice-president of Macau Federation of Trade Unions is(FOAM), said the suggestions for part-time workers is a fallback practice.

“The current law does not specify what is considered as part-timers [...] whether you work 10 hours a week or 48 hours a week are all the same, they all receive the same rights,” Lei told Business Daily, while adding advertisement

that the suggestions would turn out reducing the original rights.

The consultation text suggests defining part-time workers as those who work no more than 72 hours in four weeks. Also, part-time workers could make verbal agreements on labour relations but written proof of the relationship is required.

The consultation text also proposes allowing workers and employers to make agreements among themselves relating to overtime remuneration as well as compensation for overlapping mandatory holidays on weekends.

Part-timers could also have no-paid maternity and sick leave. On the other hand, workers would have no probation period, annual leave, notice in advance, compensation for terminating contracts, and no contribution to social security by employers.

Legislator Lei could not understand the intention of the suggestions, remarking that the Labour Relations Law would be ‘assaulted’ if such arrangements passed into law.

“Although the number of people engaged in the part-time segment is not significant, once their rights are dampened, this would cause a negative impact on the rest of the Labour Relations Law,” said Lei. She was also concerned that employers would choose to hire two part-timers to replace a full time worker as less would be paid by the employers.

“It is not an effective legal system if they are to encourage more people to work,” commented the legislator and unionist.

Unsuitable for current economic situation

Meanwhile, Vong Kok Seng, Vice President of the Board of Directors of Macau Chamber of Commerce told Business Daily that the specification of not working more than 72 hours in four weeks does not reflect the actual economic environment in the city today.

“It is very difficult to calculate or it might take some time to see the actual output value when [production] is related to giving out services,” said Vong. “Before, we could count the number of products you produced to see your productivity level, like you can qualify and quantify goods you produced in the past [during the industrial period].”

Vong also pointed out that different seasons would require different levels of demand for part-time workers.

“Like those who set up exhibitions; they work three to seven days

for a one-day event and they might need to work 10 hours or more, but many of them could easily exceed the 72 hours regulation,” said Vong.

“So does that mean they can’t work despite there being work to do? The people won’t be able to find jobs, and employers can’t find workers, so what good does that do anyone?”

The Director indicated that more research should be conducted to understand the current situation of part-time workers, while opining that the actual conditions for part-timers are not unfavourable.

Less bargaining power

Regarding the other part of the Labour Relations Law revision, Lei is concerned that workers would face pressure when talking with their employers about rescheduling the three mandatory holidays to other public holidays.

According to one of the suggested seven revisions, workers could reach an agreement with their employers on rescheduling three of the ten mandatory holidays to other non-mandatory holidays.

Nevertheless, the legislator said the other six revisions - including paternity leave from three to five days, and remuneration for the overlapping of mandatory holidays on weekends - are mostly agreed by the labour community.

Meanwhile, Vong perceived that the changes made to the Labour Relations Law would not pose great disputes and most employers would not disagree on the arrangements, but he believes that the Labour Relations Law has in general made both parties petty-minded, resulting in a negative impact.

“Sometimes I don’t think it is a good thing to make everything calculative; I mean, if you force employers to allow holidays for employees during mandatory holidays then employers would not be able to find workers during peak periods,” said Vong. “[And] some employers are not willing to triple their wages due to the drop in revenue, so they would raise prices and this would even worsen the situation.”

However, Vong said employers today realise the importance of workers, while he also perceived that workers are enjoying more benefits than before. “[Employers] know [if not treating employees well] service may not be good and it would affect business,” concluded Vong. “The most important part is to talk things over.”

Business Daily Friday, September 29 2017 3

Macau

4 Business Daily Friday, September 29 2017

Macau Tourism

Baking quality into the tourism mix After a two-year period the master plan for the development of MSAR tourism has finally been presented, with the plan’s visitation estimates depicting a scenario in which the city could welcome as many as 40 million visitors by 2025 Nelson Moura nelson.moura@macaubusinessdaily.com

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e’re not looking for as many tourists as possible but more quality tourists. This number is just a possibility and we need to have concrete plans to deal with this scenario if it does happen,” Macao Government Tourism Office (MGTO) Director Maria Helena de Senna Fernandes said yesterday.

In order to deal with that scenario, better dispersion of tourists to different areas of Macau and improved transport infrastructure will be attempted, with the MGTO head adding that a better control of visitors from Mainland China could also be on the cards.

Meanwhile the number of

No local Disney

hotel rooms in the city could increase from 37,634 in 2016 to 51,900 in 2025, with the MGTO head stating the estimates were made taking into consideration current requests for hotel licences and land for hotel development plans.

Upgrading tourism offerings would also pass by developing tourism and cultural installations in all reclaimed new areas in the city, but with Ms. Fernandes saying there are no current plans to develop hotels in these zones.

Not that much more Despite the considerable possible increase in visitation and amount of available rooms, however, the average percentage of overnight stay would only increase from 50.7 per cent to 53 per cent, with average hotel occupancy growing just 1 per cent to 84 per cent by 2025.

The presented master plan indicates that the ‘development of a theme park with distinctive features’ in the territory’ should be facilitated but with large scale projects not considered suitable for the MSAR. “The theme parks we’re discussing are not of the scale of Disney or

The Macao Government Tourism Office holds a press conference to announce the final version of the Macao Tourism Industry Development Master Plan. Source: GCS The average length of visit is expected to reach 2.3 nights in 2025 in the master plan, only 0.2 percentage points higher than in 2016.

“I don’t think this is a conservative estimate, since to reach that average a huge effort needs to be made. Integrating the city into the regional area also leads to more sharing of tourists with neighbouring cities,” added Ms. Fernandes.

Ocean Park because we simply don’t have the space or the conditions to develop these infrastructures. They will be smaller with more innovative offers,” said Ms. Fernandes.

The MGTO head also said that investors were already studying the possibility of establishing theme park attractions new to the

The number of tourism related employees - including non-residents - would also increase by 53,000 from 2016 to 295,000 in 2025, with the master plan focusing on improving working conditions for local residents in tourism positions while appeasing some of the problems generated by lack of human resources through technology innovation solutions.

“We want more chances for

territory.

These investors are still searching for spaces and local partners with the projects still in the early stages.

In August, Business Daily reported that the Land, Public Works and Transport Bureau (DSSOPT) had issued a licence for the foundation work of the theme park and

local residents to reach higher positions in the tourism industry and more young people to enter the industry,” said the MGTO head.

The study and development of the Tourism Master Plan was initiated in 2015 and presented yesterday by MGTO as the general guidelines for developing the local industry up to 2030.

The plan indicates eight main objectives: diversifying tourism products and experiences; improving service quality and skills, re-branding Macau as a multi-day destination and expanding high-value markets; optimising the urban development model; managing local tourism carrying capacity; utilising innovative technology; enhancing tourism industry co-operation; and improving Macau’s position as a core tourism city in the regional and international tourism community.

resort proposed by legislator and Executive Director of local operator Sociedade de Jogos de Macau (SJM) Angela Leong On Kei. The theme park will be situated on a plot in Cotai facing Wynn Palace and the Grand Lisboa Palace, with its theme previously described as being Hello Kitty. advertisement

Business Daily Friday, September 29 2017 5

Macau

6 Business Daily Friday, September 29 2017

Macau Hato aftermath

Getting expert advice Chinese authorities have released an evaluation report on the Typhoon Hato incident, providing suggestions for coping with future extreme weather Cecilia U cecilia.u@macaubusinessdaily.com

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even suggestions have been made by the China National Commission for Disaster Reduction (CNCDR) to improve the abilities of the MSAR to handle calamities, according to an evaluation report composed and released by the CNCDR in the wake of Typhoon Hato.

The first piece of advice suggests an improvement in the emergency mechanism. With the unified command under the MSAR Chief Executive (CE), the CE’s ability should be improved in handling emergencies to ensure public safety.

A more unified and effective mechanism in coping with emergencies should be present. Also, the preparation for emergency situations and the establishment of an effective warning system are necessary. The first piece of advice also proposes improving the mechanism of reporting disaster-related information.

The second piece of advice relates to building up lifeline construction as well as important infrastructure that could prevent or reduce the level of destruction caused by disasters.

The third suggestion proposes enhancing the co-operation between Guangdong, Hong Kong and Macau in handling emergencies. This includes integration with the Greater Bay Area development by connecting plans with related regions and the sharing of resources.

The strengthening of the city’s ability to cope with great calamities is the fourth piece of advice, which includes details such as establishing strong and advanced technological support plus the ability of the authorities and related personnel.

CNCDR stated in its fifth suggestion that related legal support should be

laid out to allow clearer responsibilities and rights enjoyed by different parties.

Meanwhile, the sixth recommendation encompasses education and easier access to information about public safety, as well as training for rescue personnel.

Lastly, the seventh piece of advice

suggests focusing on construction projects, such as survey projects on the comprehensive risks and response to emergencies by the MSAR when disaster strikes.

The report also evaluates the rareness of Typhoon Hato in comparison to past typhoons over recorded history.

Communications

Use of 4G mobile technology increases The number of prepaid users of 4G technology [LTE] increased 6.2 per cent month-on-month in August to 945,303, according to the latest statistics on major telecommunication services and types of use released by the Macao Post and Telecommunications Bureau (CTT).

The number of postpaid subscribers using the same type of technology has also posted a slight increase, up some 3.6 per cent in August to 525,327 from 506,561 the previous month.

Conversely, the number of 3G users, both prepaid users (362,424) and postpaid subscribers (199,626) decreased month-on-month, down 12.1 per cent and 6.3 per cent, respectively.

The number of mobile phone users

having two numbers – with Macau as the secondary number – has remained relatively stable at 46,137.

With respect to Internet services, numbers remain largely unchanged, with a total of 183,702 contracts from 183,093 a month earlier.

Of the total, the number of fibre broadband subscribers is 130,482 (127,809 in July) while the share of ADSL broadband subscribers has reached 53,088, slightly down from the 55,154 registered a month before.

The number of both commercial WiFi hot spots and WiFi GO Hot Spots –provided by the Macau SAR Government free of charge – remains stable month-to-month, at 2,872 and 196, respectively. S.Z.

Business Daily Friday, September 29 2017 7

Macau

8 Business Daily Friday, September 29 2017

Macau Opinion

Pedro Cortés*

Crypto news This week, besides the elections - which demonstrated that some declarations are punishable by the citizens who vote, and that some of the new Legislative Assembly members appointed by the Chief Executive seem not to have the capacity to, with all due respect, be the doormen of the building - we have had crypto news, a new means of payment (allegedly for the casinos) which is not within the scope of the Monetary Authority. I did not have access to all the details. But it is evident that something is wrong in Macau and must be stopped before it is too late.

The way to get around the law and what is established is sometimes difficult for some to comprehend. Crypto currency is not a commodity but rather a means of payment which should be regulated and supervised by AMCM. Macau has this amazing power of surprising us.

What we consider to be a Rule of Law system may be in cause with analysis of departments which cannot understand what is a means of payment and a way of raising capital for what should be the most regulated and supervised activity in Macau: gaming and gaming promotion activity.

New ways of increasing Macau as the ‘biggest’ jurisdiction in the world should always be welcome. Start-ups should (and do) have incentives from the government, but always in accordance with the law. Let’s see what the reaction is of the mother People’s Republic of China, as, in the end, it will be them who authorise or not this initiative.

Those who have had the opportunity to give me the pleasure to know them understand that I am a liberal who considers that the market should rule above any other supreme rule. But the market itself should be regulated enough to inspire confidence and trust from the people who invest in the casinos and in all other ancillary activities. The Wild West is two centuries distant and existed in another latitude. My feeling is that Macau is transforming itself into a no-rule place.

With all the ensuing bad consequences for our economy which that implies. *Lawyer and frequent contributor to this newspaper.

Appeal

Ng Lap Seng fights back Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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EAL estate mo­gul Np Lap Seng requested the annulment of his conviction in a bribery case and a new trial from a New York federal judge on Tuesday, Law360 report­ed on Wednesday.

Ng claims the prosecution accused him of acts that were not included in his indictment and that it built its case based upon a witness who has allegedly committed perjury.

He was convicted on July 30 on charges of conspiracy, money laundering, and bribery of high officials sitting in the United Nations, linked to the development of a Convention Centre in Macau.

The businessman now claims that the U.S Department of Justice

‘ambushed’ him with new allegations at trial, while more or less ignoring perjury by Francis Lorenzo, a former Ambassador to the UN from the Dominican Republic, who was one of its main witnesses in the process.

He was quoted as saying by Law360 that such “manifest injustice” would demand a new trial.

On the one hand, Ng’s lawyers claim that the federal police violated Ng’s rights when they argued at trial that he paid bribes to secure a letter and an agreement from the UN in support of his bid to host the organisation’s events, with neither of these acts described in the indictment, making Ng unable to call a witness for his defence.

On the other hand, the defendants’ lawyers claim that evidence of perjury regarding Lorenzo’s testimony is

aggravated by the fact that he played an “essential role” in the case. The fact that the government had failed to either correct or investigate it would warrant Ng a new trial, his lawyers argue.

Regardless of granting the businessman the right to be judged again, the defendants’ lawyers advocate the court order prosecutors to investigate Lorenzo for false testimony.

According to Ng’s lawyers, the perjury ensues from the fact that Lorenzo presented evidence that he engaged in a tax fraud scheme by steering payments to his then-girlfriend’s bank account, while Lorenzo and the government’s account of the girlfriend supposedly working for a company called the Sun Land Group did not add up.

Ng remains confined to his New York apartment.

Business Daily Friday, September 29 2017 9

Macau Hotels

Don’t blame the builder Norwegian company Brova Idea AS has confirmed it has been contracted to develop a floating structure with a hotel and casino to be installed in the MSAR by April 2020, while distancing itself from the cryptocurrency fundraising announced by one of the project partners Nelson Moura nelson.moura@macaubusinessdaily.com

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orwegiancompanyBrova Idea AS has told Business Daily that they have been contracted to develop a floating structure with a hotel and casino to be docked in the MSAR but that they have no relationship with the US$500 million cryptocurrency initial coin offering (ICO) announced by one of its partners.

According to Brova Idea’s Chairman of the Board of Directors Milo Andric the project is named The Dragon Pearl Casino Hotel and is expected to be set up in Macau in April 2020, with the cost of the project calculated at some US$300 million.

The Brova Idea representative said the company had signed a contract to build The Dragon Pearl and has already used “quite a significant amount of money” on design and pre-engineering; once it receives the funds it will be able to start proper engineering per the Engineering, Procurement and Construction (EPC) contract.

Registered in Norway, Brova Idea AS is a company solely focused on developing floatable structures and is part of the Brova Group owned by the Andric family.

The floating structure will have a hotel named The Dragon Pearl Casino Hotel, with 400 guest rooms, restaurants, retail space and 16,000 square metres of gaming space.

Mystery partners

Divulged in a recent report from American news broadcaster CNBC, the CEO of Thai company Wi Holding, Chakrit Ahmad, stated that an alleged Macau gaming company

Credit: Brova Idea

named Dragon Corp. was seeking to raise US$500 million through an ICO. According to Mr. Ahmad, the resulting cryptocurrency would be used by junket operators, allowing currency owners to effectively become shareholders in the junkets or even in casinos through credit provided by junkets to gaming operators.

The money raised through the ICO would also allegedly be used to fund the construction of the Dragon Pearl Casino Hotel.

When asked about the issue, the Director of the local gaming authority, Paulo Martins Chan, stated that his department did not have any register of a connection between Dragon Corp., Wi Holdings and the Macau gaming sector.

A video showcasing the Dragon Pearl floating hotel concept, posted before the CNBC report, included Mr. Ahmad stating his company would make use of its Macau partners to bring the project to the city, with a man named Las H Choi - described as the Chief Operating Officer of China Kingdom Company Limited - stating blockchain technology would

be “a great solution for players and a new model of operation for gaming industries in the world”.

When checking official commercial records, Business Daily could find no record - either in English or in Portuguese - that Dragon Corp. or China Kingdom Company Limited existed in Macau.

In a response sent to Business Daily, Mr. Andric stated that Wi Holding had approached Brova Idea with the idea of building a floating hotel in Macau but was adamant that Brova Idea was not involved in the fundraising for the project.

“Wi Holding was the one that contacted us and are a partner, but definitely not the contracting partner […]

We’re a serious company and we’re a serious business […] I will receive my money in euros and the rest is really not my business,” Mr. Andric added.

The video with statements from Brova Idea representatives and Wi Holdings and its Macau partners were also produced separately, he added.

From Hanøytangen to Macau

According to a presentation of The

Dragon Pearl sent to Business Daily the floating structure will be movable and totally self-sustainable, making use of renewable energies such as solar power and heat recovery systems, with recycling of all organic material and waste taking place on site.

‘Each custom-built floating structure is built on top of North Sea strength concrete platforms, designed to resist the impact of a tanker ship at full speed [...] Each ‘Pearl’ platform enjoys the added safety feature of a Brova double hull, making the floating structures virtually un-sinkable,’ the project introduction informs.

These floating structures are also able to either be ‘anchored to the seabed or rest directly on it depending on the depth of the water’ being transported from its production location in Hanøytangen, Norway to its final destination by a heavy lift vessel operator. The transport time is estimated at 40 days with delivery calculated ‘to the hour’.

The structures can also include space for parking, spa/gymnasium, or an enclosed area in which restaurants, shops or other communal areas such as swimming pools can be located.

According to Andric, Brova Idea is currently preparing three floating hotel projects, two projects named The Pearl and one The Dragon Pearl.

The two floating structure projects named The Pearl include a 5-star hotel with 187 guest rooms and 17 suites, and are to be delivered to an undisclosed Middle Eastern country before 2021 and 2022.

The structures’ concept design and development is carried out by Norwegian firms Dr.techn.Olav Olsen, naval architect YSA AS – Petter Yran and UAE based Bishop Design.

Credit: Brova Idea

Contract

New green screens for Studio City Studio City has signed a fiveyear contract with image capture provider Picsolve to power ‘creative experiences for visitors’ which will include its Batman Dark Flight 4D flight simulation ride to Gotham City, according to a release by the technology company.

Established in 1994, the company has offices in the UK, United Arab Emirates, the U.S. and Hong Kong, servicing theme parks, resorts and attractions in over 500 installations.

‘Picsolve’s innovation will

be central to all of Studio City’s consumer experiences. Its immersive green screen technology will feature throughout several attractions, including the resort’s Batman Dark Flight,’ notes the release.

The group’s digital platform will also allow visitors to ‘quickly view, order and share all content captured during their stay’.

Picsolve also works with Madame Tussauds Singapore wax museum and LEGOLAND® Discovery Centre Shanghai.

10 Business Daily Friday, September 29 2017

Macau Competitiveness

Greater Bay Area globally competitive

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he Greater Bay Area is getting more competitive at an international level, according to the Global Competitiveness Index, published by the World Economic Forum (WEF). The neighbouring SAR jumped three places in the ranking, placing 6th behind Germany, the Netherlands, Singapore, the United States and first-ranked Switzerland.

China also rose in the rankings, from 28th to 27th, in the WEF’s 20172018 rankings, while Taiwan fell one place from last year’s results to 14th.

‘Hong Kong SAR (6th) has made the largest leap among the top 10 economies this year, moving ahead of Sweden (7th), the United Kingdom (8th), and Japan (9th),’ notes the report.

In particular ‘the world’s best physical infrastructure’, ‘healthy level of competition’ and ‘openness’, coupled with a ‘highly flexible and efficient’

labour market and its work in ‘slightly bringing down its inflation rate’ have resulted in its ‘most significant improvement’ – business sophistication and innovation, ‘which is a step in the right direction given that the business community consistency cites their insufficient capacity to

innovate as one of the most problematic factors for doing business’.

The MSAR, as in previous editions of the report, did not appear in this year’s report.

Many of the problems identified by the report are the same as those that arise on Macau’s side of the delta.

Insufficient capacity to innovate, inefficient government bureaucracy, inflation, inadequately educated workforce and restrictive labour regulations were the top five most problematic factors noted for the neighbouring SAR. On a global perspective, ‘governments, businesses, and individuals are experiencing high levels of uncertainty as technology and geopolitical forces reshape the economic and political order that has underpinned international relations and economic policy for the past 25 years.

At the same time, the perception that current economic approaches do not serve people and societies well enough is gaining ground, prompting calls for new models of human-centric economic progress,’ observes Richard Samans, Head of Global Agenda and Member of the Managing Board of the WEF. K.W.

Profit warning

Neptune still recovering from Venetian termination Local junket Neptune Group Limited has issued a profit warning noting the group would continue to record a net loss attributable for the fiscal year ended 30 June, 2017 following the termination of two junket operations associated with the group in The Venetian, the company said in a filing with the Hong Kong Stock Exchange yesterday.

The group noted that ‘it expected that the intangible assets in respect of

all junket business of the group would be fully impaired’ as a result of the termination of both agreements on December 30, 2016 and May 31, 2017.

The announcement of the termination of the gaming promotion agreement with junket operator Hou Wan, effective August 30 this year, followed the termination of the agreement of the 14-VIP table operation of Hao Cai Entertainment Company Limited in the same property, effective last June 30.

The company noted in a previous filing that Hou Wan contributed ‘approximately 26 per cent of the total revenue’ of Neptune during the financial year ended June 2016.

Neptune said the loss for the year ended June 30, 2017 would decrease significantly vis-a-vis the net loss from last year, although the group would still record a reversal of impairment loss of trade receivables in an aggregate amount of approximately

HK$306.3 million (US$39.22 million/ MOP315.48 million).

The company further noted that the impairment of intangible assets in respect of the junket business for the fiscal year would amount to approximately HK$397.3 million rather than HK$365.9 million as stated in an announcement from July 31, while amortisation would decrease nearly 47 per cent as compared to the previous financial year. S.Z. advertisement

Business Daily Friday, September 29 2017 11

Asia

12 Business Daily Friday, September 29 2017

Greater China Auto industry

Beijing sets 2019 deadline for automakers to meet green-car sales targets Under new rules, car makers will receive credits for new-energy vehicles that can be transferred or traded

C

hina has set a deadline of 2019 to impose tough new sales targets for electric plug-in and hybrids vehicles, slightly relaxing an earlier plan to launch the rules from next year that had left global automakers worried about being able to comply.

Car makers will need so called new-energy vehicles (NEVs) to hit a threshold equivalent to 10 per cent of annual sales by 2019, China’s industry ministry said in a statement yesterday. That level would rise to 12 per cent for 2020.

The targets, announced by the Ministry of Industry and Information Technology (MIIT), remove an explicit 8 per cent quota for 2018, but otherwise match previously announced plans.

The quotas are a key part of a drive

by China, the world’s largest auto market, to develop its own NEV market, with a long-term aim to ban the production and sale of cars that use traditional fuels announced earlier this month.

However, global automotive manufacturers wrote to Chinese authorities in June, urging a softening of

the proposals for all-electric battery vehicles and electric plug-in hybrids.

Under the rules, car makers will receive credits for new-energy vehicles that can be transferred or traded.

These credits will be used to calculate if firms have met the quotas.

“We welcome the Chinese auto industry’s shift towards greater adoption of NEVs and will comply with relevant regulations presented by authorities,” Ford Motor Co said in a statement responding to the announcement.

General Motors Co said it would “strive to comply with the NEV mandatory requirements”, though it added “continued joint efforts by the government and companies are essential to build broad-based

consumer acceptance for NEVs”.

“GM has sufficient capacity to manufacture NEVs in China,” it said in a statement.

Japan’s Honda Motor Co Ltd said it planned to launch an electric battery car in China next year and would “try to expand our line-up of new energy vehicles” to meet the quotas.

China is keen to combat air pollution and close a competitive gap between its newer domestic automakers and global rivals. It wants to set goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025.

Reuters reported in August that China would delay the implementation of the NEV quotas until 2019, giving global automakers more time to prepare. Reuters

Financing

Goldman Sachs sees Mainland dominance in dollar bonds rising

In Brief IP

Beijing says rights crackdown not reaction to probes China’s commerce ministry said yesterday that its monthslong crackdown on intellectual property rights violations was not a response to probes by other countries. Protection of intellectual property rights is important to China, ministry spokesman Gao Feng told reporters at a regular briefing in Beijing. Earlier this month, the ministry said China had launched a campaign targeting theft of business secrets and knock offs of well-known brands, and had taken steps to protect copyrighted material.

Forex

State banks sell small amounts of dollars in onshore market Major state-owned Chinese banks were seen selling small amounts of dollars at around the 6.65 per dollar level in the onshore foreign exchange market yesterday, traders said, in an apparent attempt to prevent the Chinese currency from falling too fast.

“There were some minor dollar sellings from state banks in the morning,” said a trader at a Chinese bank in Shanghai. State-owned banks sold dollars in the forex market regularly late last year in what some traders believed was part of official efforts to prop up the Chinese currency, which lost over 6 per cent of its value on the dollar in 2016.

Aviation

Chinese offshore dollar bond issuance will reach as much as 80 per cent of the Asia ex-Japan market in three to five years as buying support from the region grows and the country continues its reform drive, according to Goldman Sachs Asset Management LP Carrie Hong

Issuers from China accounted for about 60 per cent of dollar-denominated bonds priced in Asia excluding Japan so far this year, data compiled

by Bloomberg show. Sales will grow until they come more in line with China’s dominant status in regional equity markets and GDP, said Singapore-based Salman Niaz, executive director of emerging-market debt at Goldman Sachs Asset Management.

China’s “dollar bond market share is not there yet,” Niaz said in an interview. “It is reasonable to expect that over the next three to five years, China would have a 70-80 per cent share of the Asian dollar bond market.”

Investors have gorged on a record US$224 billion of bond offerings in Asia ex-Japan so far in 2017 as they search for yield, according to data compiled by Bloomberg.

Niaz expects issuance in the region to be close to US$200 billion next

year, and said that the local bid is a good sign for the market in the long run. Savings from China and Japan need to be deployed, he said, noting also that with their combined balance sheets, China’s five largest insurance companies “could buy the Asia market a few times over.”

The biggest uncertainty will be the reshuffle of China’s top leaders, he said. Communist Party officials are weeks away from their twice-a-decade congress that is expected to help shape President Xi Jinping’s influence into the next decade. Still, it will likely continue its reform strategies around deleveraging, credit creation, the housing market and industries with excess capacity, Niaz said.

Ratings cut

S&P Global Ratings last week cut China’s sovereign credit assessment for the first time since 1999, and revised its outlook to stable from negative, citing the risks from soaring debt. The firm also warned this week the trend of tighter spreads on Asian bonds to near a decade low amid abundant liquidity may not last as global monetary stimulus will inevitably fade.

The average spread on dollar bonds from China’s corporations stood around 265 basis points on Wednesday, the lowest since July 28, according to JPMorgan Chase & Co. indexes.

“During September, the JACI index has been tightening, in part, due to less than expected supply of high quality new issuance from China,” said Niaz. Bloomberg News

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COMAC says C919 jet completed second test flight China’s domestically developed C919 passenger jet completed its second test flight yesterday, the jet’s maker said, but the duration and near five-month gap since its first flight have raised questions over whether its latest delivery target can be met. The narrow-body C919, which will compete with Boeing Co’s 737 and the Airbus SE A320, is a symbol of China’s ambition to muscle into a global jet market estimated to be worth US$2 trillion over the next 20 years.

However, the programme has faced lengthy delays and missed its original target of delivery to customers by 2016.

Oil industry

Kuwait expects to seal new supply deals Kuwait expects to seal new deals to supply Chinese buyers with crude amid healthy demand for its exports in Asia, an oil official from the OPEC Gulf producer told Reuters.

The country also plans to export a new light crude grade

by January, as well as spending US$120 billion over the next five years on expanding both its upstream and downstream businesses, said Waleed Al-Bader, deputy managing director marketing at state-run Kuwait Petroleum Corporation (KPC). “We see now very healthy refining margins ... this is mainly because of the past months of the OPEC cuts,” AlBader said.

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Business Daily Friday, September 29 2017 13

Asia Support

In Brief

S.Korea to offer tax help, loans to firms hit by China reprisals The finance ministry said it plans to boost domestic tourism to compensate for declining Chinese tourists Cynthia Kim

S

outh Korea said it will offer tax and loan concessions to companies whose businesses have suffered amid a dispute with China over Seoul’s deployment of a powerful missile defence system.

The government plans to allow South Korean duty-free firms and retailers operating in China to defer all or part of their corporate income and value-added taxes for up to nine months, the finance ministry said yesterday.

The ministry will also offer cheap loans to auto parts makers hit by declining sales of South Korean cars in China.

South Korea allowed the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system on its soil this year as North Korea stepped up missile tests. The move has drawn fierce criticism from China, which says the system’s powerful radar can probe deep into its territory.

In retaliation, Beijing has imposed boycotts on South Korean goods sold in China, raising pressure on new President Moon Jae-to help affected firms, analysts said.

Beijing also has banned group tours to South Korea, hurting its retail and service sectors.

China’s commerce ministry

declined to comment when asked about South Korea’s planned measures.

However, Seoul has limited options to counter Beijing’s tactics, said Stephen Lee, an economist at Meritz Securities.

“There isn’t much Seoul can do as these issues have been originating from China. There’s little the government can do in terms of making up for the loss incurred (by South Korean businesses,)” Lee said.

“Seoul can continue to announce micro-measures to buffer any shocks, but it’s too difficult to resolve the problem by removing the THAAD now,” Lee added.

The finance ministry said it plans to boost domestic tourism to compensate for declining Chinese tourists.

Chinese tourists used to account for about half of all visitors to South Korea, but their numbers halved in the first seven months of 2017 compared with a year ago.

That translates to US$5.1 billion in lost business for South Korea, data from the Korea Tourism Organization showed.

Partly due to the THAAD backlash, Hyundai Motor Co.’s retail sales in China, the world’s biggest auto market, slumped 29 per cent in the first half of 2017.

Seoul has said it plans to boost funds at policy banks by up to 500 billion won (US$437.14 million) to help car part makers and other suppliers heavily reliant on sales to Hyundai Motor and Kia Motors.

Reuters

Opposition

Japan calls snap election as new party roils outlook Some opposition lawmakers boycotted the session to dissolve the lower house earlier in the day Linda Sieg and Elaine Lies

A fledgling party led by popular Tokyo Governor Yuriko Koike gained momentum yesterday ahead of an Oct. 22 election as the biggest opposition Democratic Party said it would step aside to let its candidates run under her reformist banner.

Prime Minister Shinzo Abe, a conservative who returned to power in 2012, hopes a recent boost in voter support will help his Liberal Democratic Party-led (LDP) coalition maintain a simple majority. It now holds a two-thirds “super” majority.

But Koike’s new Party of Hope, formally launched on Wednesday, has upended the outlook for the election after the former LDP member announced she would lead it herself.

Democratic Party executives said they would not run candidates of their own and let members run under the Party of Hope banner.

The party has struggled to overcome rock-bottom ratings, defections and an image tainted by its rocky stint in power from 2009 to 2012.

“This will be a tough battle, but it’s all about how we will protect Japan, and the lives and peaceful existence of the Japanese people,” Abe told a

group of lawmakers before the cabinet formally set the date.

Some opposition lawmakers boycotted the session to dissolve the lower house earlier in the day, in protest against Abe’s calling the election and creating a potential political vacuum at a time when tension with North Korea is high.

Koike, a media-savvy former defence minister whose name has often been floated to be Japan’s first female prime minister, said on Wednesday she would not run for a seat herself, but speculation that she will persists.

“I’m someone who is always ready to take action,” Koike told a news conference where she spoke about her achievements since taking office as governor a year ago.

A survey by the Mainichi newspaper showed 18 per cent of voters plan to vote for Koike’s party, compared to 29 per cent for Abe’s ruling Liberal Democratic Party (LDP).

An Asahi newspaper poll showed 13 per cent planned to vote for her party, versus 32 per cent for the LDP. Both surveys asked voters their preference for proportional representation districts where ballots are cast for parties, rather than candidates.

“Voters in many countries have

Japanese Prime Minister Shinzo Abe (R) looks on as lawmakers raise their hands shouting ‘banzai!’ (Hurrah!) after the dissolution of the Lower House of the Parliament in Tokyo yesterday. Source: Lusa

shown they are willing to take a risk, even a severe risk, in terms of what will actually happen because they are disappointed with the status quo,” said Martin Schulz, a researcher at Fujitsu Research Institute.

But Schulz, who drew a comparison to French President Emmanuel Macron’s meteoric rise, added that Koike’s platform might not be so appealing, given its similarities to LDP policies.

Abe’s personal ratings have risen to about 50 per cent from about 30 per cent in July, partly on the back of his leadership during the current North Korea crisis.

But opposition parties say he called the election to escape questioning in parliament about suspected cronyism scandals that had cut into his support.

Koike, 65, defied the LDP to run successfully for Tokyo governor last year and her novice local party then crushed the LDP in a metropolitan assembly election in July.

Her Party of Hope shares policy space with the business-friendly LDP, but she has staked out different stances on two issues likely to appeal to voters.

Koike wants to freeze a planned rise in the national sales tax to 10 per cent from 8 per cent in 2019. Abe says he will raise the tax but spend more on child care and education instead of paying down public debt.

Koike also wants Japan to abandon nuclear power, while Abe’s government plans to retain it as a key part of the energy mix, despite safety worries after the 2011 Fukushima nuclear crisis.

Recent reforms will cut to 465 from 475 the number of lower house seats in the coming election. Reuters

M&A

Toshiba signs deal to sell chip unit Japan’s Toshiba Corp said yesterday it had signed an US$18 billion deal to sell its chip unit to a consortium led by Bain Capital LP, overcoming a key - albeit not its last - hurdle as it scrambles for funds to stave off a potential delisting. The sale of the unit - the world’s second biggest producer of NAND chips - was agreed last week but the signing was delayed because consortium member Apple Inc demanded new terms on chip supply in return for funding, sources familiar with the matter have said. Bain’s consortium also includes South Korean chipmaker SK Hynix, as well as Dell Inc, Seagate Technology Plc and Kingston Technology.

Cryptocurrency

Australian regulator warns of risks in digital coin offerings Australia’s corporate watchdog yesterday warned investors of the high risks associated with initial coin offerings (ICO), joining a chorus of global regulators who have recently stepped up scrutiny of cryptocurrencies to defuse potential asset bubbles. ICOs are popular with start-ups as a way to finance projects by selling digital coins or tokens.

They have become a bonanza for entrepreneurs globally, fuelling a surge in the value of cryptocurrencies this year.

But that has driven fears of an asset bubble, prompting closer scrutiny by regulators. The U.S. Securities and Exchange Commission warned in July that some ICOs should be regulated like other securities.

Bank of Japan

Governor: Japan’s economic expansion broadening Bank of Japan Governor Haruhiko Kuroda said yesterday the country’s economic expansion is broadening and likely to be highly sustainable.

But he reiterated the BOJ’s commitment to maintain its massive stimulus programme with inflation distant from its 2 per cent target. “Despite an expanding economy, prices continue to hover on a weak note,” Kuroda said in a speech at an annual meeting of securities firms.

Vice fin min

S. Korea’s bond sell-off due to portfolio adjustments South Korea’s vice finance minister said yesterday that a sell-off in government bonds seems to be due to portfolio adjustments by investors, not worries about the country’s systemic risks. “It doesn’t look like the offloading is related to our systemic risks. Rather, it looks more like adjusting of their portfolios,” Ko Hyoungkwon said, responding to questions by reporters on spiking yields of South Korean treasury bonds. Benchmark 10-year bonds currently yield 2.432 per cent, the highest since early August 2015. On Tuesday and Wednesday alone, foreign investors offloaded about 3 trillion won (US$2.62 billion) worth of South Korean treasury bonds, according to traders and a government official.

14 Business Daily Friday, September 29 2017

International In Brief Cape Verde

Money laundering cases more than double The number of money laundering cases in Cape Verde more than doubled in the 2016/2017 judicial year compared to the previous one, the public prosecutor’s office said yesterday. The annual public prosecutor’s report for the year between 1 August 2016 and 31 July 2017, said there were 40 new money laundering cases, 23 more than the 17 seen the year before. The new cases joined another 46 which were carried over from the previous year making a total of 86 cases filed by the public prosecutor in this area.

Portugal

Secretary asks EU to investigate fuel prices The Portuguese government has asked the European Union (EU) to investigate whether there is any fuel price cartel or abuse of dominant position in Portugal, as “there are significant, systematic deviations from international prices”. Yesterday’s Diário de Notícias, Jornal de Notícias and Dinheiro Vivo newspapers said on Thursday that the energy secretary, Jorge Seguro Sanches, sent a letter to European Competition Commissioners Margrethe Vestager, asking Brussels to investigate the situation.

In his letter, Jorge Seguro Sanches stresses that the systematic deviations of the fuel prices practiced in Portugal compared with international prices are of concern to the government.

Report

Millionaires’ wealth reached record US$63.5 trillion globally in 2016 The number of millionaires in China rose to 1.13 million from just over 1 million

T

he number of millionaires in the world rose by nearly 8 per cent last year to an all-time high of around 16.5 million people, with record total wealth of US$63.5 trillion, according to a report by global consultancy firm Capgemini.

The wealth of high net worth individuals (HNWI) -- which Capgemini defines as those with investable assets of US$1 million or more, excluding the primary residence, collectibles and consumables -- rose 8.2 per cent on the year in 2016 and is on track to surpass US$100 trillion by 2025.

Some 1.15 million people became millionaires last year, the report said.

The United States, Japan, Germany and China boast the highest numbers and together make up for almost twothirds of the total.

In the United States, their ranks rose to 4.8 million from 4.46 million, while the number of millionaires in China rose to 1.13 million from just over 1 million.

The Asia-Pacific, Europe and North America contributed equally to the rise in wealth, with Russia, Brazil and Canada reversing course

from declines a year ago, the report showed.

Russia, helped by a rebound in its stock market, saw both the number of its millionaires and their wealth grow by about 20 per cent.

‘Russia, helped by a rebound in its stock market, saw both the number of its millionaires and their wealth grow by about 20 per cent’ France overtook Britain in the top five in terms of the number of millionaires, helped by a recovery in real estate, while Sweden knocked Singapore -- which saw a decline in its equity markets -- out of top 25.

Surveys on the millionaires’

financial asset holdings show they held 31.1 per cent in equities in the second quarter of 2017, compared with 24.8 per cent in 2016.

Fixed income held steady at 18 per cent, while cash grew to 27.3 per cent from 23.5 per cent.

Alternative investments, such as hedge funds, derivatives, foreign currency, commodities and private equity, fell to 9.7 per cent from 15.7 per cent.

The report did not dive into the reasons for the reallocation, but stronger global growth, coupled with hefty liquidity after years of unprecedented stimulus by global central banks, have pushed stock markets around the world to record highs.

On the other hand, investors are wary of geopolitical risks, with tensions growing between the United States and North Korea, and are uncertain about the consequences the U.S. Federal Reserve’s exit from unconventional stimulus might have on economies and markets.

Millionaires saw a 24.3 per cent return on average on investment portfolios overseen by wealth managers. Reuters

Legislation

EU considers greater protection for savers European Union lawmakers are considering changing the rules on bank rescues to ensure bondholders’ investments are used to prop up a failing lender ahead of savers’ deposits, EU officials said. The discussions follow a decision by EU regulators to shut down Spanish bank Banco Popular in June after a run on its deposits fuelled by fears that depositors’ money could be used to rescue the lender. But the proposed changes could expose investors who hold bonds issued by banks to higher risks should they run into trouble.

Soccer

English clubs meet to hash out revenue deal England’s smaller Premier League teams met to come up with a plan to satisfy the six biggest soccer clubs, including Manchester United and Chelsea, which are demanding a bigger share of the US$1.34 billion a year in overseas broadcast rights.

One proposal involved splitting the revenue based on where teams finish in the standings, according to a person with knowledge of the matter who asked not to be identified because the discussions are private. Up to now, teams split the funds equally.

The meeting was requested by smaller clubs and takes place ahead of a possible vote on the issue at next week’s meeting of all teams.

Watchdog

EU better at breaking bad spending habits Examples of misspending included a Spanish recipient of regional development funds declaring costs twice and wrongly declaring VAT The EU’s auditor yesterday hailed progress in the bloc’s wasteful spending, which fell to 4.2 billion euros in 2016, but warned that future spending commitments had hit an all-time high of nearly 240 billion euros.

The European Court of Auditors said that while there had been “sustained improvement” in the level of misspending, EU member states and institutions could have reduced it still further if they had made use of all the information available to them.

High levels of misspending were found on rural development and the environment, the auditors said, as well as on “economic, social and territorial cohesion” -- projects to reduce regional inequalities and regenerate old industrial areas.

The report said the overall rate for wasteful spending fell to 3.1 per cent of the EU’s total 136.4 billion spending in 2016, amounting to 4.2 billion euros.

This was down from 3.8 per cent and 5.5 billion euros in 2015 but still above the acceptable level of 2.0 per cent.

The auditors nevertheless gave

their first “qualified opinion” on the accounts since 1994, indicating that they found problems but that they were not pervasive. Up to now they have always given an “adverse” opinion, indicating widespread problems.

‘We found that sufficient information was available to further prevent or detect and correct many errors’ Klaus-Heiner Lehne, the President of the European Court of Auditors, said the report reflected an “important improvement in EU finances”, but urged more action to tighten up on misspending.

“We found that sufficient information was available to further prevent

or detect and correct many errors,” he said. “In our view, this means that there is no need for additional controls, but the existing controls must be enforced properly.”

Examples of misspending included a Spanish recipient of regional development funds declaring costs twice and wrongly declaring VAT. The EU’s commitment to future spending has reached 238.8 billion euros, the auditors said -- higher than ever before.

“Clearing this backlog and preventing a new one should be priorities, bearing in mind the planning of EU spending in the period starting in 2020,” Lehne said.

The report said the figures were not a measure of fraud, inefficiency or waste, but an estimate of the money that should not have been paid out because it did not fully comply with EU rules.

EU spending in 2016 amounted to around 267 euros for every citizen in the bloc of around 500 million people.

Most of the money went on natural resources -- which covers the agriculture, fisheries and the environment -- with 57.9 billion. AFP

Business Daily Friday, September 29 2017 15

Opinion

Hong Kong Stock Exchange trading floor

Japan has to spend a little less on well-off elderly

ZhongAn’s stellar day one doesn’t a bright future make Nisha Gopalan and Shuli Ren Bloomberg Gadfly columnists

Z

hong A n O nline P & C Insurance Co. is flying high, but what’s the risk should its bigname backers, well, back off?

The online insurer’s stock surged as much as 18.1 per cent in Hong Kong yesterday after an IPO that was more than 100 times oversubscribed. Initial share sales in the city that have raised at least US$500 million have risen an average 4.2 per cent on their first day of trade, data compiled by Bloomberg show.

But valuing an insurance company more like a technology firm, especially when it’s projected to make a significant loss this year, is always dicey. ZhongAn’s growth ultimately hinges on the close ties forged, and then maintained, between its Chairman Ou Yaping and the three Mas. ZhongAn is 13.8 per cent owned by Jack Ma’s Ant Financial, an affiliate of Alibaba Group Holding Ltd., 10.4 per cent by Tencent Holdings Ltd., whose chief executive officer is Pony Ma, and 10 per cent by Ping An Insurance Group Co., whose chairman is Ma Mingzhe. SoftBank Group Corp., a cornerstone investor, holds almost 5 per cent.

The question for investors is will Alibaba, the insurer’s biggest shareholder and source of almost half its premiums last year via billion US$ shipping return ZhongAn IPO insurance, still be willing to back ZhongAn when it gets its own online insurance license?

As A l i b a b a’ s t a k i n g c o n t r o l o f unprofitable delivery business Cainiao Smart Logistics Network Ltd. this week showed, backers can vanish at any time.

Rival ZTO Express Cayman Inc. was tagged as Alibaba’s delivery service of choice before its New York listing in October last year.

The last well-received mega IPO in Hong Kong -- Huatai Securities Co.’s US$4.5 billion 2015 listing -- poses a cautionary tale. The Chinese brokerage’s float was also more than 100 times oversubscribed as investors rushed to buy shares in the belief that the more individual players in China’s stock market, the more commissions for brokers. Chinese stocks cratered later that year, and Huatai’s shares, which declined 18 per cent in 2016, have languished.

At the moment, ZhongAn, as China’s only publicly listed online insurance company, has sentiment on its side.

That could be fleeting. Bloomberg Gadfly

1.5

Noah Smith a Bloomberg View columnist

W

hen discussing Japan’s debt, most people get caught up in the issue of fiscal solvency. As everyone by now knows, Japan has a very high level of debt versus gross domestic product: This attention-grabbing number -- about twice the level of the U.S. -- often gets people asking whether Japan will default. Some believe a default is likely when the country runs out of domestic buyers for government bonds, causing interest rates to rise.

Others think the Bank of Japan can simply print money and buy government bonds without causing devastating hyperinflation. Shrewd observers point out that Japan’s debt isn’t quite as large as the headline number suggests, since much of it is held not by the public but by various arms of the Japanese government.

The solvency question surely is an important one. But it’s only one part of the larger issue.

Since the vast bulk of Japan’s government debt is owned by Japanese people, the question isn’t about paying back external creditors. It’s a matter of distribution of economic resources among the Japanese people.

If the government defaulted on its debt tomorrow, it would certainly hurt the financial system and cause a recession. But the most lasting effect would be to let Japanese taxpayers off the hook, while Japanese bondholders would find themselves less wealthy. The country wouldn’t have a fundamentally weaker economy -- all the factories and land and people and knowhow would still be there. But the promises about who gets to receive the fruits of that economy would be shifted.

The real problem with Japan’s debt, therefore, isn’t so much the danger of default; it’s that the government has made lots of promises to transfer real economic resources from young, working Japanese people to old, retired, bond-holding Japanese people. But Japan has a lot of old people and not many young people -- 27 per cent of the population is over 65, higher than any other country. Forcing that shrinking group of young people to keep the economic promises that the government has made on their behalf represents a crushing economic burden. And if that economic burden makes it harder to raise children, fertility will be suppressed, making the problem even worse in the future.

So the Japanese government needs to find some way of making the retiring baby-boom generation a little bit poorer and the hard-working younger generations a little bit richer. Raising taxes, as Prime Minister Shinzo Abe’s administration has already done and is trying to do once again, won’t accomplish this goal -- tax collection is just a way of the government making good on its promises to

“

old people, at the expense of the young. A better idea is to cut spending.

Some outside observers, recalling Japan’s wasteful construction binge in the 1990s, are prone to calling for cuts in public investment. But this was already done, long ago -- government investment in Japan is barely half its former level in inflation-adjusted terms, and as a per cent of GDP it’s less than half.

Besides, construction spending benefits both young and old, so cutting it isn’t an efficient way of easing the burden on the young.

That leaves social security and health care -- the two kinds of spending that involve the biggest net transfer from young people to old. Cutting either of these things is politically very difficult -- the Japanese electorate is dominated by older people.

So the government is, wisely, resorting to methods that are less likely to cause a public outcry.

The first is the so-called macroeconomic slide. Starting in fiscal 2018, when the country experiences either price or wage deflation, pension benefits will fall -- but when there’s inflation or wage gains, benefits rise more slowly. This system is similar to the way that companies often cut real wages for workers -- simply let inflation do the job.

The macroeconomic slide made the fiscal outlook rosier in 2014, when inflation briefly surged above the 2 per cent target.

But inflation has once again disappeared, despite continued monetary easing, proving how difficult it is for central banks to generate even moderate inflation.

Health care is a thornier issue.

Japan has one of the cheapest and most cost-effective health systems in the world, but the sheer size of the aging problem is steadily increasing total spending: Japanese policy makers and academics are thinking about ways to cut health care outlays even further, with minimal damage to the welfare of its elderly population. One idea is to have the government limit the amount of care that people are allowed to consume.

So Japan is making progress on reducing the amount that it redistributes from young to old.

But there’s also the issue of rich versus poor -pension cuts, for example, will fall hardest on the elderly poor. Japan can mitigate this by making the pension system more redistributive by reducing benefits only to wealthier retirees.

This much is certain -- Japan’s young people can’t bear the burden of the promises that politicians made on their behalf in decades past. Raising taxes isn’t the solution, debt default would cause unacceptable economic chaos, and generating inflation is hard to do. Lowering pension and medical benefits to well-off elderly people, though it’s a harsh and draconian measure, looks like the least-bad option. Bloomberg View

The Japanese government needs to find some way of making the retiring baby-boom generation a little bit poorer and the hard-working younger generations a little bit richer

”

16 Business Daily Friday, September 29 2017

Closing Transport

Speed over safety? China’s food delivery industry warned over accidents Police in the eastern city of Nanjing met with food delivery companies on Sept 20 after couriers were involved in more than 3,000 accidents in the first half of 2017 Christian Shepherd

A

scooter driver in a bright blue jacket on a food delivery run dashes across a busy intersection slick with rain, hits a turning car and is hurled along the tarmac in a video posted by Chinese police warning that couriers should slow down.

China’s home delivery boom, powered by an estimated three million couriers, most of them riding quiet electric scooters or boxy three-wheelers, has triggered a surge in road accidents, prompting warnings from police and complaints from drivers who say they feel pressure to put speed before safety.

“Accidents happen all the time at rush hour. I have a friend who was hit by a car and could not work for two months,” said a food courier in Beijing surnamed Zhang, declining to give his full name.

The number of users of China’s online food delivery market, dominated by services backed by technology giants Alibaba Group Holding Ltd and Tencent Holdings Ltd, surged 41.6 per cent to 300 million in the first half of 2017, according to a report by the state-controlled China Internet Network Information Centre.

After 76 injuries and deaths involving food delivery drivers in Shanghai were recorded in the first half of 2017

alone, police called in China’s largest food delivery companies in late August to warn them to improve safety standards.

Drivers from China’s two largest food delivery companies, Meituan-Dianping and Ele.me, were responsible for about a quarter of all the incidents, the Shanghai police said.

The news sparked a countrywide reaction as city police and state media came out to chastise the industry for accidents.

Police in the eastern city of Nanjing met with food delivery companies on Sept 20 after couriers were involved in more than 3,000 accidents in the first half of 2017, over 90 per cent of which were deemed their fault, state media reported.

The official Legal Daily urged authorities to “mobilise the masses” to use phone cameras to catch offenders and punish their employers, identified by distinctively coloured uniforms.

A spokesman for Meituan, whose drivers wear a fluorescent yellow, said that the company has safety training for drivers and conducted more than 300 driver training courses in July. He said there was a 13.6 per cent drop in traffic incidents in the following month.

A spokeswoman for Ele.me said it tells drivers that “safety is first, speed is second” and that the company recently launched a system to track

Debt

traffic violations by drivers, as well as offering rewards to onlookers who report incidents.

Need for speed

China’s drivers are rarely mugged or shot - a risk facing their counterparts in parts of the United States and some other countries - but they often suffer injuries on the country’s hectic city roads.

While drivers typically take the blame for accidents, labour activists and numerous drivers said incentives make speed a necessity.

The Hong Kong-based China Labour Bulletin, which tracks labour action in China, said couriers are increasingly airing their grievances, staging protests and strikes to demand better wages and accident insurance.

Drivers can face fines for late deliveries or poor customer ratings, the drivers said, adding that companies do not always provide insurance or coverage for accidents. Companies say drivers are covered by public and third party liability insurance.

Food delivery drivers told Reuters that they are expected to do up to 40 deliveries in one 10-to-12-hour shift, usually with a time limit of under half an hour per delivery. Being on time and getting good reviews from customers can mean an extra RMB5 (US$0.75 cents) or so per delivery.

Couriers are also usually not hired directly by the companies that design

Internet

the ordering software. Instead, they work freelance or for third party companies, leaving them without direct contracts with the platform operators.

In August, dozens of Meituan drivers staged a strike in the southern city of Yixing to complain about pay and injury compensation, showing off their scab-covered legs and using hand-written equations to show how a build up of fines for late deliveries can eat into their salaries.

Key Points Drivers say they are pressured to put speed ahead of safety Authorities concerned about the number of accidents Drivers can face fines, poor ratings if they are late Meituan drivers in southern city staged strike in August The vast majority of drivers are migrant workers under the age of 26 who send most of their income home to support their families, according to a 2016 report by Meituan-dianping.

“Food delivery platforms’ management needs to become more humane,” the official People’s Daily newspaper said in a recent commentary. “Switch from an operating model that only seeks speed to one that only seeks stability... don’t let delivery drivers risk their lives delivering meals.”

An Ele.me spokeswoman acknowledged that “balancing delivery speed and traffic safety is indeed very hard”, adding that the company is working to use artificial intelligence to optimize routes and monitor drivers.

Criticism has mostly targeted food delivery companies as their drivers face greater time pressure and have less well-defined routes than those delivering other packages.

But the wider delivery industry also has its problems.

Niu Hongqiang, 23, a driver from Hebei province working for a package delivery company in Beijing said that the safety training he received was “useless.”

“When something goes wrong, it goes wrong in a big way.” Reuters

State-owned firms

Portugal’s top banks Baidu invites domestic cybercops to jointly manage bad loans to label, rebut fake web news

Beijing says framework for reform “basically complete”

Portugal’s three biggest lenders plan to jointly manage some of their bad loans in an effort to avoid further write-downs and restore struggling borrowers to health, a move agreed with the government and central bank, the deputy finance minister said.

State-owned Caixa Geral de Depositos as well as Novo Banco and Millennium bcp will form a private vehicle to manage loans that at least two of them have made to the same corporate borrowers, Ricardo Mourinho Felix told Reuters in an interview on Wednesday.

A Novo Banco spokesman confirmed yesterday that the three banks had agreed to form a joint debt-management platform but gave no further details.

Millennium bcp and Caixa declined to comment.

The three banks account for most of Portugal’s bad loans, which are estimated to total 25-30 billion euros, or about 15 per cent of their total credit portfolios, mainly to companies. It is one of European banking’s biggest bad-debt burdens.

It is unclear how many bad loans will be jointly managed by the three lenders’ new vehicle, which Mourinho Felix said would be structured as “a complementary group of companies” and focus on loans to corporate borrowers that were considered viable. Reuters

The framework for China’s state-owned enterprises (SOEs) is “basically complete” following five years of aggressive restructuring, the top administrator for central government-owned manufacturing companies said yesterday.

Beijing is trying to streamline and modernize its bloated and debt-ridden state-owned sector and create conglomerates capable of competing globally.

The reforms have involved the restructuring of SOEs through reorganizations and mergers, reductions in excess capacity and the relocation of workers, though some analysts say much more needs to be done, especially to address high debt levels.

“The intensity of the central enterprises’ reorganisation has been unprecedented,” Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said at a media briefing in Beijing.

The government has ordered a series of mergers between central government-controlled conglomerates over the five-year period, cutting them to 98 from 117 under the control of SASAC. “We won’t use the increase or decrease in the number of conglomerates or the size of firms to influence our targets (in restructuring of SOEs),” Xiao said. Reuters

Baidu Inc. is building a system to allow China’s cybercops to spot and fix “online rumours” deemed a threat to stability, allowing police agencies to insert themselves directly into everything from its search results to discussion forums.

The platform links 372 police agencies who will be able to use sophisticated artificial intelligence-driven tools to monitor and respond to fake news, blogposts and other items across about a dozen Baidu services, including the country’s most popular search engine, the official Xinhua News Agency reported. In all, more than 600 organizations -- including financial news media such as Caijing and medical platform dxy.cn -- will be enlisted to weigh in on their respective fields, Baidu spokeswoman Whitney Yan said.

Internet giants from Facebook Inc. to Twitter Inc. are struggling to deal with a proliferation of spurious news articles across social media services. Baidu’s approach allows the Chinese government to intervene directly and write articles in rebuttal. Items that its system decides are fake will be clearly labelled a “rumour” at the very top of search results, alongside an explanation penned by the relevant agency or organization, according to a sample page Baidu provided. Bloomberg News