Business Daily #1400 October 11, 2017

Thailand announces elections for November 2018 Politics Page 12

Wednesday, October 11 2017 Year VI Nr. 1400 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Anti-graft

Former Liaison Office Director punished for “serious disciplinary violations” Page 7

Cashless solutions

MSAR 6th highest in instore transactions by Alipay users outside Mainland during Golden Week Page 6

www.macaubusiness.com

Society

Angela Leong says plans for greyhound stadium still uncertain Page 3

Brexit

EU frames legislative steps moving clearing activities from London Page 16

Balancing Bricks & Mortar Housing

Outlook for public housing supply catching up with demand is positive in the long run, says Housing Bureau president. Report reveals that by 2023 units available will match need. But in 2021 demand will be triple supply. Long-term supply of new units on reclaimed land zones could be tempered to evolution of economy and population to avoid glut. Page 2

Paying for the minimum wage

The bill of implementing a minimum wage for building management services personnel is being footed by tenants, social affairs committee finds. An average hike of 20 pct in condominium fees. While workers still ask for slight further increase to improve quality of life. Closed door session details could not be revealed, while gov’t data to help arrive at conclusions still pending.

Fatter profits

F&B Gross surplus increase of 96 pct y-o-y for local restaurants in 2016, shows survey.

Chinese restaurants’ gross surplus up 218 pct y-o-y, making up 42 pct of total receipts registered. Employee salary expenses up nearly 10 pct, to MOP3.77 bln, with overall expenses up 5 pct y-o-y. Page 5

Hedging gaining ground in Mainland

Labour Page 4

HK Hang Seng Index October 10, 2017

28,490.83 +164.24 (+0.58%) Worst Performers

New World Development

+5.06%

Sun Hung Kai Properties Ltd

+1.62%

Want Want China Holdings

-2.86%

CLP Holdings Ltd

-0.44%

Henderson Land Develop-

+3.37%

HSBC Holdings PLC

+1.42%

Kunlun Energy Co Ltd

-0.67%

China Life Insurance Co Ltd

-0.42%

WH Group Ltd

+2.49%

Sino Land Co Ltd

+1.30%

China Merchants Port Hold-

-0.63%

China Resources Land Ltd

-0.41%

AAC Technologies Holdings

+2.44%

Industrial & Commercial

China Shenhua Energy Co

-0.51%

China Overseas Land &

-0.38%

China Unicom Hong Kong

+1.65%

Sands China Ltd

CITIC Ltd

-0.51%

Hengan International Group

-0.38%

+1.11% +1.04%

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

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Currencies Following a reverse trend in the yuan this year, Chinese companies are starting to hedge their financial positions.

If the RMB saw a sharp decrease against the dollar last year, the opposite move in 2017 is stressing national companies’ finances.

Page 8

2 Business Daily Wednesday, October 11 2017

Macau Housing

Better housing situation in the future The public housing demand report released yesterday shows that supply is not meeting demand in the short term but the situation is set to improve given the planned projects on reclaimed land and the large-scale project at Wai Long Cecilia U cecilia.u@macaubusinessdaily.com

T

he situation for meeting the demand for public housing is positive in the long run, although the current supply is not yet sufficient to meet demand, according to Arnaldo Ernesto dos Santos, president of the Housing Bureau.

The statements were made at the first meeting of the Public Housing Affairs Committee, in which the Public Housing Demand Research report was also divulged. The report found that demand for public housing would reach 31,247 by 2021 while the government is capable of supplying 9,273 units in the same period.

However, by 2023, supply would be able to match demand.

Regarding the long term prospects, the Bureau head said that “with the reclaimed land plots in front of the Airport and the reclaimed land Zone A almost completed we will have the opportunity to catch up with demand,” noting that the short supply at the moment is due to land shortage.

In addition, the current progress towards revising the public housing law will “allow a better and more

balanced distribution of resources while satisfying demand little by little”.

According to the report, the study estimates that 49,873 public housing units will be provided by 2026, which would be capable of meeting the 36,592 unit demand estimated for the same year. Of the total demand for public housing in 2026, 19,496 would be for social housing units, while 22,905 would be for economic housing.

However, also taking into account potential supply from the private sector, the report also indicated there will have be a certain number of units becoming vacant by 2026.

Regarding the total potential supply from both public and private housing sectors in the coming decade, unit numbers would increase by 77,387, to total 296,397, adding to the current 219,010 units in the city.

The report also suggests the government roll out half of the public housing project units from the New Zone A to meet the demand for public housing before 2023 and that the other half of the project be saved for future development in accordance with changes in the population and economy. The potential 22,000 units advertisement

that can be provided in Zones B, C, D and E can also be used for long-term planning.

The report also advises updating information on demand as well as estimates of demand for public housing every five years with demographic and census data.

Meanwhile, when asked about the schedule for a new round of applications for economic housing, Santos said it would at the earliest be one to two years following the completion of the environmental evaluation of the Wai Long Public Housing project.

“For economic housing applications, there needs to be in place plans such as the locations and how many units are available and we can only open [applications] after acheiving this,” he said.

Xiaochun Qiao - a professor at the Institute of Population Research of Peking University and one of the team elaborating upon the report said the MSAR Government needs to plan out the steps.

“The most urgent [thing] is the government should put planning into further provision of public housing through construction [...] given the limited supply and the short period of time, despite the plan being elaborated [...] the government needs to speed up,” said Professor Xiao.

As stated in the report, the increased supply of public housing would be made in the mid and long-term period, but there would be a larger impact on private housing, said the professor.

Increasing ratio of public housing

The report reveals that the ratio percentage of public housing within the housing market has increased to 22 per cent, with the completion volume of public housing exceeding the volume of private housing since 2011, accounting for 56.9 per cent of the total supply of housing in the city.

Meanwhile, according to the report, the average household size in the city is becoming smaller, with estimates for 2.93 persons per family unit by 2026, down from 3.08 in 2016.

From the perspective of economic housing, the report estimates that 33 per cent of the demand for economic housing units would be two-member households, while households that contain one member or three members would each account for about 25 per cent of demand. For households with four members, the estimated amount would be 14 per cent.

More meetings to come

The Bureau head said another meeting with the committee will be held next month.

“We will have more meetings; with the report having been released we wish to get more opinions from committee members in order to lay out policies given that the committee is set up to help the government to set housing policy,” said Santos.

The last meeting was held in 2015.

Business Daily Wednesday, October 11 2017 3

Macau Tourism affairs

Wine Museum; Glass half empty MGTO has not yet decided to relocate the Wine Museum to Coloane Sheyla Zandonai sheyla.zandonai@macaubusiness.com

C

oloane may not be the ‘ideal location for the new Wine Museum,’ Business Daily has learned from Macao Government Tourism Office (MGTO).

The Office claims it is mulling the location for accommodating the new facilities of the museum given that ‘the renovation project of the Grand Prix Theme Museum

will soon begin,’ thereby forcing the relocation of the Wine Museum.

Both museums currently share the facilities of the Tourism Activities Centre (CAT) in ZAPE, across from Lotus Flower Square.

In previous replies to Macau Business, MGTO explained that although Coloane has been selected as a strong contender to accommodate the new Wine Museum since at least July 2016 a final decision about its future location was only likely to be announced

during the presentation of the MSAR Government’s Policy Address for 2017, this coming November.

According to MGTO’s spokesperson, one of the reasons that might push the government to not consider Coloane a favourable location for the museum concerns “limitations relating to the conservation and construction in this zone [Coloane],” which would cause “the total area [to] be smaller than the existing Wine Museum.”

MICE

Convention and exhibition industry abuzz The carnage wrought by Typhoon Hato has raised questions in the industry about whether the conventions and

exhibitions sector has been affected and what to expect from the rest of the year, according to the Macao Trade

and Investment Promotion Institute (IPIM).

One of the sector representatives quoted by IPIM noted that in the wake of the typhoon September still saw two convention delegations visit the hotel property the individual is employed at, with 12,000 and 14,000 participants, respectively. The representative noted that due to ‘the joint efforts of all sectors, the city has rapidly recovered, all business was back to normal and the hotel has successfully confirmed a large number of

new businesses,’ as quoted

by IPIM. A sector representative of another hotel in the territory noted that large conventions and exhibitions in the city have led to an occupancy rate of the hotel of 95 per cent.

Yet another representative of a hotel told the trade institute that the MSAR has become an ideal destination for convention and exhibition organisers from around the world due to the comprehensive infrastructure and world-class facilities specifically designed

to cater to the sector.

Official statistics show that 333 conventions and exhibition events were held in the second quarter of 2017, of which 308 were conventions, posting an increase of 16 events compared to the same period of the previous year.

For the fourth quarter of this year, several large convention and exhibition events will take place in Macau, with the Macao Trade and Investment Promotion Institute (IPIM) confirming the hotel industry is optimistic. C.U. advertisement

Society

Angela Leong: No gov’t notice received for greyhound stadium With the contract of greyhound stadium operator Companhia de Corridas de Galgos Macau (Yat Yuen) set to expire in July of next year, legislator and executive director of the local gaming operator Sociedade de Jogos de Macau, Angela Leong On Kei, told the press that the operator has not received notice from the government requesting the initiation of exit procedures and guidelines for co-ordination, TDM Radio News reported.

Leong divulged that despite the tender opened to study uses for the property that future plans for the venue were still uncertain.

The tender for the study of potential uses for the track area was awarded to City Planning & Engineering Consultants Ltd., at a cost of MOP1.45 million and set to last 203 days, information on the Land, Public Works and Transport Bureau website reveals.

On the other hand, Leong claimed that gaming operators would be capable of co-ordinating with the government, if needed, to transform the shuttle parking area next to the Border Gate into a temporary bus terminal, with prerequisites that the transformation would benefit travellers and is feasible.

Speaking on TDM radio programme Macao Forum, Leong added that shuttles operated by gaming operators provide alternative transportation for residents apart from only carrying tourists.

In addition, she commented that the government should be more specific when drafting the bill to regulate whether gaming workers can enter casinos during non-working hours, providing more details on areas such as penalties. She urged that the bill not discriminate against gaming workers who want to be entertained in casinos. C.U.

Press freedom

AIPIM presents freedom of the press report to GCS The report is based upon a survey of Portuguese and English media professionals

A report entitled ‘Portrait of freedom of the press and access to sources of information in the exercise of the journalistic profession in Macau,’ produced by the Macau Portuguese and English Press Association (AIPIM) was delivered yesterday to the Director of the Government Information Bureau (GCS) and Spokesperson of the Macau SAR Government, Victor Chan,

by AIPIM representatives.

The report was made public on September 27.

During the event, AIPIM conveyed the concerns expressed by the journalists and

media workers who participated in the survey, highlighting current difficulties obstructing the access to official information, including the judiciary system, the executive power, and legislative body and public administration.

Concerns and criticisms were also raised with regard to the operation of the Government Spokesperson system.

AIPIM opined that the report could aid the local journalistic community and various institutions to promote greater transparency and better communication between the parties. S.Z.

4 Business Daily Wednesday, October 11 2017

Macau Opinion

José I. Duarte*

New-speak, old-memories As a rule, I avoid introducing personal matters or experiences in these comments. Today is an exception. It will shortly become clear why I will break the rule today and what it is all about. First comes the story.

Almost twenty years ago, I made my first trip to Beijing.

As it was mandatory under the circumstances, I visited the Forbidden City. I went with some Chinese friends.

Because it is relevant to the narrative, I was the only foreigner in the group, and it was the first time they had visited the place with a foreigner.

As they were buying tickets, they realised that I would be charged more than them, the locals – because I was, well, a foreigner. So, they were “positively discrim­ inated” in favour of. Mind you: they did not appreciate the privilege!

In fact, they started arguing with the ticket seller, stressing how much they felt such treatment was unfair and unjustified. More than that, one pointed out he had never encountered such favouritism in other countries and would feel affronted if he did. Either out of sympathy for the argument or because the fellow was just not in the mood to keep listening to an argument about which he possibly couldn’t care less, it all ended up with me paying the local tariff. The practice was later discontinued.

Fast forward to Macau, late 2017. There is a government suggestion that there will be an increase in the bus tariffs, and that non-residents will start paying more than residents. As a result, the most underprivileged, those with the lowest incomes and most diminished in their civil and labour rights, will benefit from further “distinctions”. The proposal is upsetting; being hailed as “positive discrimination” makes it only more so.

Discrimination it is, no doubt about that. It is also unfair and unjustified; and in no acceptable usage of the expression can it be deemed as “positive”. People can debate if positive discrimination is an appropriate tool to correct the effects of past social wrongs. But in no part of the world is discrimination in favour of those who are already more advantaged seen as desirable, fair or described as “positive” in any morally defensible way.

The faster the idea is shelved, the less moral and social damage will be caused. We may then keep the focus on more important and deserving matters.

Namely, if those fee increases are needed, justifiable or wise. *economist and permanent contributor to this newspaper.

Labour affairs

Paying the minimum wage bill Worker representative suggests a 5 per cent increase in the minimum wage for staff hired for building management tasks, with consumers likely to foot the bill Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

enants are footing the bill of the changes brought about by the implementation of a minimum wage for building management services personnel, according to a committee.

Since the implementation of the minimum wage in 2016, there had been an “average increase of 20 per cent in condominium fees,” according to information provided by the Secretary General of the Standing Committee for the Co-ordination of Social Affairs (CPCS), Ng Wai Han, on the sidelines of a closed door meeting held yesterday between representatives of employers and employees in the MSAR. The CPCS meeting was held in order to discuss the minimum wage for cleaning and security workers employed in building maintenance services and the ensuing impact on consumers, as well as the revision of an attendant report conducted by the Labour Affairs Bureau (DSAL).

Speaking as representative for workers, Leong Sun Iok said there was no agreement reached on raising the minimum wage – currently set at MOP30 per hour – adding that he believes that “such an amount is still below expectations because the type of work involved is strenuous.”

“We believe the amount has to be

increased because these people need to improve their quality of life,” he said.

Replying to questions from the press, Leong claimed that worker consensus was that the minimum wage should be increased by at least 5 per cent, which would raise the minimum hourly pay to MOP31.50.

He added that this would still be a “low amount” but argued that he understands there are other criteria to be considered before moving ahead with the proposal, such as inflation.

No targeted date for a discussion on the matter was revealed during the press conference although Mr. Leong recalled that the minimum wage law stipulates a mechanism for the revision of the amount and conditions of the minimum wage and that this should be pursued annually.

As for the establishment of a universal minimum wage, he said the topic was not tabled yesterday.

Meanwhile, Wong Chi Hong, the Director of DSAL and Co-ordinator of the CPCS Executive Commission, confirmed that there had been an increase in the number of workers who saw their income increase following the implementation of regulations on the minimum wage, although he added he could not provide the exact figure.

Inconclusive talks

Overall, all parties that spoke to the press were adamant in claiming that

they could not disclose the content of the discussion held behind doors, only advancing that there was an agreement on the need for additional information on behalf of the government as well as further studies on the matter.

The representative of the employers, António Chui Yuk Lam, stated they “need more data to study and analyse” the agenda discussed during the meeting, and to summarise the position conveyed yesterday by all parties.

The additional information referred to by representatives and authorities during the press conference refers to a survey that was previously conducted by the government with public services, cleaning and security companies alike, involved in building management services.

In tandem, Chui claimed they “are going to submit a report with new opinions after the government sends them the new data that [they] requested.”

It was also said a few times during the press conference that the government pledged to send the additional information to the parties within ten days.

Repeated questions by the media about the nature of the data requested of the government by both employers and employees’ representatives went unanswered.

The Secretary for the Economy, Lionel Leong Vai Tak, left the premises immediately after the meeting.

Business Daily Wednesday, October 11 2017    5

Macau Food business

Food outlets serve up fatter profits The gross surplus of restaurants and similar establishments in 2016 went up 96 per cent year-on-year to MOP258 million Nelson Moura nelson.moura@macaubusinessdaily.com

T

he restaurant and similar establishments sector saw gross surplus increase by 96 per cent year-on-year in 2016 to MOP258 million (US$32.09 million), according to survey results revealed yesterday by the Statistics and Census Service (DSEC).

The study did not include restaurants and similar facilities directly operated by hotels and gaming establishments or street hawker stalls.

The total amount of receipts collected in 2016 by the restaurant and similar establishments sector increased by 6.5 per cent annually, to MOP10.69 billion, with expenses climbing 5.2 per cent year-on-year, to MOP10.46 billion.

Fighting expenses

Purchase of goods rose by 2.1 per cent yearly in 2016 and represented 36.8 per cent of the total expenses by those in the sector, at MOP3.85 billion.

At the same time expenses paid out on employee salaries increased 9.8 per cent yearly to reach MOP3.77 billion in 2016.

Rent comprised the largest amount of restaurants and similar establishments’ operating expenses in 2016, amounting to MOP1.18 billion, falling 0.5 per cent annually.

Electricity expenses and materials represented the second and third largest operating expenses for the food & beverage sector, with both

having increased - by 7.1 per cent and 0.6 per cent yearly to MOP362 million and MOP236 million, respectively, in 2016.

The survey also revealed that the amount the sector contributed to the local economy in 2016 - gross value added - went up by 13 per cent yearon-year to reach MOP4.03 billion.

Chinese domination

The number of restaurants and eating

& drinking places recorded in 2016 showed the first decline since 2012, dropping by 20 establishments to 2,189.

However, the number of people engaged in the industry went up by 101, for 32,260 by the end of last year.

When considering cooked-food stalls in municipal markets, some 2,265 food & beverage establishments were registered in 2016,

with 32,398 people engaged in their operation.

In 2016, there were 598 Chinese restaurants, bringing in 42.3 per cent of the total receipts registered last year.

In all, Chinese restaurants registered 9.2 per cent more in receipts in 2016 than the previous year, reaching MOP4.53 billion, with gross surplus rocketing 218 per cent yearly to MOP105 million. advertisement

th

8th Half Page Ad Charity Golf 2017 Business Daily - outlined.indd 1

10/1/2017 6:23:49 PM

6 Business Daily Wednesday, October 11 2017

Macau E-payments

Holiday peps up spending spirit The MSAR ranked 6th in terms of volume of in-store transactions conducted by Alipay users outside Mainland China during the recent Golden Week holiday period

O

f the 10 countries and regions outside Mainland China that saw the largest volume of in-store transactions conducted by Alipay users during the Golden Week holiday period Macau ranked 6th, according to a report provided to Business Daily

by Ant Financial Services Group (formerly Alipay).

According to the Alibaba Group subsidiary, Hong Kong topped the list, followed by Thailand, Taiwan, Japan, South Korea, Macau, Malaysia, Singapore, Australia and New Zealand.

The report - which does not specify the total number of transactions - indicated that

the volume of transactions in Hong Kong during this year’s eight-day holiday period was 13 times higher than last year.

The neighbouring city also consumed around 16.6 per cent of the 1.2 million-plus e-coupons used on Alipay worldwide.

Meanwhile, the volume of in-store Alipay transactions in Thailand increased sixfold compared to the Golden Week period of last year, with results in Taiwan some 13 times higher.

The report also indicated that per capita in-store spending through Alipay had increased by half from last year to RMB1,301 (MOP1,590/ US$197), with spending ‘much higher than average’ outside

Asia, especially in Europe, where users spent an average of RMB3,150 through Alipay.

As a third party online payment service provider, Alipay allows customers to conduct transactions directly

from their mobile devices, with stores able to accept payments through QR Scan or barcode scanning.

In 2015, Macau Pass SA became Alipay’s authorised agent for the settlement of

mobile payment transactions, with local regulations requiring a partnership with a local, recognised credit institution to conduct third party payment activities in the MSAR. N.M.

Aviation

Entertainment

Taking Off Soon

Bringing down the curtain on the House of Magic

Honda Aircraft Company announced yesterday it had appointed Chinese company Honsan General Aviation Co. Ltd. as its official dealer for the provision of sales, service and support for its advanced business light jet HondaJet in Mainland China, Hong Kong and Macau.

“The HondaJet has been received with tremendous interest in and around China and we have appointed Honsan General Aviation HondaJet as a dealer in the region,” Honda Aircraft President and CEO Michimasa Fujino announced in the release.

Guangzhou-based Honsan General

Aviation is to set up shop in the new RMB426 million (US$62 million) fixed based operator (FBO) complex currently being developed in Guangzhou Baiyun International Airport.

The first phase of the new FBO complex is expected to be completed by the end of this year, with the construction of a 5,000 square metre passenger terminal and a 20,000 square metre business aviation hangar.

Honda Aircraft is a subsidiary of American Honda Motor Co. Inc., the United States subsidiary of Japanese motor group Honda Motor Company, Ltd. N.M.

With a Bernstein note stating The House of Magic show at Studio City has closed, the property told Business Daily the attraction had been suspended for renovation The House of Magic show at Melco Resorts and Entertainment Ltd. property Studio City has been closed for renovation for an undisclosed period of time, the Integrated Resort has informed Business Daily.

A note from brokerage firm Sanford C. Bernstein on Monday stated that the show at Studio City had closed, with the property website removing its advertising for the non-gaming attraction.

‘For Studio City, the House of Magic has not been a successful venue.

Melco is looking at repositioning portions of the property but has not yet announced a replacement feature,’ reads the Bernstein note.

According to the property management, the show has been suspended for renovation, with no specifics provided as to whether the show will be

maintained or altered.

The House of Magic was a US$40 million show devised by American illusionist Franz Harary, with the attraction described as the ‘world’s first multi-theatre, immersive visitor magic experiences’ upon its opening in 2015.

Business Daily enquired of Melco Resorts if the show was to be removed or replaced but no response had been received when this newspaper went to print. N.M.

Tourism

Lustre comes off Golden Week Despite a yearly increase in visitation during the Golden Week holiday period, analysts from Morgan Stanley consider the registered 9 per cent year-on-year rise in daily gross gaming revenues as a less ‘golden’ result Nelson Moura nelson.moura@macaubusinessdaily.com

Despite a strong last four days, a report by Morgan Stanley considers that daily gross gaming revenues registered in Macau during this year’s Golden Week holiday period were ‘weaker than expected’ with an increase of ‘only 9 per cent year-on-year’ in gross

gaming revenue, to reach MOP1.06 billion (US$131.87 million).

Gaming revenue results registered during the eightday holiday period were lower than the MOP1.26 billion registered during this year’s five-day Chinese New Year holidays.

The report justified the lower than expected result of the Mid-Autumn period

this year coinciding with the Golden Week period of October 1 to October 8, and with the same period of last year having seen the opening of The Parisian Macao and Wynn Palace.

Although Chinese visitation to Macau decreased by 5 per cent yearly in the first four days of the holiday period, visitation rebounded by 36

Big spending neighbours

Meanwhile, the number of visitors registered in the neighbouring city of Zhuhai during the eight-day holiday period went up by 5.6 per cent yearly to 2.37 million, with the amount spent by visitors rising 2.1 per cent year-on-year to

per cent year-on-year in the remaining four days.

Morgan Stanley analysts consider the overall 11 per cent yearly increase in visitation ‘impressive’ but referred to the gaming revenue single digit increase as ‘concerning’.

Despite the results, the report estimates gross gaming revenue in the last quarter

of the year will see a yearly growth of 16 per cent, with full-year results increasing 18 per cent year-on-year.

However, a recent ‘slowdown in VIP’ yearly growth created by a high base comparison and a ‘macro/liquidity slowdown’ together with a potential premium mass slowdown could impact estimated growth.

RMB1.3 billion, reports the Zhuhai Government online portal.

The majority of visitors originated from cities in the Pearl River Delta and along high-speed rail routes, with 564,700 visitors staying overnight in the city.

According to the report more than half of all

tourist revenue in the city was generated by visitation to five major tourism attractions; namely, Haibin Park, City Parlour, New Yuanming Palace - including the Lost City Water Park, Xianglu Bay - and Zhuhai Hengqin Chimelong International Ocean Tourist Resort.

Business Daily Wednesday, October 11 2017 7

Macau Corruption

China anti-graft body punishes former top mainland official in Hong Kong About 1.34 million low-ranking officials have been punished since 2013 in Xi’s nationwide drive against corruption, in which he promised to target both “tigers and flies”

C

hina’s top anti-corruption body has punished a former senior official based in Beijing’s representative office in the Asian commercial hub of Hong Kong for what it called “serious disciplinary violations”, the usual euphemism for corruption.

The announcement comes just over a week before the party opens a crucial five-yearly party congress in Beijing, where president Xi Jinping is expected to consolidate power in a closely watched leadership reshuffle.

Li Gang, who spent a decade as the deputy director of Hong Kong’s Liaison Office before being appointed to China’s cabinet, or State Council, was put on probation for one year,

the ruling Communist Party’s second most serious disciplinary action.

In a short statement late on Monday, the party’s graft-busting Central Commission for Discipline Inspection said it had “approved a report on Li Gang’s serious discipline violation” for which he had been given the probation.

It did not elaborate.

Last year the watchdog sent an official to monitor Beijing’s State Council-level Hong Kong and Macau Affairs Office that oversees affairs in the former British colony, which returned to Chinese rule in 1997.

Li is one of the most senior mainland officials linked to Hong Kong to become ensnared in China’s

anti-corruption campaign.

About 1.34 million low-ranking officials have been punished since 2013, the watchdog said on Sunday, in Xi’s nationwide drive against corruption, in which he promised to target both “tigers and flies”.

The crackdown has taken down dozens of senior officials, including the powerful former domestic

security chief Zhou Yongkang.

In 2012, Li moved from Hong Kong to the neighbouring city of Macau soon after Leung Chun-ying was selected as the territory’s leader following what was widely seen as a mud-slinging election campaign.

Leung, who surprised many in Hong Kong last year by saying he would not seek a second term, now serves as one of the vice chairmen of the largely ceremonial advisory body to China’s parliament.

The Hong Kong Liaison Office recently welcomed a new leader, Wang Zhimin, an official hailing from the southern province of Fujian, where Xi spent almost two decades climbing the political ladder. Reuters

Luxury

DFS Group growing locally Luxury duty free retailer DFS Group ‘experiencing sustained growth’ in the MSAR and Hong Kong in the first nine months of this year In its most recent financial report, French luxury goods producer LVMH Moet Hennessy Louis Vuitton SE stated its Hong Kong-based retail subsidiary DFS Group is ‘experiencing sustained growth, particularly in Hong Kong and

Macau’.

According to a report by LVMH regarding the first nine months of this year, the group’s selective retailing sector saw organic revenue increase by 12 per cent compared to the same period last year, reaching

9.33 billion euros (MOP88.37 billion/US$10.99 billion).

The DFS Group currently has four T Galleria dutyf ree retail stores in the MSAR: in City of Dreams, Shoppes at Four Seasons, Studio City and Galaxy Macau. The company

also has four stores in Hong Kong.

The company currently has duty free stores in 13 countries with 13 stores in major airports and 18 T Galleria by DFS stores in downtown areas or resorts.

In the first nine months of

this year, LVMH registered a 14 per cent increase in revenue to reach 30.09 billion euros, with the sale of fashion & leather goods making up 36 per cent of the total and selective retailing representing 31 per cent. N.M. advertisement

8 Business Daily Wednesday, October 11 2017

Greater china Currencies

Mainland firms rush to hedge as yuan swings begin to sting Between 2012 and 2014, only about 30 companies each year announced hedging plans, but that number jumped to 68 last year Samuel Shen and John Ruwitch

H

obbled by the yuan’s unexpected surge this year, more Chinese companies are trading currency derivatives to hedge risks, although many mainland firms remain exposed to swings in China’s increasingly volatile currency.

Companies in China have for years been accustomed to a stable yuan that moved in one direction for long periods of time. Yuan hedging markets are still in their infancy, stymied by the central bank’s stringent requirements for hedging and the limited participation of speculators and large state-owned firms, which could make markets more liquid.

But that is changing. Volatility has risen steadily since 2015 after the People’s Bank of China decided to let market forces have a bigger sway in the yuan’s direction, clamped down on capital flows and, more recently, introduced more opacity in the way it sets the currency’s value.

The yuan slumped 6.5 per cent against the U.S. dollar in 2016, but has unexpectedly reversed course this year, surging 5.3 per cent so far.

More than 70 China-listed companies have announced plans this year to use derivatives for risk-hedging, according to Reuters’ calculations based on exchange filings. Among

them, 27 firms are trading yuan forwards, swaps or options for the first time.

“Last year, when the yuan was falling, there was no need to hedge, because depreciation was on our side,” Jiang Tao, an investor relations official at Shenzhen Yuto Packaging Technology Co, told Reuters.

The Chinese exporter of gift boxes and stickers is one of the 70 companies reviewed and generates over 60 per cent of its revenue overseas. In the first half of this year, it posted a RMB47.5 million currency loss due to a stronger yuan.

It says the less predictable currency trends have prompted it to use derivatives this year to hedge risks.

Although Reuters’ calculations are not exhaustive, with some companies not disclosing their use of derivatives, it nonetheless shows a rising interest in hedging currency risks. Between 2012 and 2014, only about 30 companies each year announced hedging plans, but that number jumped to 68 last year.

“It’s more about mentality, than about competence,” said Oliver Rui, Professor of Finance and Accounting at business school CEIBS. Rui, who sits on the boards of several Chinese companies as an independent director, said most firms are not used to hedging because the yuan has only become more volatile

in recent years.

Corporate China’s still evolving risk-management culture, however, poses a dilemma for Beijing, which has been under international pressure to liberalise the yuan while also seeking to prevent destabilising currency swings.

Exporter complacency

China has seen a rise in foreign exchange transaction volumes between banks and clients, a barometer of companies’ hedging activities, which has tracked increasing volatility in the yuan over the past six months.

But that monthly turnover of around US$500 million is tiny for the world’s second biggest economy, which has an annual trade turnover of RMB3.7 trillion, as well as increasing offshore financing and investment activities. Several local companies have turned to overseas derivatives market, such as Hong Kong’s yuan futures, or non-deliverable forwards (NDFs).

A lack of participation by China’s state-owned enterprises (SOEs) in the derivatives market has also kept volumes low. Many such firms were barred from being too active in the onshore yuan market after incurring losses in overseas derivatives during the 2007-08 global financial crisis.

For export-oriented manufacturers such as Shenzhen Yuto Packaging

Technology Co., a strong yuan has meant weaker dollar income.

According to an estimate by brokerage Minsheng Securities, China’s listed manufacturers recorded currency losses totalling RMB8 billion (US$1.20 billion) during the first six months, equivalent to 1 per cent of their combined net profit. Nearly 1,400 listed firms in the sector said they suffered.

Shandong Laiwu Jinlei Wind Power Technology Co is another firm making its debut in the currency derivatives market. It last month announced plans to conduct hedging worth up to US$40 million for 2017.

Others, such as Kingclean Electric, have been stung by unhedged positions. The home appliance maker, dubbed “the King of Cleanliness”, booked a RMB62.9 million currency loss in the first half and as a result posted a meagre 2 per cent net profit gain despite a 37 per cent surge in sales.

Liu Zheng, an analyst at Zheshang Securities Co, pointed to Kingclean’s U.S. dollar cash pile, worth more than US$400 million at the end of June, which he says was unhedged. The company didn’t return emailed requests for comments.

“Apparently, the company was betting that yuan would depreciate further, following last year’s tumble,” Liu said. Reuters

advertisement

GDP

Beijing: No problem meeting 2017 growth target The World Bank last week raised its economic growth forecast for China for 2017 to 6.7 per cent from 6.5 per cent China will have no problem meeting its economic growth target of around 6.5 per cent this year, and may even beat it, the head of the Statistics Bureau said yesterday, confirming widespread market expectations.

Steps taken by the government to rein in the overheated property market have also been effective and will remain in place, Ning Jizhe told reporters in a briefing in Beijing.

Analysts have expected that fullyear growth would meet or exceed the government’s target after the world’s second-largest economy expanded by a stronger-than-expected 6.9 per cent in the first half, fuelled by heavy government infrastructure spending and a property boom.

If growth does beat last year’s 6.7 per cent - the lowest in 26 years - it would mark the first acceleration in the growth rate in seven years.

As fears of the economy suffering a hard landing have faded, policymakers have become readier to tackle mounting debt and push forward difficult structural reforms.

Ning’s comments came just a week before a five-yearly Communist Party Congress which will be closely watched for any leadership reshuffle and cues on broad policy directions.

While the economy could lose some momentum in coming months due to higher borrowing costs and property cooling measures, most analysts believe the slowdown will be moderate.

The World Bank last week raised its economic growth forecast for China for 2017 to 6.7 per cent from 6.5 per

cent. It also estimates growth will moderate at a slower pace to 6.4 per cent in 2018 compared to a previous forecast of 6.3 per cent.

Some critics have argued China should abandon its arbitrary annual growth target or lower it, to allow healthier and more sustainable economic development, and become less reliant on government stimulus.

China routinely sets its GDP target during a central government economic meeting towards the year-end and announces it at the country’s annual parliament meeting early in the next year.

Ning said survey-based unemployment in major cities was 4.83 per cent in September, the lowest since 2012.

Many analysts, however, say official job figures are an unreliable indicator of nationwide employment conditions. Reuters

Business Daily Wednesday, October 11 2017 9

Greater China M&A

In Brief

Buyers eye Sinopec’s Argentina oil assets in sale worth up to US$1 bln One of the sources said there could be more than 15 prospective suitors Julie Zhu and Guillermo Parra-Bernal

Advisers to China’s Sinopec have offered its oil assets in Argentina to about a dozen potential suitors, three sources familiar with the matter said, as losses and labour headaches prompt Asia’s largest refiner to pull out.

The Argentine oil and gas assets, mainly in the southern province of Santa Cruz, could be worth US$750 million to US$1 billion, one of the sources said.

That would be less than half the US$2.45 billion Sinopec paid in 2010 to buy the Argentine assets from U.S.-based Occidental Petroleum Corp, marking an aggressive drive to diversify its oil sources at the time.

Prospective buyers for the assets mainly large energy companies from the United States, Europe, Africa and Latin America -include Angola’s state oil company Sonangol and two Russian energy giants, including Rosneft, said two of the sources.

Mexico’s Vista Oil & Gas has also expressed an interest, according to a separate source.

One of the sources said there could be more than 15 prospective suitors.

Argentina’s Corporacion America,

which controls energy company Compania General de Combustibles (CGC), decided it was no longer interested after studying some of the assets in Santa Cruz, spokeswoman Carolina Barros told Reuters.

Sinopec is being advised by Scotia Waterous, a unit of Canada’s Bank of Nova Scotia, which focuses on energy deals, two of the sources said.

All the sources declined to be named as the sale plans are confidential.

Sinopec and Sonangol did not respond to requests for comment.

Asked about the sale and its interest, Rosneft said it was not able to confirm the information.

Vista, Scotia Waterous and Argentina’s energy ministry declined to comment.

Boom, bust

In 2010, when Sinopec bought the Argentine assets, China - the world’s No.2 oil consumer - was scouting for natural resources to feed its surging economy.

Worsening economic conditions and social unrest in Argentina, however, have “weighed” on the operation since then, Sinopec said in September last year.

Argentina’s president, Mauricio

Macri, has made attracting energy investment a priority since he took office in 2015. His government said last month it had brokered a deal to calm labour conflicts in Santa Cruz and lower costs.

Key Points Sinopec’s Argentine assets worth about US$750 mln-US$1 bln -source Sonangol, Rosneft among potential suitors -sources Could be tough sell given labour woes, declining output-sources Sinopec being advised by unit of Bank of Nova Scotia -sources But two sources said the Sinopec assets would be a tough sell regardless, given labour woes and declining oil output. Sinopec had already considered divesting the investment in 2015, sources told Reuters last year.

“It doesn’t have to be (fast), unless Sinopec is willing to lose a huge amount of money,” said one source, referring to Sinopec’s willingness to accept low bids.

Based on a US$60 per barrel crude price, Sinopec suffered losses of US$2.5 billion on oil projects in Argentina by the end of 2015, Chinese publication Caixin reported last year, citing an internal audit report.

“Golfo San Jorge, around where the Sinopec assets are located, is an old area,” said a different source familiar with the process.

“The (Santa Cruz) province recently auctioned off four areas, and three were won by locals - ENAP, CGC and YPF. It’s a tough sell, and soon there will be another offshore auction that might further reduce the attractiveness of Sinopec’s wells.” Reuters

Auto industry

Japanese carmakers enjoy cruise in Mainland fast lane Toyota’s sales in China grew 14.1 per cent in September from a year earlier to 118,900 vehicles Japan’s top carmakers are enjoying strong growth in China, the world’s top auto market, bucking concerns about a slowdown in the market after tax incentives were cut back this year.

Toyota Motor Corp and Honda Motor Co said yesterday vehicle sales in China grew close to 15 per cent in September, after strong sales in

Key Points Toyota Sept China sales +14.1 pct, Honda +15.5 pct Nissan saw sales rise 15.1 pct for the month World’s top auto market picking up speed in recent months August. Nissan Motor Co Ltd posted similar growth on Monday.

After a sluggish start to the year, China’s car market has shifted into a higher gear since mid-year, posting a third successive month of rising sales in August. Overall growth is expected to slow to 5 per cent from a double-digit rise in 2016.

Analysts said international carmakers were benefiting most from the uptick, even as some Chinese rivals saw sales growth slow and a diplomatic spat between Beijing and

Seoul hit South Korea’s Hyundai Motor Co and affiliate Kia Motors.

“After a good run in recent months, local Chinese brands are growing much slower now,” said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight.

“That’s why some good foreign (carmakers) are now seeing their sales grow by double-digits.”

Toyota’s sales in China grew 14.1 per cent in September from a year earlier to 118,900 vehicles, after a 13.2 per cent increase in August. It sold 960,400 vehicles in the first nine months of the year, up 7.9 per cent against 2016.

Honda’s sales in the market were up 15.5 per cent for the month, following a 20.6 per cent rise in August.

Its Jan-Sept sales totalled 1.03 million vehicles, a 17.7 per cent increase from the same period a year ago.

Honda, the smaller of the two automakers, has been outstripping Toyota in China so far this year, thanks to hot-selling models that include the redesigned Civic and its subcompact crossover SUVs. Toyota, Japan’s top automaker by volume, is still on target to sell more than 1.21 million vehicles this year in China up from the 1.2 million vehicles it sold in 2016. Reuters

Markets

Top anime streaming site is said to plan IPO in U.S. Bilibili, China’s top online platform for streaming Japanese animation, is planning a U.S. initial public offering that could raise at least US$200 million, according to people with knowledge of the matter. The website operator aims to list in New York as soon as next year, the people said, asking not to be identified because the information is private.

Bilibili hosts anime titles including “Boruto: Naruto Next Generations,” based on a sequel to the New York Times bestselling manga series about ninjas that teleport across dimensions.

Funding

Tujia raises US$300 mln Tujia.com, China’s biggest short-term property rental firm, said yesterday it had raised US$300 million from investors, valuing it at more than US$1.5 billion as it looks to tap growing demand from Chinese tourists for independent travel. The investment round was led by Chinese travel agent Ctrip. com International Ltd and All-Stars Investment, while China Renaissance’s New Economy Fund, Glade Brook Capital, and G Street Capital also participated. Tujia’s main rival in China is Airbnb, which is beefing up its presence and looking to lure in the country’s young millennials. Airbnb was valued at US$30 billion last year.

IPO

Micro-lender may spawn nation’s latest billionaire Surging valuations for Chinese fintech start-ups are about to turn micro-lending tycoon Min Luo into the country’s latest IPO billionaire. Luo, 34, founder and chief executive officer of online loan provider Qudian Inc., owns about a fifth of the company, which hopes to raise as much US$825 million in a U.S. initial public offering this month. The price range values the business at a minimum of US$6.3 billion based on the shares it will have outstanding after the offering, and gives Luo a net worth of at least US$1.2 billion, according to the Bloomberg Billionaires Index.

Stocks

Beijing is said to curb stock-market rally by selling banks Chinese state-backed funds intervened to limit gains in the nation’s stock market on Monday, part of the government’s effort to restrain market swings before a key leadership reshuffle this month, according to people familiar with the matter. The funds sold shares of largecap companies, including banks and China United Network Communications Ltd., said the people, who asked not to be identified because the information is private. Before Monday, the funds had been buying stocks to support the market after S&P Global Ratings cut China’s sovereign credit grade, the people said.

10 Business Daily Wednesday, October 11 2017

Greater China FX

Prospects for swap renewal with Korea look positive South Korea’s finance minister has publicly said the deal should be extended to cement existing financial safety nets Shin-hyung Lee and Cynthia Kim

T

he central banks of China and South Korea appear to be on track to extend a US$56 billion currency swap deal that expired yesterday, a senior South Korean source said, describing its prospects as “optimistic”.

South Korean and Chinese officials have been in talks to extend the currency swap deal at a time when Beijing is unofficially restricting trade and tourism with South Korea in retaliation against Seoul’s decision to deploy a U.S. anti-missile defence system.

The US$56 billion swap ensures both central banks have access to large amounts of each other’s currency should extra liquidity be needed at short notice.

Bank of Korea Governor Lee Ju-yeol remained cautious yesterday, and asked for patience as talks were still on-going.

“There is no outcome yet, and we have meetings even today,” Lee told reporters yesterday, when asked if the deal would be extended.

“As we talk, expiration isn’t all that important and negotiations are still taking place. It will be great if things can be concluded before expiration but that is not always the case,” Lee told reporters.

South Korea’s finance minister has

publicly said the deal should be extended to cement existing financial safety nets, but the ministry declined to comment yesterday.

South Korea’s decision to host the Terminal High Altitude Area Defense (THAAD)has drawn fierce criticism from China, which says the system’s powerful radar can probe deep into its territory.

China agreeing to extend the currency swap deal would indicate an uneven response to the THAAD,

and signal an easing of tensions between the two nations in economic terms, said Kim Doo-un, a foreign exchange analyst at Hana Financial Investment.

“Extending the deal could indicate that Beijing would still want to separate economics from politics,” Kim said.

“Even if the deal is extended, they are unlikely to make a huge public announcement ahead of the congress as policy matters are typically

in lock-down mode.”

China’s Communist Party is scheduled to hold its policy-setting five-yearly congress from October 18.

The People’s Bank of China was not immediately available for comment on the currency swap negotiations.

The US$56 billion agreement with China is South Korea’s biggest currency swap deal, accounting for about 45 per cent of its swap arrangements.

Reuters

Sharing economy

Bike-sharing scheme leader Ofo plans Paris debut Ofo will compete with Paris’ pioneering Velib bike-sharing scheme, which has inspired similar set-ups in cities worldwide Geert De Clercq

China’s bike-sharing scheme operator Ofo plans to launch its bicycles in Paris around year-end in a move to become a dominant player in Europe.

Ofo, which operates 10 million bikes in China, launched a fleet of 4,000 in Milan last month and has begun operations in Vienna, Valencia and the London borough of Hackney.

Key Points Ofo global leader with 10 millions dockless bikes Ofo aims to start launch in Paris round year-end Start-up Gobee-bike debuted Paris scheme on Monday “We are ready to launch in Paris, we want to start by year-end or early next year, maybe more quickly if possible,” Ofo France general manager Laurent Kennel told Reuters.

Ofo is also in talks with other French and European cities about rolling out its dockless bicycles, which can be

parked anywhere and unlocked with a smartphone app.

Ofo will compete with Paris’ pioneering Velib bike-sharing scheme, which has inspired similar set-ups in cities worldwide.

Unlike Ofo’s bikes, Velib’s 24,000 bicycles must be parked in 1,800 docking stations spaced 300 metres from one another.

“Our service is complementary to the existing subsidised public offering,” Kennel said.

Asked about problems in China with parking too many bikes in public areas, Kennel said Ofo is talking to authorities about optimising the number of bikes.

The 16 million bicycles provided by Ofo, Mobike and other Chinese operators have caused chaos on China’s pavements, with thousands dumped in already crowded public spaces.

Some Chinese cities have banned further deployments.

On Monday, one of Ofo’s smaller competitors -- Hong Kong start-up Gobee.bike -- launched a few dozen of its green dockless bikes in the Paris city centre.

Founded by French entrepreneur

Raphael Cohen, Gobee.bike plans to scale up to several thousand in coming months. Like Ofo’s bikes, Gobee’s are equipped with a GPS system and traceable with a phone app.

“I am very impressed with the innovation in bike schemes in China and I want to bring this to Europe, I believe there is a huge potential here,” said Cohen.

Unlike Velib, where the first half

hour of cycling is free, Gobee charges 50 cents per half hour, but hopes that the ability to park the bikes anywhere will make it competitive.

Ofo and Gobee.bike are entering the Paris market as Velib operator JCDecaux is replaced by the Smoovengo consortium, which won a 600-700 million euro contract to run the Paris city bike sharing system from 2018 to 2032. Reuters

Business Daily Wednesday, October 11 2017 11

Asia Election

Japan’s Abe takes aim at new parties in opening shots of campaign The LDP-led coalition had a two-thirds “super majority” of seats in parliament’s lower house before dissolution Tim Kelly and Kiyoshi Takenaka

E

lection c a m paigning began in earnest in Japan y e st e r d a y w i t h conservative Prime Minister Shinzo Abe aiming to shake off suspected cronyism scandals and repulse the challenge from an upstart new party to extend his nearfive year hold on power.

The Oct. 22 election pits Abe’s Liberal Democratic Party-led coalition against the less than one-monthold Party of Hope headed by popular Tokyo Governor Yuriko Koike, a former LDP lawmaker often floated as a possible first female Japanese premier.

Calling for a snap election, Abe had said he needed to renew his mandate to cope with a “national crisis” stemming from rising regional tensions over North Korea’s nuclear and missile programmes and the demographic timebomb of Japan’s fast-ageing, shrinking population.

Opposition disarray and an uptick in his own ratings, which had rebounded after sinking due to a series of scandals, had encouraged the 63-year-old Abe to take the plunge.

But, the sudden emergence

of Koike’s party, which also appeals to conservative voters, could upset Abe’s calculation. The main opposition Democratic Party imploded last month and a big chunk of its candidates are running on the Party of Hope ticket.

Others created a small, liberal party.

In his first official campaign speech, Abe attacked the opposition for creating new parties and wooing voters with populist slogans.

“What creates our future is not a boom or slogan. It is policy that creates our future,” Abe said in Fukushima, northeast Japan. “We just cannot afford to lose.”

The LDP-led coalition had a two-thirds “super majority” of seats in parliament’s lower house before dissolution, so losing its simple majority would be a major upset.

Recent opinion polls show the LDP in the lead and some analysts think Abe could even repeat his past landslide victories, since Koike appears to be losing momentum.

A soggy performance for the LDP, however, could prompt calls from inside the party to replace Abe or deny him a third term as LDP leader when his tenure ends in September 2018.

If he did secure that third

Japanese Prime Minister Shinzo Abe exchanges high-five with voters after kicking off his election campaign event in Fukushima yesterday. Source: Lusa

term, Abe would be in a strong position to become Japan’s longest-serving premier.

Shortage of hope?

Koike, who defied the LDP last year to run successfully for governor, calls her fledgling party a “reformist, conservative” group and is pledging to break free from the fetters of vested interests -- an often popular campaign slogan in Japan.

“We have a surplus of things in this country, but what we don’t have is hope for the future,” said Koike, 65, kicking off her campaign in Tokyo.

She has declined to say whom her party would support for premier when parliament convenes after the election, leaving the door open to a variety of possible tie-ups including with Abe’s LDP. The Party of Hope echoes

Abe’s LDP on security and diplomacy - it backs tough sanctions on North Korea and controversial security legislation enacted in 2015 to expand the military’s role overseas.

Koike also agrees with Abe that the post-war, U.S.-drafted, pacifist constitution should be amended, though they are not necessarily agreed on what changes are needed.

On economic policies, Koike’s party has sought to differentiate itself by calling for an end to nuclear power by 2030 and a freeze on a sales tax hike planned for 2019.

Abe’s government wants to keep nuclear power as a key part of Japan’s energy mix and raise the sales tax but spend more of the revenues on education and child care.

A centre-left Constitutional Democratic Party of Japan, formed from the rump of the failed Democratic Party, aims to get support from voters satisfied with neither conservative option.

Abe’s LDP had 288 seats in the lower house before it was dissolved for the election, while its junior partner the Komeito had 35. The total number of seats has been cut to 465 from 475. Reuters

Gold

Australian state kills plan to hike gold mining tax Miners in the world’s second-biggest gold mining nation pumped money into large advertising campaigns against the plan James Regan

Legislators in an Australian state yesterday blocked a proposal to raise hundreds of million of dollars in additional taxes on gold mining after the industry warned the step would spark job losses.

The Labor government in the state of Western Australia wanted to lift royalty rates on gold sales to 3.75 per cent from 2.5 per cent to raise nearly A$392 million (US$305 million) over four years and help repair a budget weighed down by a record deficit.

But the bill was effectively killed after Liberal Party members of parliament voted to block the measure in the state’s upper house.

“The notion that this increase would not have a negative impact on the sector was nonsense,” said Ian Kemish, a spokesman for Newcrest Mining Ltd, which employs 1,550 workers at its Telfer mine in the state.

Miners in the world’s second-biggest gold mining nation pumped money into large advertising campaigns

against the plan, similar to strategies used against past mining taxes. The Chamber of Minerals and Energy released analysis last week claiming the increase threatened up to 3,000 jobs.

Proponents of the increase countered that mining companies were

highly profitable based on today’s gold prices of around A$1,650 per ounce.

The state last year accounted for about 80 per cent of the 287 tonnes of gold mined in Australia, receiving A$250 million in royalty payments.

After the global financial crisis of 2008, a mining frenzy spurred by demand for Australian ores had miners rushing to fill orders. As companies spent billions on new mines and transport infrastructure, politicians took to calling the state the economic engine of the nation.

“The notion that this increase would not have a negative impact on the sector was nonsense” Ian Kemish, a spokesman for Newcrest Mining But cooling growth in China helped turn the boom to bust, leading to massive layoffs and a dramatic drop in state revenue. Reuters

12 Business Daily Wednesday, October 11 2017

Asia Politics

Thai junta sets firm date for election after many false starts The government has faced increasing pressure to lift a ban on political activities levied soon after the coup Aukkarapon Niyomyat

T

hailand will hold a general election in November 2018, P r i m e M i n i st e r Prayuth Chan-ocha said yesterday, the most precise date he has given yet for the vote since taking power in a 2014 military coup.

Prayuth, head of the ruling junta, said the exact date would be announced in June 2018. The junta has announced election dates at least two times in the past, only to push them back later, citing concerns such as changes to the constitution and security issues.

“Around June we will announce the date for the next election,” Prayuth told reporters at Bangkok’s Government House.

“In November we will have an election.”

Former army chief Prayuth, who led the May 2014 coup widely criticized by Western nations, said it was necessary to end a decade of political turbulence and root out corruption.

In April, King Maha Vajiralongkorn signed into law a military-backed constitution

that kickstarts the process for an election the junta has promised will restore democracy.

The new charter provides for a proportional voting system likely to reduce the influence of major political parties, which critics say aims to strengthen the role of the military.

Analysts expect political activities to resume slowly after the funeral of King Bhumibol Adulyadej this month ends a year of mourning for a monarch many Thais saw as a father figure.

“Prayuth wants to delay the election but he knows that after the king’s cremation, there will be pressure for an election,” said Kan Yuenyong of the Siam Intelligence Unit think tank.

“This announcement for the election in November next year will act to reduce that pressure, because if not, there could be chances for protests,” he told Reuters.

Good for country

The government has faced increasing pressure to lift a ban on political activities levied soon after the coup.

Prayuth will consider

Prime Minister Prayuth Chan-ocha (C)

lifting the ban “at an appropriate time”, he told reporters, without giving details.

The junta had initially promised an election in 2015, after seizing power from the government of Prime Minister Yingluck Shinawatra, sister of Thaksin Shinawatra.

Thaksin’s governments, or those backed by him, have won every election since 2001, partly because of their overwhelming popularity with politically-powerful

rural voters.

But the Shinawatras made enemies, including those among the military-backed establishment who accused Thaksin and his allies of corruption.

Thaksin was ousted in 2006 and lives abroad in self-imposed exile. Yingluck followed suit in August, when she fled Thailand ahead of the verdict in a criminal case.

Some politicians expressed scepticism over the election

date.

“It isn’t really believable, because they have changed it many times,” said Chaturon Chaisang, a member of Thaksin’s Puea Thai Party.

Ong-art Klampaiboon, deputy leader of the Democrat Party, Puea Thai’s biggest competitor, welcomed the news.

“The election date creates clarity,” Ong-art said. “This should be good for the country and the people.” Reuters

Monetary meeting

Singapore c.bank expected to keep policy unchanged in October Core inflation slowed to a five-month low of 1.4 per cent year-on-year in August Masayuki Kitano

Singapore’s central bank is expected to keep monetary policy unchanged at its semi-annual review this week as inflation remains subdued, but improving economic momentum could open the way for a tightening in 2018.

Twenty-four of 25 analysts in a Reuters survey conducted between Sept. 25 to Oct. 10, predicted the Monetary Authority of Singapore would keep its exchange-rate based policy on hold at its review, due on Oct. 13 at 8 a.m. (0000 GMT). One analyst expects the MAS to tighten.

Thirteen analysts expect the MAS to tighten in 2018, with most of these expecting a move as early as April.

The results include eight new responses received after an earlier Reuters poll published on Sept. 27.

The government’s advanced estimate of third-quarter gross domestic product, due at the same time, is expected to show that GDP expanded 3.2 per cent from the previous three months on an annualised basis, according to the median forecast in a Reuters survey. From a year earlier, GDP likely grew 3.8 per cent.

That would put average year-onyear growth for the first three quarters at nearly 3.1 per cent, slightly above the government’s growth forecast range of 2.0 to 3.0 per cent for all of 2017.

Business Daily is a product of De Ficção – Multimedia Projects

Although Singapore’s trade-reliant economy has gained a boost this year from an improvement in global demand for electronics products and components, most economists expect the MAS to stand pat this week, given the lack of strong inflationary pressures.

“The price pressures are still quite subdued, inflation is picking up only gradually and hence the policy needs to be accommodative for a bit longer from an inflation perspective,” said Mohamed Faiz Nagutha, ASEAN economist at Bank of America Merrill Lynch in Hong Kong.

Slack remains in the labour market and private consumption has been weak, he added.

Core inflation slowed to a fivemonth low of 1.4 per cent year-onyear in August. In the second quarter private consumption expenditure rose just 0.1 per cent from a year earlier.

Chua Hak Bin, regional economist at Maybank Kim Eng, the only analyst in the Reuters poll who expects the MAS to tighten this week, cited the pick-up in economic growth.

“The full-year (growth) may well exceed 3.0 per cent... So growth has clearly surprised on the upside,” Chua said.

The MAS could take a forward-looking view on inflation, and tighten by shifting to a slight appreciation bias for the Singapore dollar’s policy band,

he added.

The MAS manages monetary policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within in an undisclosed policy band based on its nominal effective exchange rate (NEER).

Key Points Singapore c.bank decision, Q3 GDP data due on Oct 13 24 of 25 analysts see MAS keeping policy steady in Oct 1 analyst expects MAS to tighten

The central bank kept policy unchanged at its last review in April.

It kept the rate of appreciation of the Singapore dollar NEER’s policy band at zero per cent, and made no changes to the mid-point and the width of the policy band.

The MAS also reiterated the forward guidance it introduced in October 2016, saying a “neutral” policy stance is appropriate for an “extended period”.

Eleven analysts said they expect the MAS to remove or tweak its forward guidance, opening the way for future policy tightening. Nine others predicted no change to that language.

Reuters

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Wednesday, October 11 2017 13

Asia Politics

In Brief

Australian High Court sits to resolve lawmakers’ citizenship crisis Turnbull’s unpopular centre-right government holds just a one-seat majority in parliament, meaning its future could rest on the outcome of the citizenship crisis Colin Packham

Australia’s High Court began a threeday hearing yesterday to determine the eligibility of seven lawmakers who may hold dual citizenship, a case that could determine whether the government is able to maintain its razor-thin majority.

Australia’s parliament was rocked by revelations in August that the seven politicians, including the deputy prime minister and two other Cabinet members in Prime Minister Malcolm Turnbull’s coalition government, are dual citizens.

That means they are potentially ineligible to hold elected office under Australia’s constitution.

Turnbull’s unpopular centre-right government holds just a one-seat majority in parliament, meaning its future could rest on the outcome of the citizenship crisis.

The seven lawmakers accept they were dual nationals at the time of their election last year but the government argues that five of them, including all three Cabinet members, should be cleared because they were unaware that they had contravened the constitutional requirement at the time.

Australian Solicitor-General Stephen Donaghue urged the seven justices of the High Court not to interpret the constitution literally.

Donaghue said instead the constitution should only disqualify politicians if they had prior knowledge that they may be dual citizens but did not take

“reasonable steps” to investigate and renounce their second citizenship where needed.

A ruling could come as soon as Thursday.

Should the High Court rule Deputy Prime Minister Barnaby Joyce, the sole lower house lawmaker caught up in the crisis, is ineligible, Turnbull will then need to win the support of one of three independent lawmakers to keep his minority government.

Joyce acquired dual citizenship from his New Zealand-born father.

He said in a submission to the court he believed that his father had renounced his New Zealand citizenship before he was born.

He did not know until he was 10

that his father was still a New Zealand citizen, Joyce said.

Turnbull’s government is already in a minority in the upper house Senate and, should the High Court disqualify all seven lawmakers, he will face a government reshuffle after losing two more Cabinet members who are senators.

Support for Turnbull continues to languish near a six-month low, but political analysts believe he might receive a boost if he is able to win passage of a same-sex marriage bill.

Turnbull’s government won High Court approval last month to stage a non-binding postal survey on the issue, which is widely popular among Australians. Results of that poll will be announced on Nov. 15. Reuters

Australian Prime Minister Malcolm Turnbull

Governor Kuroda pledges to stick with quantitative easing Tankan survey which showed confidence among big manufacturers rose to the highest in a decade The Bank of Japan (BOJ) raised its assessment of four of the country’s regional economies due to strong exports, consumer spending and construction, an encouraging sign that the broader economy can continue to grow at a healthy pace.

BOJ Governor Haruhiko Kuroda yesterday reiterated the central bank’s resolve to maintain its massive stimulus programme until inflation moved sustainably above its 2 per cent price target.

He also said inflation was likely to gradually accelerate towards 2 per cent due to improvements in the output gap and inflation expectations.

“Japan’s economy is expected to continue expanding moderately in

the future,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.

In a quarterly report on regional areas of Japan, the BOJ revised up its assessment for four of nine regions and maintained its upbeat assessment for the other five.

The report upgraded three regional economies to “expanding moderately” or “moving toward a moderate expansion”, their most bullish assessment in 10 years.

One region was also upgraded to “expanding moderately” for the first time since the BOJ began regional surveys in 2005.

Yesterday’s report follows the BOJ’s tankan survey which showed confidence among big manufacturers rose to the highest in a decade, as a

Bank of Japan Governor Haruhiko Kuroda

Philippine lawmakers reject Duterte pick Philippine lawmakers rejected President Rodrigo Duterte’s choice of health secretary yesterday, making her the fifth cabinet member to have been turned down since Duterte came to power. No reason was given for the rejection of Paulyn Ubial, who has been in public office for 27 years.

In the Philippines, all cabinet ministers must be approved by the Commission on Appointments and hearings can take place long after they start work. Senator Gregorio Honasan, chairman of the commission’s health committee, said it had decided to “withhold its consent” to the appointment of Ubial.

He did not elaborate.

Infrastructure

Indonesia aims to finish phase in key rail line by 2019 Indonesia aims to finish the first phase of construction of a multi-billion dollar rail project linking the capital Jakarta to the country’s second-biggest city of Surabaya by 2019, transport minister Budi Karya Sumadi said. In a message on his Twitter account, Sumadi said the government wanted construction of the “semi-fast” rail link connecting Jakarta to Semarang, the capital of Central Java, to be completed by 2019 and track work on to Surabaya to be finished by 2021. Indonesia and Japan agreed to initial discussions on the project in January during Japanese Prime Minister Shinzo Abe’s visit to Jakarta.

Bank of Japan

Stanley White

Cabinet

weak yen and robust global demand add momentum to the economic recovery.

The BOJ still faces a dilemma, because inflation remains weak even though the labour market, capital expenditure and exports are all doing well.

Key Points C.bank gets more upbeat on four of nine regional economies Maintains bullish view for remaining five regions BOJ to maintain ultra-easy policy - Gov Kuroda In August, Japan core consumer prices rose 0.7 per cent from a year earlier, which is still very distant from the central bank’s 2 per cent inflation target.

Kimihiro Eto, the BOJ’s Osaka branch manager, offered an explanation of why inflation remains so low.

“We see rising spending on big-ticket items due to rising wages and a tight labour market,” he said.

“At the same time, households are really hunting for bargains on daily goods, suggesting some concerns about the future. This behaviour is hard to change.”

After three years of heavy asset buying failed to drive up inflation, the BOJ revamped its policy framework last year to one capping long-term interest rates, instead of targeting the pace of money printing. Reuters

Technology

Japan launches fourth satellite for high-precision GPS Japan yesterday launched a fourth satellite for a new high-precision global positioning system (GPS) it hopes will encourage new businesses and help spur economic growth. The fourth Michibiki satellite lifted off from Japan’s southern Tanegashima space port aboard an H-2A rocket taking just over 28 minutes to reach orbit, the Japan Aerospace Exploration Agency said.

Having four satellites that loop over Japan and Australia in a figure of eight orbit will allow for uninterrupted coverage and puts engineers on course to switch the system on in April.

Cholera outbreak

Vaccination begins in Bangladesh The World Health Organization (WHO) began distributing 900,000 doses of cholera vaccine yesterday in Bangladesh’s camps for Rohingya refugees fleeing from Myanmar, as authorities rush to prevent a major outbreak of the deadly disease. More than 10,000 cases of diarrhoea have been reported in the past week alone, the WHO said.

Doctors in two clinics have told Reuters that there have been several cases of patients with the symptoms of cholera, a virulent diarrhoea that kills within 36 hours if not treated.

14 Business Daily Wednesday, October 11 2017

International In Brief Exchanges

Russia to ban websites offering crypto-currencies Russia will block access to websites of exchanges that offer crypto-currencies such as Bitcoin, Russian Central Bank First Deputy Governor Sergei Shvetsov said yesterday. He called them “dubious”. Russian financial authorities initially treated any sort of money issued by non-state approved institutions as illegal, saying they could be used to launder money. Later the authorities accepted the globally booming market of crypto-currencies but want to either control the turnover or to limit access to the market. “We cannot stand apart. We cannot give direct and easy access to such dubious instruments for retail (investors),” Shvetsov said, referring to households.

Diplomacy

Turkish PM says visa dispute with U.S. must be fixed quickly The United States has punished Turkish and U.S. citizens alike by suspending visa services, Turkey’s prime minister saidyesterday, accusing Washington of taking an emotional and inappropriate decision against an ally. Binali Yildirim said the dispute should be resolved as soon as possible, but defended Turkey’s arrest of a U.S. consulate employee last week which prompted the U.S. move, and its reciprocal visa suspension within hours of the U.S. move. “Turkey is not a tribal state, we will retaliate against what has been done in kind,” Yildirim told ruling AK Party parliamentarians.

Oil industry

OPEC Secretary General urges U.S. shale oil producers to help cap global supply While some producers have cut supplies this year in order to prop up prices, U.S. production has soared by almost 10 per cent this year

O

PEC’s Secretary General Mohammed Barkindo yesterday called on U.S. shale oil producers to help curtail global oil supply, warning extraordinary measures might be needed next year to sustain the rebalanced market in the medium to long term.

“We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle,” said Barkindo.

The comments by the Organization of the Petroleum Exporting Countries official came during a speech delivered at the India Energy Forum organized by CERAWeek in New Delhi.

“At the moment we (OPEC and independent U.S. producers) both agreed that we have a shared responsibility in maintaining stability because they are also not insulated from the impact of this downturn,” Barkindo said, referring to a slide in oil prices that spurred OPEC to agree production cuts late last year.

“The call by independents themselves (is) that we need to continue

this interaction,” he said.

While OPEC and some other producers, including Russia have cut supplies this year in order to prop up prices, U.S. production has soared by almost 10 per cent this year, driven largely by shale drillers. Barkindo said he hoped that new producers, not just U.S. shale drillers, would join production cuts.

“They are also not insulated from the impact of this downturn” Mohammed Barkindo, OPEC’s Secretary General On Monday, Saudi Arabia cut crude oil allocations for November by 560,000 barrels per day (bpd), in line with the kingdom’s commitment to the supply reduction pact.

“Demand-supply is returning to rebalance through massive destocking that we have been witnessing of stocks in OECD across regions in a very massive way,” Barkindo said

later, speaking to reporters on the side-lines of the conference.

“In the past four months alone, we have seen destocking to the tune of 130 million bpd,” he said.

The aim of the OPEC-led cut is to trim the level of oil in OECD industrialized countries compared with the five-year supply average. Barkindo said the stock overhang to the fiveyear average stood at 171 million barrels in August, against 338 million at the start of the year.

“The speed and pace (of destocking) has accelerated as a result of anticipated and projected demand growth in the second half of 2017 to the tune of 2 million bpd. We are witnessing a fast return to a balanced market,” Barkindo said.

Still, on Sunday Barkindo said OPEC and other oil producers might need to take “some extraordinary measures” next year to rebalance the oil market.

World oil demand growth in 2017 is expected at 1.45 million barrels per day (BPD) and it should stay around 1.4 million bpd in 2018, Barkindo said. He said India’s share of global oil demand is expected to rise to over 9 per cent by 2040, up from 4 per cent now. Reuters

Survey

One in three Swiss uncomfortable with outsiders More than one in three Swiss feel uncomfortable around people perceived to be “different” because of their nationality, religion, skin colour or other factors, a government survey found. The poll released yesterday sought for the first time to gauge how people coexist in a country of 8.4 million residents, a quarter of them foreigners. Thirty-six per cent said they felt uneasy in the presence of people they found outside the norm, particularly those who spoke a foreign language, or moved around.

Sixteen per cent of respondents went further and said they felt threatened by foreigners.

Portugal

PSD leadership election set for January, party congress for February The National Council of Portugal’s main opposition, the centre-right Social Democratic Party (PSD), has approved moves to hold elections for a new leader in January, followed by a party congress to be held in February. Party members are to choose a replacement for Pedro Passos Coelho, the former prime minister who announced last week that he would not be standing again, following poor local election results on 1 October, on 13 January. The congress is then to take place from 16 to 18 February. The announcement was made after a meeting of the National Council late on Monday night.

Financial system

EU parliament head challenges ECB over bad loan guidelines The European parliament does not have a role in banking supervision decisions, although it can ask the ECB for information Silvia Aloisi

The head of the European parliament has challenged the European Central Bank over how new guidelines for bank bad loans are being set, escalating a row between Italy and the ECB over the proposed measures.

The ECB last week issued new proposals that will force banks from 2018 to set aside more cash against newly classified bad loans and said it may also present additional measures to tackle the sector’s huge stock of bad debts.

Italy - whose banks hold nearly 30 per cent of the bloc’s 915 billion euros (US$1.08 trillion) in bad loans - has reacted angrily to the proposals, asking the ECB to soften them following a public consultation that runs until Dec. 8. Italian bank shares fell for a fifth straight day yesterday following a string of analyst reports warning the country’s lenders would be hit by the new measures.

EU parliament speaker Antonio Tajani, an Italian national, said in a letter to ECB President Mario Draghi, also Italian, that he was “deeply concerned” about how the new policies were being set.

Tajani urged Draghi to involve the European parliament in the process to avert an institutional clash.

“I seriously wonder whether specific additional obligations... can be imposed on supervised entities without appropriately involving the co-legislators in the decisionmaking process” Antonio Tajani, EU parliament speaker “I seriously wonder whether specific additional obligations... can be imposed on supervised entities without appropriately involving the co-legislators in the decision-making

process,” Tajani said in the letter, seen by Reuters and reprinted in the Italian press.

“I would urge you to take all steps in order to ensure that parliament’s prerogatives as co-legislator are duly respected, so as to avoid an inter-institutional dispute about this issue.”

The ECB declined to comment.

The letter is an unusual challenge to the ECB by a mainstream European lawmaker such as Tajani, an ally of former prime minister Silvio Berlusconi who was elected president of the European parliament in January.

The European parliament does not have a role in banking supervision decisions, although it can ask the ECB for information.

The ECB’s banking supervisory functions are legally separated from monetary policy and are carried out by the Single Supervisory Mechanism (SSM), chaired by Daniele Nouy.

Draghi, who like Nouy often appears before the European Parliament, regularly invokes the separation principle when asked about SSM matters.

Draghi tends to reply to letters from European lawmakers within days and his responses are published by the ECB. Reuters

Business Daily Wednesday, October 11 2017 15

Opinion Business Wires

Taipei Times Far Eastern International Bank could be fined between NT$2 million and NT$10 million (US$65,842 and US$329,207) if a hacking incident at the lender was found to be a result of lax internal controls, the Financial Supervisory Commission said. The company is expected to submit a full report on the incident to the commission before the end of this week.

It has also been ordered to process large transactions manually until it has shored up its information security measures.

A preliminary investigation by the commission’s Department of Information Management suggests that the malware which facilitated the cyberheist had infiltrated Far Eastern Bank’s systems when one of its employees opened an infected e-mail.

Straits Times Resale prices of non-landed private homes (in Singapore) inched up 0.1 per cent in September compared with August, flash estimates from SRX Property yesterday show. There were also fewer resale transactions in September, when the property market might have felt the Hungry Ghost effect.

SRX Property also revised up its resale price increase for August to 0.9 per cent from its initial estimate of 0.7 per cent. Private resale prices have been on recovery path since November last year, albeit a more muted one than for new private homes, collective or government land sales.

Don’t expect China’s new leaders to change Christopher Balding a Bloomberg View columnist

F Viet Nam News Speaking at a meeting in HCM City on Monday to introduce the 2018 Shop & Store Vietnam Expo, Suttisak Wilanan, deputy managing director of Reed Tradex, said many franchises in the food, education and other sectors are being established in Việt Nam and the entry of more new brands is imminent. “The spending habit of Vietnamese consumers is now moving towards modern retail and their demand is becoming more individualised,” he said. So that provides an opportunity for global franchises, he said. Việt Nam’s franchise market has been ranked eighth by the International Franchise Association.

Inquirer.net The Bureau of Internal Revenue’s collections jumped 11 percent to P1.3 trillion as of end-September, but the country’s biggest tax-collection agency still missed its nine-month goal. The latest data from the Department of Finance showed that the BIR’s collections from January to September rose from P1.18 trillion a year ago. The total amount collected during the first nine months, however, fell below the P1.35-trillion target for the period. As of September, collections from large taxpayers reached P810.1 billion while those from small taxpayers amounted to P464.6 billion.

or all the mystery surrounding who will rise and fall at next week’s big leadership conclave in China, only one question really matters to investors: Will President Xi Jinping, having side-lined any obvious opposition, attack head-on the enormous imbalances and risks building inside the Chinese economy?

Optimists argue that he will. The Economist Intelligence Unit recently wrote, “Xi will find his ability to implement policy substantially reinforced by newly strengthened majorities. After the Party congress, we believe that Mr. Xi will have even more room to pursue a deleveraging agenda.” By this logic, Xi recognizes that the explosion of debt in China following the global financial crisis in 2008 poses an almost existential threat and has only been waiting to clear away internal resistance before moving boldly to address it.

Having now amassed all the levers of power necessary to ensure success, he is sure to prioritize economic and financial reform.

This logic is curious, however.

It implies that Xi -- already the most powerful Chinese leader since Deng Xiaoping and a man who has swept away thousands of corrupt cadres, imposed far-reaching reforms on the People’s Liberation Army and tightened the Party’s control over virtually all information in China -- has simultaneously been powerless to execute basic economic reforms. The European Chamber of Commerce in Beijing summed up the doubts of many recently when they complained of “promise fatigue.” It seems unlikely that a few changes in the senior Politburo will suddenly unleash capabilities that Xi didn’t possess previously.

We now have five years of data on Xi’s policies and predilections, and very little of it suggests he is deeply invested in a pro-market, reformist agenda.

Instead, his economic policy has throughout been marked by a short-term focus on propping up growth, with frequent opportunistic reversals when reforms have gone ahead. There’s been much talk about how determined the government is to maintain stability in the run-up to this month’s congress, when China appoints its new leadership for the next five years. In fact, that same impulse has driven most of the government’s decisions ever since Xi took power in 2012.

Chinese policy makers, for instance, have for years talked about restraining debt growth. Yet despite regular exhortations about the need for deleveraging, the hard realities of sustaining 10 per cent nominal growth and real estate prices have dissuaded the government from clamping down too hard. Outstanding mortgage loans are up 31 per

“

cent through June, with medium- and long-term loans to households continuing to rise 2 per cent a month. Credit is still growing rapidly; by the end of this year, the ratio of total social financing to nominal GDP is expected to have risen from 169 per cent in 2012 to 204 per cent.

Officials urged Chinese companies to invest overseas in order to gain expertise and improve efficiency -- until they saw the effect of all that outbound investment on the yuan. A little more than a year ago, the government began cracking down on outflows, effectively killing hopes of that the currency might be liberalized. This shortsighted decision may have bolstered the yuan’s value and halted the drain on China’s foreignexchange reserves. But it comes at the expense of the longer-term goal of promoting the yuan as a global currency.

Plans to implement supplyside reforms, while sound in theory, have suffered from a failure in execution. National operating rates of steel mills in September 2017 averaged 5 per cent less than September 2015, even though year-todate steel materials output is flat, implying net capacity continues to rise significantly.

Fixed-asset investment levels in steel remain high, while down from peaks, meaning more capacity is being added and plant utilization is shrinking.

Xi doesn’t seem to view China’s economic problems as so dire that they outweigh the need to promote growth, especially not if they can be managed with constant tweaks.

Consequently, economic policy seems likely to continue to focus on controlling rolling asset bubbles, threats to growth and currency problems while avoiding tackling systemic issues.

A go-slow approach, however, can’t keep up with fast-growing risks. New total social financing through August is rising at nearly twice the rate of 2016 and total debt outstanding is growing slightly faster. New capacity in heavy industry continues to far outpace capacity reductions, exacerbating oversupply. Real estate and property development loans are up an eye-watering 24 per cent and 18 per cent respectively.

Leadership turnovers in every country almost always bring optimism about the direction of economic policy. Prior to Xi’s ascension in late 2012, too, analysts focused on his supposedly pro-market and debt fighting credentials; today, observers in India and Japan confidently predict that their own leaders will double down on bigbang structural reforms once they win re-election.

This is an understandable reaction. It shouldn’t overwhelm a sober assessment of the evidence.

We now have five years of data on Xi’s policies and predilections, and very little of it suggests he is deeply invested in a pro-market, reformist agenda

”

Bloomberg View

16 Business Daily Wednesday, October 11 2017

Closing Korean crisis

Trump may visit demilitarized zone during trip to South Korea

area, any visit to the truce village of Panmunjom and an observation post in the DMZ would take place amid escalating tensions on the Korean U.S. President Donald Trump may travel to the demilitarized zone separating the two Koreas as Peninsula. part of his first visit to South Korea in November, Trump tweeted on Sunday that only “one thing would work” to stop Kim Jong Un’s regime from Yonhap News reported yesterday, citing an further developing a nuclear arsenal aimed at unidentified military official. hitting the U.S. mainland. While he didn’t provide Trump is expected to send a “significant further explanation, it left observers speculating message” to North Korea either verbally or “kinetically” during the trip, Yonhap said, without that it might be a military choice. He’s also played down hopes for direct talks between elaborating on what that may mean. the U.S. and North Korea as touted by his own While Trump would be following his Secretary of State Rex Tillerson. Bloomberg News predecessors by visiting the heavily fortified

South Korean side of the shared frontier

Brexit

EU lawmakers give tentative nod to clearing law that could clobber Britain The European Parliament and EU states have final say on the reform Huw Jones

E

uropean Union lawmakers yesterday gave broad support to a law that could end the City of London’s global dominance in clearing euro-denominated financial contracts after Brexit.

The plan has raised hackles in Britain, where it threatens both job losses and tax revenues.

The draft EU law proposes that a foreign clearing house -- which stands between two sides of a transaction to ensure its smooth completion -- must be subject to more intense supervision by the bloc’s regulators if it wants to serve customers in the EU. But if a clearing house is systemically important to the euro zone, then euro-denominated business with EU based customers must move to the bloc.

The draft law is anathema to Britain, which voted to leave the EU in a referendum last year.

It is home to LCH, an arm of the London Stock Exchange that clears most euro-denominated swaps in Europe. Financial services represent Britain’s biggest tax earning sector and the LSE has warned that

thousands of jobs could leave the UK if euro clearing was forced out.

In the first debate in the European Parliament yesterday, lawmakers from the two biggest parties, the centre right European People’s Party and the centre-left Progressive Alliance of Socialists and Democrats, gave broad backing to the draft law, but called for some changes.

“We have to do everything to avoid potential inconsistency in decisionmaking...

We must not politicise the whole process” Danuta Huebner, Polish centre-right MEP “It’s a good proposal from the European Commission,” Polish centre-right MEP Danuta Huebner

told parliament’s economic affairs committee.

“In principle, I support the proposal, which I find necessary,” added Roberto Gualtieri, an Italian centre-left lawmaker who chairs the committee.

The European Parliament and EU states have final say on the reform, with changes expected during the approval process.

No timetable has been agreed for approving the law and, separately, there has been scant agreement on any new relationship between the EU and Britain.

That means LCH’s European customers don’t know at the moment if they can continue using the London clearer after Brexit.

Exploit this uncertainty, Frankfurt-based Eurex unveiled a “Brexit-proof” package of sweeteners on Monday to woo LCH customers.

Brexit protectionism

Huebner said parts of the draft law were too complex, creating uncertainty over how exactly EU regulators and the European Central Bank would decide when euro clearing conducted outside the bloc must move to the EU. “We have to do everything to

avoid potential inconsistency in decision-making,” Huebner said.

“We must not politicise the whole process.”

Gualtieri said there was a need to “upgrade” EU supervision of clearing, but lawmakers should be “very cautious, reflective and in a listening mood” given the potential consequences.

Others said there was need to avoid protectionism or using clearing as a stick to beat Britain given that the UK was already “fighting with itself”.

Kay Swinburne, a British centre-right lawmaker, a lone voice in outright opposition, said a regional restriction on a global currency is the wrong approach.

“There is a reason why we have done so much work at the global level, and I really hope that we are not going to throw all of that away to have some protectionism with regards to a Brexit decision,” Swinburne added.

Banks and the LSE have warned that forcing out some clearing would split markets and bump up costs for EU companies who use swaps to insure against adverse moves in borrowing costs, raw material prices, and currency swings. Reuters

A panorama of London

Gold

Internet

Trade

India’s imports jump 31 pct on festive demand

Baidu checks 3 billion German exports back ‘fake news’ claims every year to growth after summer lull

India’s gold imports in September rose 31 per cent from a year ago as jewellers increased their purchases ahead of a festival at the end of the month, provisional data from GFMS showed.

Higher purchases by India, the world’s second-biggest consumer, could lend support to global prices that are trading near their highest level in a week. The higher imports may also widen the South Asian country’s trade deficit.

The country’s imports were 48 tonnes in September, Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, said yesterday.

Much of the gain last month was simply due to the Indian holiday of Dussehra being celebrated on Sept.

30, rather than in October last year, as the holiday shifts since it is based on a lunar calendar.

Gold buying during Dussehra is considered auspicious.

“This year since Dussehra was advanced by a fortnight, import numbers for September are looking better than last year,” said a Mumbai-based bullion dealer with a private bank.

However, the September figure was lower than the monthly average for 2017 of 75 tonnes, because buyers were wary of purchasing gold since purchases were counted under the Prevention of Money Laundering Act (PMLA) beginning in August. Reuters

China’s biggest search engine, Baidu Inc., checks out 3 billion claims of fake news every year and works closely with government agencies to tackle an issue it calls a global challenge.

The spread of rumours and false information is a problem faced by companies around the world that requires technology and cooperation with external organizations to fix, President Zhang Yaqin told Bloomberg Television.

Baidu, one of the country’s three largest Internet players, employs technology to spot potentially spurious information before turning to local agencies such as the cyberspace administration to verify items, he said.

Pressure is building on social media services from Google to Twitter to try and curb the proliferation of fake news and targeted ads that critics say have an outsized effect on public discourse and elections.

Facebook’s chief security officer, Alex Stamos, said last week it was very difficult to spot fake news and propaganda using computer programs, a view echoed by former Microsoft Corp. Chief Executive Officer Steve Ballmer.

Companies in China, where freedom of speech is heavily curtailed by censorship programs, have long used a mix of advanced technologies and human cybercops to police the internet and suppress opinions deemed to threaten social harmony. Bloomberg News

Germany’s trade surplus grew slightly in August compared with the previous month, official data showed yesterday, with no sign complaints from abroad are sapping the export strength of Europe’s powerhouse.

Exports outweighed imports by 21.6 billion euros (US$25.5 billion) in August, slightly more than in July, federal statistics authority Destatis said in seasonally-adjusted figures.

Still in adjusted terms, Germany sold 3.1 per cent more goods abroad than in July, at 108.4 billion euros.

Imports grew more slowly, adding 1.2 per cent to reach 86.8 billion.

Germany registered a trade surplus of around 250 billion euros in 2016, a figure that has become a bone of contention with allies and trade partners.

They complain the country fails to buy enough from abroad to share the fruits of its economic success -- so far to no avail.

“Despite the summer lull, 2017 should be the best year for German exports since 2010,” forecast ING Diba bank economist Carsten Brzeski.

Outside factors are “the biggest risks for the German economy and the export sector,” he added. AFP