1. automotive and vehicles
2. motorcycles

MOP 6.00
Closing editor: Luís Gonçalves
Publisher: Paulo A. Azevedo
Number 754 Monday March 23, 2015
Waiting for Uncle Sam
T
Year III
he world is waiting. And guessing. Just when will the US hike interest rates? One thing is
certain; it will shake up the financial markets. With Macau’s currency pegged to the US dollar
a big chunk of its financial reserves are denominated in ‘greenbacks’. The Monetary Authority of
Macau anticipates a US interest hike in 2015. An event that will ‘substantially impact’ the city’s
MOP250 billion fiscal position. Diversification of investments and more in equities to reduce the
impact of likely turbulence is the plan
PAGE
Flip a coin
3
Casino positions most
sought after amongst
jobseekers in 2H, 2014
They’re the exception. Contrary to the
majority of analysts, US-based investment
bank Brean Capital has advised clients to buy
the four major casino stocks in Macau. The
institution anticipates a pleasant surprise in
2H. With gaming shares cheaper than ever,
now is the time to jump in, they say. This,
predicated on market recovery driven by the
opening of new casinos this year
PAGE 2
Ireland offers help on
environmentally friendly
policies and technologies
PAGE 4
For Hong Kong, a chill sets
in as rich China tourists
shop elsewhere
PAGE 5
MTEL to lease
lines for 4G
PAGE 8
‘Rare’ cyber attack
disrupted CTM networks
They’re not letting the grass grow under their
feet. MTEL Telecommunication Company
Ltd. is discussing the lease of fixed lines with
three of the four 4G-service bid winners. The
operator also suggested that the 4G-service
fee in the city would be lowered by 30 percent.
A consequence of MTEL charging less for
fixed-line service fee
PAGE 2
Economic evaluation
PAGE 2
HSI - Movers
March 20
Chinese NY Times
in Macau on May 1
Name
Economists from all over the world have
gathered since yesterday in Beijing. In order to
analyse and brainstorm the immediate future
of China’s economy. Vice premier Zhang
Gaoli said slower growth is very desirable
Its website is blocked in Mainland China. Thus, the New York
Times is launching a monthly Chinese-language print publication
for Hong Kong and Macau. Global news and local content are the
editorial format. ‘Chinese Monthly’ is set to launch on May 1 with
a print run of 50,000 copies. To be available in hotels, airline
lounges, residential complexes and on newsstands in both territories
PAGE 16
PAGE 4
%Day
Ping An Insurance Gr
4.07
Sands China Ltd
3.21
Cathay Pacific Airwa
3.04
Galaxy Entertainment
1.69
Kunlun Energy Co Ltd
1.36
China Mobile Ltd
-1.75
Sino Land Co Ltd
-2.04
Link REIT/The
-2.55
China Resources Powe
-2.84
Li & Fung Ltd
-7.60
Source: Bloomberg
www.macaubusinessdaily.com INTERVIEW
I SSN 2226-8294
Breath of fresh air
One of the SMEs the gov’t has avowed to help. But this one
slipped through the net, it seems. Alexander Chan Kuok Keong
is founder and chairman of Macau’s first electric motorcycle
manufacturer. Having poured four years and MOP10 million into
the Oasis Electric Motorcycle Factory, his bikes went to market
this month, he tells Business Daily. The gov’t may not have kicked
in with money but their promotion of the eco concept is vital, he
says. Not to mention a practical solution to worsening pollution
PAGES 6 & 7
Brought to you by
2015-3-23
2015-3-24
2015-3-25
18˚ 21˚
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16˚ 20˚
2 | Business Daily
March 23, 2015
Macau
Secretary: New pair of pandas coming
to Macau in first half of this year
The local government is soon to arrange to have a new pair of pandas chosen from Mainland China, which will arrive
in the city within the first half of this year, a “prioritised task” following the delivery of the Policy Address for 2015,
Secretary for Administration and Justice Sonia Chan Hoi Fan told media on the sidelines of an event yesterday. The
move follows the kidney failure death of Sam Sam in June last year - the female half of a panda couple given to
Macau by Beijing to celebrate the 10th anniversary of the 1999 handover. The pandas, offered as a gift by Beijing,
were named Hoi Hoi and Sam Sam (meaning ‘happy’ in Cantonese). They had been residing in the Macau Giant Panda
Pavilion in Seac Pai Van Park and became a tourist attraction in the territory.
MTEL discussing ‘Rare’ cyber attack,
fixed-line lease deal not system error,
with 3 4G operators disrupted CTM’s networks
A
F
ixed-line telecommunications
service provider MTEL
Telecommunication Company
Ltd. has revealed that it is discussing
the lease of fixed lines with three
of the four 4G-service bid winners.
The operator also suggested that the
4G-service fee in the city would be
lowered following MTEL charging
less for the fixed-line service fee.
Michael Choi, chairman and
chief executive officer of MTEL, told
reporters last Thursday evening a
ta media dinner that the “active”
discussions on leasing fixed-lines
between MTEL and three local
telecommunications operators that
won the 4G bids will certainly be
successful, according to local Chineselanguage newspaper Macao Daily.
Earlier this month, the Bureau
of Telecommunications Regulation
(DSRT) announced that Companhia
de Telecomunicações de Macau
(CTM), China Telecom (Macau),
Hutchison Telephone Macau, known
as 3Macau, and SmarTone had been
granted licences to operate the 4G
service.
Of the four winners, only CTM
runs a fixed-line telecommunications
service.
Meanwhile, Mr. Choi said that
MTEL will keep its promise as stated
in its bidding submission for fixedline services that the service fee will
be 30 per cent cheaper than the
market price. As such, he believed
that the 4G-service fee would thus
decrease as the costs of the operators
are reduced.
According to Mr. Choi, MTEL had
received a total of 2,140 enquiries
and applications for local and
international fixed-line services as
at last Wednesday, while up to last
Thursday, the coverage of the new
fixed-line provider had reached 38
per cent of the Macau Peninsula, 35
per cent of Taipa and 43 per cent
of Coloane.
K.L.
‘rare’ attack that specifically
targeted a large-scale firewall
system was to account for the
brief interruption in the fixed-line
and mobile phone networks of the
city’s dominant telecommunications
operator Companhia de
Telecomunicações de Macau SARL
(CTM) on Thursday evening, the
company explained.
The attack was identified as the
world’s ‘rare’ and ‘newly discovered’
network attack, after the technicians
of the telecom operator’s firewall
vendor and security experts ruled
out that the disruption in services
was due to system or product error,
CTM explained in a press statement
on Friday.
The company declined to name
the firewall vendor to Business Daily,
however, when requested to do so in
a phone enquiry.
The telecom operator said it has
already filed the case about this latest
network attack with the relevant
judicial authorities.
CTM’s fixed and mobile networks
were attacked at 9:15 pm on
Thursday, resulting in disruption
in Internet and mobile broadband
services in Taipa and in the north
and centre of the Macau Peninsula.
The affected services were resumed
within an hour of the network attack,
the company said.
The company noted that the
successful resistance against the
network attack on Thursday was a
result of its effectiveness in optimising
the network stability and security
since last year.
Both the company and Bureau
of Telecommunications Regulation
(DSRT) have denied that the
disruption in services was due to work
on the Hong Kong-Zhuhai-Macau
Bridge damaging a submarine cable.
S.L.
Casino positions most
sought after amongst
jobseekers in 2H, 2014
A
sales assistant is the position
that has the largest gap
between employers’ offer
and job seekers’ expectations, while
casino workers have the narrowest
gap and have been the most sought
after position, the latest employment
service data released by the Labour
Affairs Bureau (DSAL) shows.
A total of 2,973 jobseekers have
approached the Labour Affairs
Bureau to land a new job during the
second half of last year, with the most
sought after positions those of casino
workers, clerks, security workers, sales
assistants and cleaners.
Of these five types of position,
the sales assistant position shows the
greatest salary gap (at MOP2,646
or US$338) between employers’
offer and employees’ demand: the
jobseekers would like to earn an
average monthly salary at MOP10,022
as sales assistants, while employers
only offered MOP7,376.
Casino workers have the narrowest
gap (at MOP1,206) between
employers’ offer and employees’
expectations: jobseekers would like
to earn an average monthly salary of
MOP15,138 as casino workers, while
employers were offering MOP13,932
for the position.
The most employed positions
in the second half of last year were
those of cleaners, waiters/waitresses,
entry-level construction workers, sales
assistants and chefs.
The recruited cleaners were at the
bottom of the wage ladder where they
were employed at a monthly average
of MOP6,511; by contrast, entry-level
construction workers were offered the
highest salary level of the five positions
at a monthly average of MOP12,153.
Some 47 per cent of the nearly 3,000
jobseekers were aged 45-59; while
another 31 per cent were aged 25-44.
More than half of these jobseekers had
graduated from secondary school.
By the end of last year, the Bureau
reported that 1,774 jobseekers were
still in need of a recruitment match.
S.L.
Business Daily | 3
March 23, 2015 Macau
US interest hike to ‘substantially
impact’ Macau’s fiscal reserves
The Monetary Authority of Macau is keen to invest more in equity and diversify
its financial portfolio this year in order to protect its fiscal reserves from likely
volatility provoked by a US interest rate hike
Luís Gonçalves
[email protected]
T
he Monetary Authority of
Macau (AMCM) is expecting
that a hike in US interest
rates will ‘substantially affect’
the revaluation of the city’s fiscal
reserve that last year amounted to
almost MOP250 billion. Macau’s
central bank is aiming to strengthen
its investment in equities this year
and estimates that China will follow
the majority of central banks
around the world and lower its
interest rates.
In a report published last week,
AMCM said it expects a rise in the US
interest rate this year, a movement
that will have an impact on economic
and financial policies in the biggest
countries in the world and bring back
volatility to global bond markets,
exchange rates and stock markets.
For Macau, the FED – US central
bank - move will have a direct impact,
as the local currency is pegged to the
US dollar through the Hong Kong
dollar. And also, because 47 per cent
of the city’s fiscal reserve is allocated
to bonds, the majority denominated
in US dollars and renminbi.
AMCM says these factors ‘could
substantially’ affect the short term
revaluation results of the fiscal
reserve. ‘Against this backdrop, the
AMCM will closely track market
developments and aim to safely
and effectively implement dynamic
portfolio allocations based on an
overall appropriate risk level. In
particular, the Fiscal Reserve will
make use of market opportunities
to further strengthen the portfolio’s
weighting on the equity sector’.
Anselmo Teng, chairman of AMCM
The institution is willing to diversify
its investment in order to compensate
for the expected turbulence following
the US interest hike in stocks, bonds
and currency values with one of the
strategies being to invest more in
equities. Regarding the renminbi,
AMCM predicts that Bank of China
will follow major central banks
that are cutting interest rates in
order to stimulate their economies.
AMCM assured that it would follow
developments ‘closely and execute
necessary hedging strategy, and
adjust appropriately the ultimate
asset allocation in renminbi based on
risk and return consideration, thus
ensuring the safety of funds invested
while at the same time pursuing a
steady medium to long term rate of
return’.
Last year, the total size of the fiscal
reserve amounted to MOP246.34
billion, with MOP116.46 billion
allocated to the Basic Reserve and
MOP129.88 billion to the Excess
Reserve. The investment in bonds
represented almost half of it (47 per
cent) in December, of which US dollar
and renminbi denominated bonds
were the major components. The
total income generated from bond
investments amounted to MOP3.65
billion and continued to be the greatest
source of income for the fiscal reserve,
the report said. The return rate last
year was 3.3 per cent compared to
2.2 per cent in 2013.
In a separate report, AMCM
announced that the official reserves
assets had increased 8.3 per cent
in February from a year ago to
MOP133.9 billion. Since December
of last year, the reserves increased by
MOP2.5 billion.
Shun Tak’s joint venture Jetstar Hong Kong left with one plane
T
he startup airline Jetstar Hong
Kong, in which Hong Konglisted conglomerate Shun Tak
Holdings Ltd. has one-third financial
stake, is now only left with one aircraft
to begin operations as it has disposed
of another aircraft.
According to a filing by Shun Tak
on Friday, Jetstar Hong Kong has
entered into agreements to sell its two
aircraft at US$83 million (HK$643.8
million) to Chinese aircraft leasing
firm CMB Financial Leasing Co. Ltd.
The two aircraft sold by Jetstar
Hong Kong were two unused Airbus
A320-232, according to the filing.
This latest sale is the third disposal
of aircraft made by Jetstar Hong
Kong within one year, a size-down
that sees the budget carrier’s initial
nine-strong fleet on standby reduced
to one at the moment.
Shun Tak, whose managing
director is Pansy Ho Chiu King, said
in the Friday filing that the sales of
the two aircraft would be used for
repayment of debt and for general
working capital purposes of Jetstar
Hong Kong.
‘As the establishment of Jetstar
Hong Kong is taking longer than
initially expected, the sale of aircraft
under the aircraft sale agreements will
optimise the fleet plan in the short
term,’ the filing read.
Jetstar Hong Kong was initially
Pansy Ho, managing director of Shun Tak
launched in March 2012 as a Hong
Kong-based budget carrier flying to
short-haul destinations in Asia.
But the joint venture airline,
owned in equal parts by China
Eastern Airlines, Shun Tak and
Quantas Airways Ltd., is still awaiting
regulatory approval to operate.
Jetstar Hong Kong has been
grounded for more than two years due
to regulatory hurdles. Jetstar Hong
Kong’s application for a licence has
been challenged by Cathay Pacific on
the grounds that the budget carrier
has failed to meet the Basic Law’s
requirement of having its principal
place of business in Hong Kong.
S.L.
4 | Business Daily
March 23, 2015
Macau
UM to expand international academic accreditation
The University of Macau (UM) UM expects to see more academic programmes gain international
accreditation in the future. Three Bachelor’s degree programmes offered by UM’s Faculty of
Science and Technology have been recognised by Washington Accord signatories (including the
United States, the United Kingdom, Canada, Japan, and Russia) with three other Bachelor’s degree
programmes offered by the Faculty of Business Administration gaining international accreditation.
The institution says that other faculties at UM are also developing plans to seek accreditation from
independent international academic institutions.
NY Times to launch Chinese monthly
in Hong Kong, Macau
The Times is among several Western news organisations whose websites have been
blocked in Mainland China
T
he New York Times is
launching a monthly
Chinese-language
print publication for Hong
Kong and Macau that will
include global news as well
as local content.
The US newspaper group
said the ‘Chinese Monthly’
would launch on May 1
with a print run of 50,000
copies, to be available in
hotels, airline lounges,
residential complexes and
on newsstands in Hong Kong
and Macau.
The 24-page publication
will include ‘news, opinion
and lifestyle content from
The New York Times in
simplified Chinese for
Chinese audiences,’ a Times
statement said Thursday.
‘In addition, approximately
20 per cent of the content
will be devoted to local news
and events in Hong Kong and
Macau.’
The paper will be produced
by the International New
York Times, with editorial
content overseen by ChingChing Ni, editor-in-chief of
the Chinese-language news
website for the group.
“Our Chinese audience has
grown enormously through
cn.NYTimes.com and we are
excited to complement our
digital offering by bringing
high-quality coverage of
world affairs, business and
culture to our Chinese readers
in print,” said Craig Smith,
managing director for China
at the Times.
The Times is among several
Western news organisations
whose websites have been
blocked in Mainland China.
On Friday, Reuters said
its news websites were
inaccessible in the country
where censors keep a tight
grip on information.
AFP
Ireland offers help on environmentally
friendly policies and technologies
The Irish Minister for the Environment met the Secretary for Transport and Public
Works, Raimundo Rosário, to discuss environmental issues and to advise on how
Macau might deal with the current situation
João Santos Filipe
[email protected]
E
conomic growth and
environmentally friendly
policies can walk hand in hand
with one another. This was one of the
main points that the Minister for the
Environment, Community and Local
Government of Ireland, Alan Kelly,
told the Secretary for Transport and
Public Works, Raimundo Rosário, in
a meeting between the two that took
place yesterday afternoon.
“It is possible that economic growth
and environmentally friendly policies
walk hand in hand with one another.
Across my visit to China and Hong
Kong environmental issues have been
the main topic of conversation”, he
said in a meeting with journalists prior
to the appointment with the Macau
Secretary. “You can have exponential
economic growth while adopting
environmentally friendly policies in
areas such as air, water, soil, food
production or waste management”.
At the same time, Alan Kelly said
that Irish companies have technologies
more environmentally friendly in
different areas that can be used in
Macau.
“We have these technologies and
they are being commercialised. They
can also be commercialised across
Asia, including China, Hong Kong
and here. There is a market in Macau
for these”, he added.
This is the second time that an
Irish minister has visited Macau since
January. The first was the Minister
of State for Finance, Simon Harris,
and more visits are likely to be made
in the near future.
“This is part of our strategy. I
have spent the last week and a half in
China - Shanghai, Beijing, Hong Kong
and now Macau”, he said. “There is
potential here on the enterprises side.
Macau is changing and recreating
itself. Ireland has a huge amount
to offer in financial services, IT and
services and we are here to talk as well
as [demonstrate] how these services
fit in Macau. We would like to share
our experiences and you may even see
me back in a few months. ”
During his visit to the MSAR, the
Irish Minister for the Environment,
Community and Local Government
is also meeting local businessmen
through the Irish Chamber of
Commerce of Macau. The financial
services provided by Irish companies
will be one of the hot topics of these
conversations.
“We are one of the top locations in
relation to financial services around the
world. It has been under our skin. We
have refocused on this very deliberately
because we want to have a large proportion
of the share of what is happening across
China, Hong Kong and Macau. In relation
to our financial services we feel that we
have a lot more to offer”, he added.
The Irish minister also addressed the
problem of planning in Macau and how
it affects the environment of the city.
“You can’t change the fact that
you are where you are. You need to
retro-plan it. You need to think how
within the environment you created
you can re-sustain and redefine it”,
he explained. “Retro-thinking is about
adopting sustainable policies for the
future. It is never the wrong time to
start doing the right thing.”
Business Daily | 5
March 23, 2015 Macau
Economy secretariat opens Wechat access
The Office of the Secretary for Economy and Finance announced yesterday the launch of its own official website
(www.gsef.gov.mo) and a mobile instant-message account at Wechat (named ‘SEFRAEM’), an online channel that
the office said it would use as a platform to publish its latest news and receive public opinions on the MSAR’s
policies. The Office, overseen by Secretary Lionel Leong Vai Tac, has pronounced its online presence ahead of the
delivering of the Policy Address 2015, for which the Legislative Assembly is set to debate on the economy and
finance-related policies on March 30 and 31, according to the official agenda.
Genting profits dip 30.1
per cent to US$384.5
million in 2014
The company based in Hong Kong saw
passenger ticket revenue down 15.6 per
cent but managed to increase gaming
revenue by 10.5 per cent
T
Brean Capital:
2H to pleasantly
surprise Macau
The investment bank has advised clients
to buy stocks from the four US major
casino operators in Macau to profit
in the future from the current low prices
on offer
Luís Gonçalves
[email protected]
U
S-based investment bank
Brean Capital has adopted
a contrarian position to the
majority of gaming investors and
advised its clients to buy stocks of
the four major casinos in Macau as
it anticipates a nice surprise in the
second half of the year.
After losing almost 50 per cent
of its value since last year’s peak,
gaming shares continue to suffer
several headwinds, as revenues show
no sign of recovery with investors
predicting a 20 per cent drop in 2015.
Some even have misgivings about
the anticipated success of the new
Cotai properties. Despite the gloomy
outlook, however, others want to take
a chance on the cheap stocks.
Take Brean Capital, for example.
The investment bank said last week
that it is confident that the second
half of the year will deliver in terms
of revenues as the opening of Galaxy
Phase II and Melco Crown’s Studio
City will together provide Macau
with 5,200 extra hotel rooms and
likely be the main drivers of industry
performance this year.
In the long term, the infrastructure
package of the city like the Hong
Kong-Zhuhai-Macau Bridge, the
Light Rail Transit system and the
Taipa Ferry Terminal, will support
the expansion of Cotai gaming
properties. With this in mind, Brean
Capital decided to advise its clients
to buy stocks from the four major
casinos operators that have operations
here (Melco Crown, MGM Resorts,
Wynn and Las Vegas Sands). This
contrasts with the majority of analysts
(Deutsche Bank, Morgan Stanley or
Wells Fargo) that recently revised
down their outlook for Macau and
advised selling some of the operators’
stock.
Brean Capital says Melco Crown
profits are likely to increase in the
future after the opening of Studio
City: ‘We would take advantage
of recent weakness in the shares to
build positions’. Las Vegas Sands
is described as the ‘best-positioned
gaming company’ with a strong
position in Macau and its presence in
the growing Singapore market. MGM
Cotai will boost MGM’s earnings, with
the same happening with Wynn and
its Wynn Palace.
he profit of Genting Hong
Kong decreased 30.1 per cent
year-on-year during the fiscal
year of 2014 from US$552.4 million
(MOP4.4 billion) to US$384.5 million
(MOP3.1 billion), the company
announced on Friday.
During last year the operator
of casino cruise ships managed
to increase revenues coming from
gaming by 10.5 per cent year-onyear from US$315.7 million in 2013
to US$348.9 million. Based on the
explanation of the company gaming
volume declined during the year with
the larger revenue primarily explained
by higher blended hold rates.
Passenger ticket revenue also
dropped 15.6 per cent year-on-year
to US$134.8 million from US$159.6
million. This drop was mainly
attributed to changes related to the
cruise ships Virgo and Gemini.
‘Passenger ticket revenue
decreased 15.6 per cent mainly due
to the drydock of SuperStar Virgo as
well as changes in deployment and
itineraries of SuperStar Gemini and
Virgo, which included the relocation
of Gemini from Shanghai to Singapore
and of Virgo from Singapore to
Hong Kong in 2014’, the company
explained.
In its annual results Genting also
announced that the production of one
of the two cruise ships ordered by the
company started during February.
‘Star Cruises has two new
cruise ships on order with Meyer
Werft for delivery scheduled in the
fourth quarter of 2016 and 2017,
respectively. The production of
Genting World, the first of its two new
cruise ships in the pipeline, officially
commenced following the steel cutting
ceremony on 9 February 2015 at
Papenburg.’
In relation to 2015, the company is
not introducing many changes to the
current itineraries of its cruise ships.
‘Virgo and Gemini will continue
their homeport deployment in Hong
Kong and Singapore, respectively.
Gemini will be offering various
itineraries cruising to destinations
including Penang, Langkawi, Port
Klang and Malacca while Virgo will
be offering destination cruises from
April onwards to Sanya and Taiwan.
SuperStar Aquarius will commence
its seasonal deployment in Keelung,
Taiwan from April’.
The Board of Directors
recommended a final dividend of
US$0.01 per share.
J.S.F.
Corporate
BNU donates MOP 1.6 million to Tung Sing Tung
BNU donated MOP1.6 million to Tung Sin Tong in a ceremony chaired by Mr. Chui Sai
Cheong, President of Tung Sin Tong and Mr. Pedro Cardoso, CEO of BNU.
Established in 1892, Tung Sin Tong has been a leading charity organisation in Macau,
providing free medical services and education for citizens in need. In order to collect more
funds for charity, BNU and Tung Sin Tong launched the Tung Sin Tong Visa credit card in
1999, whereby BNU donates 1 per cent of the consumers’ retail spending on this affinity
credit card to Tung Sin Tong. No annual fee is charged to Tung Sin Tong Visa Card holders.
In 2012, BNU launched Tung Sin Tong Platinum Affinity Card. Since the inception of this
donation scheme, BNU has contributed more than MOP10.4 million to Tung Sin Tong.
6 | Business Daily
March 23, 2015
Macau
Struggling to create a green
motorcycle revolution in Macau
“How can we resolve the polluted air?” The question brought Alexander
Chan Kuok Keong, founder and chairman of Macau’s first electric motorcycle
manufacturer Oasis Electric Motorcycle Factory, into the green business.
Having spent four years developing his own e-motorcycles and investing more
than MOP10 million without any return, Mr. Chan told Business Daily of his
determination to get this totally new business up and running.
Kam Leong
[email protected]
Why did you want to
manufacture electric motorcycles
in Macau?
Back to 2009, the air pollution
was already very serious. I have a
friend who had been very healthy
but suddenly got asthma because
of the polluted air. So I thought
that all the residents in Macau
were also facing health risks as we
have to breathe such polluted air
every day. And I asked myself how
we could resolve the environmental
problems. Meanwhile, I saw some
introductions of electric cars in
the International Environmental
Co-Operation Forum & Exhibition
then. But I thought it would
be really difficult to replace
automobiles with electric vehicles.
In addition, the pollution caused
by motorcycles is actually worse
than that by cars as they do not
have carburettors to filter the
gas. Macau is a small place, so
if electric motorcycles can be
economical, and with strong
propulsion, it can be popular in
the market. So I started to have
the concept of entering the ecofriendly industry.
You worked in real estate before.
How did you prepare to enter a
totally different business?
The development process was
really difficult. At the beginning,
I met a South Korean at the
environmental exhibition. He
did environmental business in
South Korea and co-operated
with some vehicle manufacturers
there. We clicked after we
discussed the business. At the
beginning, we were thinking about
manufacturing electric motorcycles
here in Macau then exporting
them to South Korea. However,
we failed eventually as the cost
was very expensive. In addition,
people in South Korea travel
primarily by car. Their demand
for motorcycles is very low, so
the plan failed. Although we later
tried to introduce some South
Korean models into Macau but
due to the price and the problem
of propulsion, it also was not
successful.
What is the problem with
charging battering in Macau?
It’s the time it takes. At that time,
we had not come up with the idea
of battery exchange stations.
Instead of importing electric
motorcycles from other cities,
why did you decide to develop
one yourself?
In addition to South Korea, I went
to Japan and Taiwan. However,
for Japan, it mainly exports
motorcycles rather than electric
ones. Only Taiwan manufactures
electric bicycles, which is actually
The Factory
different to electric motorcycles,
with the speed less than 30
kilometres per hour. Although
some manufacturers in South
Korea said they could design
the e-motorcycles for us you can
imagine that the cost was very
high. We also tried to import the
e-bike from Taiwan, but they
aren’t really working so well.
How did you develop the electric
motorcycle yourself?
I went back to Mainland China.
Frankly, our country had already
reached very advanced techniques
in developing and manufacturing
electric motorcycles. You have to
know that if you want to develop
an electric motorcycle by yourself
you have to solve three problems –
electric traction motors, batteries
and the system. In China, I cooperated with a Chinese electric
engineering company. We spent
more than a year on developing the
three parts I mentioned before we
successfully created a new kind of
electric traction motor. After that,
we even registered a patent on the
Mainland. Meanwhile, I decided
to make use of the resources of
Mainland China as a backup for
us to import auto parts, then we
group everything in Macau.
Have you ever thought about
giving up?
The development process is really
hard and there have been many
challenges. I sometimes wonder
whether I should give up. I have
The Oasis Electric Motorcycle Factory
was founded by Alexander Chan in
2009, who initially considered that
electric motorcycles could not be
possible in Macau due to the battery
charging problem as there are not
enough auxiliary facilities in the
city to support drivers charging their
electric motorcycles for a few hours.
Nevertheless, Mr. Chan started to
develop his own electric motorcycles.
After four years of effort, he
succeeded in developing electric
motorcycles whose batteries can be
removed to charge independently.
Meanwhile, another new idea
occurred to him in the form of the
Battery Exchange Station. Mr.
Chan describes the concept of such
‘stations’ as like a vending machine,
allowing drivers to drop the old
battery in and pick up a new battery
by themselves in the station.
Although saying the factory had not yet
made money following the soft opening
of sales on March 10, the chairman
believes his business will get brighter.
He hopes to sell more than 1,000
electric motorcycles this year.
The pollution caused by
motorcycles is actually
worse than that by cars
as they do not have
carburettors to filter the
gas. Macau is a small place,
so if electric motorcycles
can be economical, and
with strong propulsion,
they can be popular
in the market
been working on this for more than
four years, without any income.
However, we have been improving
our own e-motorbikes over these
four years. So give up or not? But
at the end, there is always a power
pushing me to continue.
Many may think that e-motorcycles
are not as good as real motorbikes.
What do you think?
It is true that many people think
like that. As such, I always
encourage people to try it for
themselves. In fact, e-motorcycles
are much better than normal motor
ones. Firstly, they are quieter.
Secondly, the starting propulsion
of the e-ones is more stable than
the usual ones. In addition, there’s
no emission of polluted air. Lastly,
it is more economically affordable
– electricity for a 100-kilometre
trip costs only MOP20, while gas
costs between MOP50 and MOP60
for the same distance.
In your opinion, how can electric
motorcycles be popular in
Macau?
Through the government’s
promotion, which will be the most
effective way to promote electric
motorcycles. If the government
does not promote the concept
of environmentally friendly,
then the green businesses will
never work in Macau. As such,
the government should conduct
measures simulating residents to
purchase electric vehicles. For
example, government vehicles
should be changed to electric
first. The government really has
to make the first move; only
after that will residents follow,
and it will greatly benefit next
generations.
Business Daily | 7
March 23, 2015 Macau
Are you confident in your
business prospects?
There is no support from
the government at all
I am confident, for sure. I have
let many people try my vehicles.
They said the vehicles are okay.
In fact, we just started sales
earlier this month. So I will
start doing more promotion. In
addition, I am discussing cooperative opportunities with some
enterprises.
For example?
Do you think government
support is enough?
There is no support from the
government at all.
What are you expecting the
government to do?
To fulfil what it said. It suggested
few years ago to subsidise the
owners of two-stroke motorcycles
when they got rid of their old
motorbikes for new ones. As such,
it could also subsidise those want
to change to electric motorcycles.
This can help decrease the number
of old motorbikes polluting the air
in the city. Everyone will gain from
that. Everyone knows that it is a
good thing to be environmentally
friendly, yet it really needs the
promotion of the government.
When we SMEs are willing to start
such businesses, why doesn’t the
government support [us]? The
government really has to make a
move, instead of only making a
move once things the enterprises
do are effective.
But as you said, without
government support how are you
able to promote your business?
We’ll hold a trial session for
people to try our motorcycles
soon. Meanwhile, if they come
to me and give up their 2-stroke
motorbikes for our e-motorcycles,
I’ll give them a MOP2,000
discount. I think we have to take
the initiative rather than waiting
for the government. However, if
the government subsidises the
elimination of old motorbikes for
electric motorbikes by more than
MOP2,000 in the future, I will
also refund the difference to my
clients.
We’re discussing with some
delivery companies or
restaurants about changing the
motorbikes they use for delivery
services to electric motorcycles.
In addition, we’re reaching
government departments,
hoping they can use our electric
motorcycles.
The battery exchange station
A battery exchange station
is another of your company
patents. Where did the
inspiration for this idea
come from?
As I said, the time it takes to
charge a battery is always the
biggest problem for attracting
people to use electric motorcycles.
In addition, it’s hard for you to
find a place to charge motorcycles
for some four hours on the
road or in residential buildings.
Before coming up with the idea,
I actually thought about creating
something like the post houses
for horses, letting people drop
their no-battery e-motorbike
there and getting a full-battery
e-motorbike. However, this is
kind of impractical. Later, I was
inspired by the automatic lockers
in supermarkets. Then, I thought
that a station allowing drivers
to drop off and pick up batteries
would work better. We will collect
the batteries to charge in our
factory, which may even be more
secure as well.
How many ‘stations’ have you set
up?
Currently, we have four. We’d
actually applied to install our
stations inside public car parks
but the government rejected
it, saying it cannot oversee our
installations.
What do you plan to do then?
I will install our battery stations
in private places, and expand the
number of stations gradually.
What is the future plan?
Once our electric motorcycles
get more popular in Macau,
we may consider exporting our
productions to other countries.
Actually, I’ve been discussing
co-operating with companies
from a few countries as well,
such as Indonesia. Nevertheless,
we have to be successful in
Macau first.
8 | Business Daily
March 23, 2015
Hong Kong
For Hong Kong, a chill sets in as rich
China tourists shop elsewhere
Mainland tourists are flying to South Korea and Japan on easier visa rules
and cheaper currencies. While in Hong Kong and Macau, Chinese visitors
are facing stricter entry rules, demonstrations and an anti-graft campaign
KEY POINTS
Tour groups from mainland
down 80 pct in early March
South Korea, Japan report
surging China tourism
Tough trend for retailers
like Chow Tai Fook
Credit Suisse cites weaker
tourism in HK forecast cut
C
hinese tourists are rapidly
deserting Hong Kong, leaving
retailers who built businesses
around the once insatiable demand of
its Mainland neighbours with bigger
but emptier stores and squeezing
the whole city’s visitor-dependent
economy.
With cross-border tensions
exacerbated by pro-democracy Hong
Kong protests, tour groups visiting
Hong Kong from China plunged about
80 per cent in early March. A Beijing
crackdown on conspicuous spending
by Mainlanders also shows no signs
of letting up, sending tourists further
afield.
While day-trippers from just
outside Hong Kong continue to
buy daily essentials there, Chinese
travellers with cash to burn are
homing in on places like South Korea
and Japan. According to the Japan
National Tourism Organization,
Chinese visitors lured by the weaker
yen and easier visa rules nearly tripled
in February to a monthly record:
with one in four tourists in Japan,
the Chinese became the biggest
visitor group in a country with which
relations have often been fraught.
That’s bad news for Hong
Kong retailers like Chow Tai Fook
Jewellery and cosmetics chain Sa
Sa International Holdings Ltd. To
the chagrin of some Hong Kongers,
these firms expanded networks in
the former British colony by about
50 per cent over the past five years
to cater to the then-surging demand
from Chinese tourists.
“The old shops are squeezed and
replaced by chain stores like Chow
Tai Fook, Sa Sa and other popular
shops for them (Mainland buyers),”
said one 22-year-old Hong Kong
shopper, who gave his surname as
Yu. “That is crazy!”
While some Hong Kong residents
accuse Mainland tourists of pushing up
prices and clogging already crowded
streets, resentment rides high also on
It will be a cold winter
for retail this year
Renee Tai,
analyst at UOB Kay Hian
the other side of the border. Many
have expressed shock, saying Hong
Kong people are rude and pledging
to take their money elsewhere, with
some Internet users going so far as to
post pictures of Hong Kong re-entry
permits cut into pieces.
Destination South Korea?
The net effect is a tourism
slowdown that leaves a gaping hole
in an economy where Chinese visitors
- 47 million last year, about 40 per
cent of them from areas beyond the
border zones - account for about a
third of retail spending.
In a report this week, Credit Suisse
cut its economic growth forecast for
Hong Kong to 1.6 per cent from 2.4
per cent for this year, citing weaker
Mainland tourist spending, and
rated stocks dedicated to the city
‘underweight’.
Chow Tai Fook, the world’s largest
jewellery retailer, has so far relied on
Mainland Chinese for nearly 60 per
cent of its sales in Hong Kong and
the nearby casino hub of Macau. At
Sa Sa, reliance is even greater, with
Mainlanders accounting for 71 per
cent of its sales in Hong Kong and
Macau.
But as tensions grew last year, even
before Hong Kong’s ‘Occupy’ prodemocracy protests, Chow Tai Fook
pointed the way towards one option
for Hong Kong retailers: it opened
its first point of sale in South Korea’s
popular tourist destination of Jeju
Island last September, and said it’s
looking at further expansion overseas
to tap affluent Chinese tourists.
Like Japan, South Korea is a big
beneficiary thanks to its currency
weakening even as the strength of the
U.S. dollar eroded competitiveness in
Hong Kong - its currency is pegged to
the greenback. More than 6 million
Mainland Chinese visited South Korea
last year, up 42 per cent from 2013,
spurred by an easing of visa rules.
In Hong Kong, observers are
bracing for a chill settling over the
city’s stores for some time.
“We’re going to see very weak data
from May 1 (Labour Day holiday),”
said Renee Tai, analyst at UOB Kay
Hian in Hong Kong. “It will be a cold
winter for retail this year.”
Reuters
Business Daily | 9
March 23, 2015 Gaming
MGM Resorts rejects nominees
from Land & Buildings’ Litt
Jim Murren
M
GM Resorts International
rejected proposed board
nominees from an activist
hedge-fund manager pressing the
casino operator to split into a realestate investment trust and a hotel-
management firm, setting the stage
for a proxy fight.
The board of MGM, the largest
casino operator in Las Vegas,
unanimously rejected four director
nominees proposed by Land &
Buildings Investment Management,
according to a regulatory filing.
“The board, as it is currently
constructed, is very effective,
independent, and diverse and has
a broad range of expertise,” MGM
Resorts said.
Land & Buildings said it will press
ahead to elect its nominees. A proxy
fight will pit the casino company
against Jonathan Litt, whose Land
& Buildings Investment Management
values Las Vegas-based MGM Resorts
at US$33 a share, about 50 per cent
above the current price. Litt says the
shares could hit US$55 if the company
restructures and sells assets as urged.
The rejection ‘sends a clear signal
that the board would prefer to take
part in a contentious situation rather
than work collaboratively to reach a
solution that is in the best interests of
all shareholders,’ Land & Buildings
said.
MGM released its annual proxy
statement Friday without scheduling
a date for its shareholder meeting.
The company declined to comment
beyond the filing.
‘The Land & Buildings proposals
include concepts that the board
and management have previously
analysed,’ MGM Resorts said in the
filing. “The company will continue to
review opportunities in keeping with
its commitment to identify long-term
strategies to enhance shareholder
value.’
Sun International
buys Peermont
S
un International Ltd., South
Africa’s biggest hotel and casino
operator, said it will buy all of
Peermont Global (Pty) Ltd. to expand
its asset base and pursue growth
opportunities.
Sun will pay 9.4 billion rand
(US$768 million), less net debt and
certain capital expenditure adjustments,
the Johannesburg-based company
said in a statement. Sun will assume
all of Peermont’s debt and will fund
the transaction by issuing shares
to Peermont’s shareholders and by
holding a rights offer. Sun will roll
over Peermont’s senior debt and start
a new financing facility, it said.
It may take nine to 12 months to
implement and close the transaction
and ‘Sun International intends
exploring the possibility of disposing
of certain of the smaller assets within
the Peermont portfolio following the
closing of the proposed transaction,’
the hotel group said.
Sun International fell 4.5 per cent
to 123 rand in Johannesburg trading,
the lowest intraday price in almost
two months.
Peermont was founded in 1995.
It delisted from Johannesburg’s stock
exchange in 2007 following a private
equity-led buyout from a group led by
the Mineworkers Investment Company.
Sun International, which is involved in
hotels, gaming and entertainment, owns
28 hotels including the Palace of the
Lost City, which borders a game park
in South Africa’s North West province.
Bloomberg
10 | Business Daily
March 23, 2015
Gaming
Kazuo Okada
Japan tax agency, Hong Kong join FBI
in reviewing Universal casino payments
J
apanese tax authorities have begun
a review of how slot machine
maker and casino developer
Universal Entertainment accounted
for US$40 million in payments
made in 2010 to an associate of the
Philippines’ top gambling regulator
at that time, people with knowledge
of the matter told Reuters.
The review is part of a wider audit
of the company’s books, the people
said.
Separately, the payments are also
a focus of a previously undisclosed
criminal investigation by Hong Kong’s
Independent Commission Against
Corruption, sources said. The ICAC
has become involved because the
transfers under review passed through
bank accounts based in Hong Kong,
those people said.
On Wednesday, Universal said
in a statement that its U.S.-based
subsidiary, Aruze USA, had received
a subpoena from a grand jury in
the United States that it believed
was related to ‘suspicion’ of bribery
related to the payments. The company
did not say when that subpoena had
been received or where that federal
grand jury was seated.
Universal said it believed it
would not face charges in the United
States ‘as long as a fair and proper
investigation is conducted.’ The
statement by Universal was the first
time the company had acknowledged
a subpoena or confirmed the existence
of a grand jury as part of the federal
investigation.
The FBI has been investigating
whether payments that originated in
a bank account held by Aruze USA
that were made in 2010 to Rodolfo
Soriano, an associate of the then-head
of the Philippine gaming regulator,
constituted a violation of U.S. antibribery laws, according to people
with knowledge of the probe. At the
time of the payments, Universal was
seeking tax and other concessions
related to a casino it is building in
Manila Bay.
The National Bureau of
Investigation in the Philippines
investigated the case as potential
bribery but said it was suspending
that probe because it did not have
access to witnesses in Japan. Soriano
did not respond to a request for
comment.
Lewis Tam, a spokesman for
Hong Kong’s ICAC, said the agency
“would not comment on individual
cases.” The FBI declined to comment.
A spokesman for Japan’s National
Tax Agency said it was policy to not
comment on specific cases.
Universal had no immediate
comment beyond its statement.
Mississippi renews licence
In recent months, the FBI has
continued to gather evidence and
interview witnesses, sources have
said. The FBI investigation has been
underway since 2012.
In addition to the bribery question,
the FBI has been examining whether
an offered payout to a former
Universal employee in Japan to stop
co-operating with its investigation
constituted obstruction of justice
or witness tampering, people with
knowledge of the matter said.
The offer of a payment was made
in July 2013 by a lawyer for Universal
to a former Universal employee if
he retracted claims and stopped
co-operating with investigators,
according to records reviewed by
Reuters.
Japanese tax authorities began
examining Universal’s accounting
in 2014 and went this week to the
company’s headquarters near Tokyo
Bay, sources said.
The scope of the tax agency’s
audit was not clear. The agency has
the power to bring criminal cases
if it determines there is evidence of
wrongdoing but it has not indicated
that the review of Universal has
moved from an audit to a more formal
investigation.
Universal has blamed the transfers
on the unauthorised actions of former
employees. The company convened an
outside panel of experts which found
that while there was no evidence
of bribery, the payments pointed
to governance problems. Universal
restated its accounting for the
payments twice in 2013.
Universal has said that $10
million was improperly accounted
for as payment for a bad loan. The
company has yet to determine how
the remaining $30 million was used.
The developments came as
Mississippi’s gaming regulator on
Thursday renewed the licence held by
Universal’s founder and controlling
investor, billionaire Kazuo Okada,
to sell slot machines in the state,
saying it based its decision on its own
investigation and not on press reports
about the allegations of bribery.
The Mississippi Gaming
Commission voted to approve the
‘suitability’ status of Okada, whose
licence had come up for a nine-year
review. The commission also approved
the licence of Aruze Gaming America,
Okada’s slot machine subsidiary.
It did, though, add a new clause
to Okada’s gaming licence that would
trigger a review for possible revocation
in case the probes by the FBI and
others are not resolved satisfactorily,
the commission’s executive director
Allen Godfrey told Reuters.
“The allegation is very concerning
to me, but until there is something
I can hang my hat on, I can’t act,”
he said.
The hearing was the first public
appearance in the U.S. by Okada since
the FBI launched its probe.
Reuters and Japan’s Asahi
newspaper are among the media
outlets that have reported on the
FBI’s investigation.
“You may have some doubts as
to what I’ve been doing because of
the reports in the press, including
Reuters and Asahi Shimbun,” Okada
said through an interpreter before the
commission made its ruling. “These
are all misunderstandings. They
portray me as if I’m a bad person
but that’s not the case.”
Okada has sued Reuters for
defamation based on that reporting.
A Reuters spokeswoman said the
company stands behind its reporting.
Reuters
Business Daily | 11
March 23, 2015 Greater China
Monetary policy
to remain prudent
China will stick to a prudent monetary
policy despite a recent rate cut and a
reduction in the reserve requirement
ratio, China’s central bank governor
Zhou Xiaochuan said yesterday. Monetary policy needs to support growth as
well as helping structural adjustments,
Zhou said. China’s QFII scheme was not
flexible enough and reform measures
were being planned, he said.
GF Securities to raise
up to US$3.6 bln
Chinese brokerage GF Securities plans
to raise up to HK$27.9 billion (US$3.6
billion) from a Hong Kong stock offering, IFR reported on Saturday, citing
people familiar with the matter. The
Shenzhen-listed company will offer 1.48
billion shares at an indicative price range
of HK$15.65 to HK$18.85 each, added
IFR, a Thomson Reuters publication.
The deal has attracted cornerstone investment of a total of $1.9 billion from
17 investors, IFR said. Bookbuilding of
the deal will start today, with pricing
slated for March 31.
More action to raise
grain output
China will step up efforts to increase
grain output this year by providing stronger technical guidance and more credit,
the state-owned Xinhua News Agency
reported on Saturday. Chinese Premier
Li Keqiang has urged local governments
to take more measures to help farmers
protect farmland and minimise damage
from accidents such as fires. China’s
state cabinet has already ordered local
governments to take up more responsibility to maintain supplies and increase
reserves in the world’s most populous
nation. Meanwhile, Vice Premier Wang
Yang has also asked for more technical
guidance.
First passenger
flight with biofuel
succeeded
Hainan Airlines announced it finished
China’s first passenger flight with sustainable biofuel on Saturday, a milestone
for the country’s commercial aviation
industry. The flight, which carried more
than 100 passengers from Shanghai to
Beijing in a Boeing 737, used biofuel
made by Sinopec from waste cooking oil
collected from restaurants in China. The
airplane’s two engines were powered
by the fuel blended of approximately
half biofuel and half traditional jet fuel,
the company said. Boeing has been
collaborating with Chinese airlines to
develop aviation biofuel industry.
Beijing mayor urges
tackling smog
Beijing mayor said Beijing will map out
a long-term planning to tackle smog
and curb air pollution with neighbouring
Tianjin municipality and Hebei Province.
The mayor Wang Anshun addressed
the China Development Forum 2015
which opened on Saturday, saying that
Beijing failed to achieve last year’s target
of cutting PM 2.5 density by around 5
percent, despite traffic control, emission reduction and more plants. “We
cut the PM 2.5 density by 4 percent
last year, showing a good trend,” he
said. “Beijing and its neighbours will
strengthen cooperation and continue
improving air quality.”
Lagarde says yuan in SDR
basket question of when
The yuan’s inclusion could be seen as diminishing the dollar’s
standing internationally
C
hina’s yuan at some point
would be incorporated in
the International Monetary
Fund’s Special Drawing Right (SDR)
currency basket, IMF Managing
Director Christine Lagarde said.
“It’s not a question of if, it’s a
question of when,” she said during a
question and answer session following
a speech at Fudan University.
“There’s a still a lot of work to
be done and everyone knows that,”
she added.
Her comments follow speculation
that the IMF may decide to include
the yuan in the SDR basket - currently
made up of dollars, yen, pounds and
euros - during a five-year review due
to be conducted this year.
A U.S. Treasury spokeswoman
said it was too early to comment
on the review of the SDR currency
basket.
The yuan’s inclusion could be seen
as diminishing the dollar’s standing
internationally.
The first step in the review of the
basket for the SDR, an international
reserve asset, is an informal board
meeting in May, followed by a formal
review in the autumn. Any changes
would come into effect in January
2016, but would require a 70 or 85
percent majority on the IMF council.
Though Beijing keeps a tight
rein on the yuan’s movements and
maintains strong capital controls, it
is pushing for the increased use of
Lagarde also said China’s biggest current challenge is escaping the “middle-income trap”
the yuan for trade and investment
as part of a long-term strategic goal
to reduce dependence on the dollar.
In her speech, Lagarde also said
China’s biggest current challenge is
escaping the “middle-income trap”
- a term which refers to the large
number of developing economies
that experienced heady periods of
investment and export-driven growth
based on cheap labour only to see
their economies flatten out as their
cost advantages shrink.
Only a few countries like Taiwan
and South Korea are considered to
have successfully made the transition
in recent decades.
Lagarde called for slower, higher
quality growth in China.
“By brewing its economic cup of
tea more slowly, China will end up
with a richer taste,” she said.
China’s economic growth slowed to
just 7.4 percent last year, the slowest
in 24 years, and the IMF estimates it
will slow further to just 6.8 percent
in 2015. That is below the Chinese
government’s official target of 7.0
percent.
Reuters
PBOC’s researcher says
yuan level on proper level
The country’s top foreign exchange regulator said China
would soon allow Chinese individuals to invest in overseas
markets using the local currency through a pilot programme
Kevin Yao
T
he current level of China’s yuan
is appropriate because it reflects
foreign exchange supply and
demand and economic fundamentals,
a top central bank researcher said
on Saturday, playing down talk of
suspected official intervention.
On Friday, the yuan ended its
best week since 2007 after a rush of
dollar sales over the past few days by
major state-owned banks, possibly
acting on behalf of the central bank.
Lu Lei, head of the research
bureau at the People’s Bank of
China, reiterated the policy goal of
keeping the yuan “basically stable
on a reasonable and balanced level”.
“We believe the current level is
appropriate, it reflects the situation of
the real economy, reflects the surplus
and shortfall in global capital, also
reflects money supply of our country
and other countries,” he told reporters
on the side-lines of a forum.
The yuan’s jump of close to 1
percent during the week followed
months of weakness. Many forex
traders suspected the turnaround
was engineered by the central bank
to deter speculators who had been
betting on further yuan falls.
The yuan is currently allowed to
trade within a range 2 percent above
or below the official fixing on any
given day. Before this week, the spot
rate had been hugging the weakest
side of that band since January.
Many analysts believe the central
bank is playing a balancing act on the
yuan, because allowing it to weaken
could help support the export sector.
Any sharply depreciation could
undermine efforts to internationalise
the yuan.
Lu also said the government
would conduct more experiments in
making the yuan convertible on the
capital account, but would take steps
to manage risks from cross-border
capital flows.
Yi Gang, a deputy central bank
governor who is also the country’s top
foreign exchange regulator, said China
would soon allow Chinese individuals
to invest in overseas markets using
the local currency through a pilot
programme.
“We are studying plans to allow
individuals to invest overseas,” he told
the forum. Yi said such an investment
scheme would be launched “in the
near future”.
Shanghai, China’s financial hub,
hopes to allow individuals to invest
in overseas markets this year through
a trial scheme to be launched in its
free trade zone, a city government
website has reported.
The new Qualified Domestic
Individual Investor programme,
or QDII2, is part of measures
jointly proposed by the municipal
government, the central bank and
government regulators that would
promote capital account yuan
convertibility and international use
of the yuan.
Reuters
12 | Business Daily
March 23, 2015
Greater China
Cooperation with ADB closer
ADB president Nakao said his bank was ready to cooperate with the AIIB
Kevin Yao and Matthew Miller
C
hina is discussing
ways in which a
new regional lender
being pushed by Beijing can
cooperate with the Asian
Development Bank (ADB),
Finance Minister Lou Jiwei
said yesterday, as he sought to
fend off concerns that the two
banks would become rivals.
Some 27 countries have
now signed up to participate
in the Asian Infrastructure
Investment Bank (AIIB), a
US$50 billion fund slated to
begin operations at the end
of the year providing project
loans to developing countries.
AIIB is being seen by some
as a challenge to the Manilabased ADB and World Bank,
however, with the United
States urging countries to
think twice before signing up.
Lou described the
relationship between
AIIB and the ADB as
“complementary” and said
he had held discussions
earlier yesterday with ADB
president Takehiko Nakao on
how the two could cooperate.
“We discussed what
safeguard standards we
should adopt. I don’t agree
(with suggestions) which one
is the best,” Lou said during
a conference in Beijing.
The United States,
worried about China’s
growing diplomatic clout,
has questioned whether the
AIIB will have sufficient
standards of governance
and environmental and social
safeguards.
Lou said the bank would
reference the best practices
of multilateral agencies
but added that some of
those measures could be
cumbersome.
“We don’t believe some
bureaucratic or complex
ways are good,” he said.
He said the AIIB was
dominated by developing
countries and their requests
and demands needed to be
respected.
Early opposition to the
AIIB from Western countries
partially dissolved after
Britain said this month it
would join, with France,
Germany and Italy swiftly
following suit.
Lou told China National
Radio on Saturday 27
countries have now signed
up.
“Their participation
shows our openness and, with
some rich countries joining,
this will help improve the
Asian investment bank’s
credit rating and reduce
costs,” he said.
Their participation
shows our openness
and, with some rich
countries joining, this
will help improve the
Asian investment
bank’s credit rating
and reduce costs
Lou Jiwei,
China’s Finance Minister
Japan, Australia and
South Korea, all major U.S.
allies, remain absent from
the AIIB’s list of members.
A Japanese government
spokesman said on Friday
Tokyo maintained a “cautious
position” on participation.
Confirming the talks with
Lou, ADB president Nakao
said his bank was ready to
cooperate with the AIIB but
no decisions had been made
on specific areas.
“We have already started
sharing knowledge regarding
procurement systems (and
other technical matters),” he
told Reuters on the side-lines
of the conference.
Nakao earlier said
Asia had a huge need for
infrastructure financing,
reiterating comments made
by Lou.
Reuters
China, Japan, South Korea agree to find a summit date
The countries will try to accelerate free trade negotiations
Sam Kim
Japanese Foreign Minister Fumio Kishida (L-R), South Korean Foreign Minister Yun
Byung-Se and Chinese Foreign Minister Wang Yi shake hands prior to their meeting in
Seoul, South Korea. 21 March 2015
C
hina, Japan and South Korea
agreed to seek a meeting of
their leaders at the “earliest
convenient time” as East Asia’s
biggest economies try to repair
relations marred by historical and
territorial disputes.
The countries will also try to
accelerate free trade negotiations,
South Korea’s Foreign Ministry said
in a statement Saturday following
the first meeting of the three nations’
foreign ministers in almost three years.
“The three countries are close
neighbours and they were supposed to
be good neighbours to one another,”
Chinese Foreign Minister Wang Yi
said at a joint press conference with
his South Korean and Japanese
counterparts in Seoul.
China has demanded Japan do
more to acknowledge its militant
past and the countries said in a
joint statement that they now agree
to face history directly. Chinese
President Xi Jinping and Japanese
Prime Minister Shinzo Abe agreed
in a November summit to gradually
restart various political, diplomatic
and security talks that have been
frozen.
Relations between China and
Japan have been dominated by
disagreements over the sovereignty
of islands in the East China Sea in
recent years. China compounded
tensions by setting an air
identification zone overlapping with
those of Japan and South Korea in
November 2013. Weeks later Abe
visited a Tokyo war shrine seen
by some as a symbol of Japan’s
aggression during World War II,
sparking protests from China and
South Korea.
Long break
The three countries’ leaders last
met in May 2012, a month after
their foreign ministers met. There
have been five summits since 2008.
South Korean President Park
Geun Hye has refused to meet
separately with Abe until he does
more to atone for Japan’s wartime
wrongs and addresses the issue of
so-called comfort women, the name
given to those forced into Japanese
military brothels during World War
II.
South Korea and Japan remain
deadlocked over a set of islets
between their countries, threatening
to undermine U.S. President Barack
Obama’s efforts to maintain a united
front with its two biggest regional
partners to contend with a more
assertive China.
While Abe has sought to improve
ties with China and South Korea
-- two of Japan’s biggest trading
partners -- he’s also weighing the
wording of a planned statement in
August to mark the war anniversary.
Abe has hinted he may water down
previous expressions of remorse in
the declaration, risking an angry
response from his neighbours.
The countries are members of sixnation talks that seek to convince
North Korea to dismantle its
nuclear arms programs by offering
assistance. The U.S. and Russia are
also part of the talks.
Bloomberg News
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Business Daily | 13
March 23, 2015 Asia
Inflation prompts
Pakistan rate cut
India’s Rajan says agency
backs removing
central bank debt powers
Details of how the new agency would operate still have to be
worked out
Central bank cut its key discount rate
to 8 percent from 8.5 percent, citing
a continuing fall in inflation and an improving economy. Analysts had been
hoping for a cut, following a drop in
inflation triggered by lower oil prices,
even though the State Bank of Pakistan
cut the rate by one percentage point at
its last meeting in January. It projected
an inflation rate of between 4 and 5
percent for the full calendar year. The
rate cut takes effect today.
S.Korea exports down
South Korean exports fell slightly during
the first 20 days of March compared
with the same period a year ago, customs data showed, reflecting persistently sluggish demand offshore. Exports
during the March 1-20 period slipped 1.5
percent to US$24.549 billion from a year
ago while imports dropped at a quicker pace of 10.8 percent to US$26.653
billion, Customs Korea data showed.
Shipments from South Korea have been
suffering in past months due to weak
demand from China and Europe, where
economies have been ailing.
India’s rains risk crops
Unseasonable rainfall has damaged
some crops and could stoke food price
inflation and some shortages, though
surplus stocks of food grains would
help the country cope comfortably,
the finance minister said. “The damage to the crops and its consequential
effects would be there. It could impact
on inflation. It could impact on certain
(food) shortages,” Arun Jaitley told television channel CNN-IBN on Saturday.
“But then since we’ve surplus as far
as the foodgrains are concerned, we
can cope ... with the issue of shortage
comfortably,” he said.
Myanmar’s special zone
operational this year
The first phase of Myanmar’s Thilawa
Special Economic Zone (SEZ) project
will be completed and put into commercial operation by June, an official report
said yesterday. The Zone-A, which occupies nearly 400 hectares in southeast
Yangon, has employed 1,936 people,
mostly Myanmar people. The entire facility, which is expected to complete by
2016-17, will create some 40,000 job
opportunities, the report said. The SEZ,
the first of its kind in Myanmar, has been
constructed by Myanmar-Japan Thilawa
Development, a Myanmar-Japan joint
venture, since November 2013.
Freeport says
blockade lifted
A five-day blockade by workers at Freeport-McMoRan Inc’s Indonesian mine
ended on Saturday and normal operations were being resumed at the Grasberg site, a spokeswoman for the U.S.based miner said. The demonstration,
which began last Monday and halted
production at one of the world’s biggest
copper mines, relates to a settlement
reached with other employees at the
end of a previous dispute and was not
union-backed.
I
ndia’s central bank governor,
Raghuram Rajan, cautiously
backed a government plan
yesterday to hand over public debt
management to a new agency, as the
two sides played down reports of
friction over the biggest regulatory
shakeup in a generation.
“A public debt management
agency as a professional organisation,
independent of the (central) bank,
independent of the government, is
something that is desirable,” Rajan
told a joint news conference with
Finance Minister Arun Jaitley.
However, Rajan emphasized that
details of how the new agency would
operate still have to be worked out.
“Besides time and the nature
of resources it uses, how it works
with the central bank and with the
government, those are all details
that the government is working to
fill out. Those are the things that
have to be determined,” Rajan said.
Jaitley denied any “disconnect”
with the central bank over the
changes proposed in the budget,
which also include setting up a
monetary policy committee.
He said all the changes had been
proposed with the central bank
before being included in legislation
known as the finance bill, which is
due to be voted on by parliament
in April.
Finance ministry sources told
Reuters earlier this week that
officials at the Reserve Bank of
India had reservations about the
proposals.
Raghuram Rajan
Reuters
Abe-Kuroda honeymoon
soured by fiscal friction
Kuroda feels Japan cannot afford to delay tax hikes
and spending cuts
A
rift is emerging between Prime
Minister Shinzo Abe and his
hand-picked central bank boss
on how to fix Japan’s tattered finances,
which could blunt the impact of the
“Abenomics” stimulus policies they
have worked together to prosecute.
Two years into Bank of Japan
Governor Haruhiko Kuroda’s tenure,
the cracks are becoming hard to
conceal and could affect the timing
of any further monetary easing and an
eventual end to the massive moneyprinting programme he set in train.
Their differences over fiscal policy
needed to cut Japan’s staggering
public debt, which at 230 percent
of GDP is twice the U.S. figure and
about 50 points higher than perilous
Greece, have so far been masked by
their shared determination to end
deflation.
The perception of common purpose
is critical to giving businesses, markets
and consumers the confidence to
change behaviour and ensure that
the stimulus measures and inflation
targets are effective.
But the mask began to slip last year
when Abe decided to delay a sales tax
hike, making Japan’s primary fiscal
goal harder to achieve.
A former finance ministry
bureaucrat, Kuroda feels Japan
cannot afford to delay tax hikes and
spending cuts given its dire fiscal state,
while Abe prefers to focus more on
boosting growth to raise tax revenues.
Last month a key policy panel run
by Abe’s right-hand man, Economics
Minister Akira Amari, began debating
proposals that could water down
Japan’s fiscal target of returning to
a primary budget surplus, excluding
debt servicing costs and income from
bond sales, in fiscal 2020.
Abe has not resiled from that
target, but the panel is laying the
ground for him to add other goals
that give him more wiggle-room on
spending, government officials say.
Breach of ettiquette
His favourite idea, floated at the
panel, is to add a goal on the ratio of
debt to GDP. This ratio falls without
deep spending cuts, as long as the
BOJ maintains both low interest rates
and solid economic growth with its
massive stimulus.
Defying central bank etiquette,
Kuroda spoke against the proposals
at a panel meeting on February 12
in front of Abe.
He returned to the theme two
weeks later, despite raised eyebrows
in government.
Behind his concern is that Japan’s
huge public debt could lead to cuts
in its sovereign debt ratings, which
in turn would hurt Japanese banks
with huge bond holdings.
Delays in fiscal reform are also
likely to leave the BOJ with a bloated
balance sheet, already equal to 60
percent of GDP, for longer than it
wants.
Confrontation coming?
Kuroda earned political capital
by giving Abe what he wanted with
an intense burst of stimulus in April
2013, which boosted corporate profits
and improved consumer sentiment.
But the relationship soured when
he expanded stimulus in October to
pace up inflation without advance
consultation with the administration,
say sources familiar with the
deliberations.
KEY POINTS
Cracks appearing between
Abe and Kuroda over fiscal
target
Kuroda feels Japan shouldn’t
delay tax hikes, spending cuts
Abe open to goals affording
more spending flexibility
Rift hurts confidence in
stimulus, inflation goals
The move raised suspicion among
Abe’s aides that Kuroda was teaming
with the finance ministry to nudge a
wary premier into proceeding with the
scheduled second sales tax hike in 2015.
Weeks later, Abe decided to
postpone the tax hike despite repeated
calls from Kuroda to go ahead with
the plan.
Kuroda has continued to push
for fiscal reform, and people close to
him say the governor won’t shy from
expressing his displeasure at attempts
to loosen fiscal discipline.
This suggests political considerations
won’t influence the timing of future
easing as much as markets suspect, say
former and incumbent policy-makers
close to Kuroda.
The real test will come if and when
the BOJ succeeds in hitting its inflation
target, which would lead to higher
long-term interest rates, says Kato of
Totan Research, a veteran BOJ watcher.
Reuters
14 | Business Daily
March 23, 2015
International
AIG settlement wins
approval
American International Group shareholders won approval on Friday of a
US$970.5 million settlement resolving
claims they were misled about its subprime mortgage exposure, leading to a
liquidity crisis and US$182.3 billion in
federal bailouts. U.S. District Judge Laura
Taylor Swain in Manhattan granted final
approval at a hearing to what lawyers for
the investors call one of the largest class
action settlements to come out of the
2008 financial crisis. It marks the largest
shareholder class action settlement in
a case where no criminal or regulatory
enforcement actions were ever pursued,
the plaintiffs’ lawyers have said.
Deutsche Bank revamp
plan to hit retail
Retail operations will bear the brunt of
its planned restructuring and will most
likely be spun off in a stock market listing, two sources familiar with internal
discussions at Germany’s biggest bank
said. The bank’s supervisory board held
a 14-hour meeting in Frankfurt on Friday,
spending part of the time reviewing
three scenarios proposed by the management board, the sources said. The
supervisory board favours one proposal
that would see the bank’s retail operations, including its Postbank subsidiary,
bundled up and spun off with a separate
stock market listing, the source said.
HSBC buying bonds
of commodity
exporters
HSBC Global Asset Management, an arm
of HSBC Holdings, is buying bonds of
commodity exporting countries because
their valuations have dropped so far with
the plunge of oil prices, an executive
said. The firm, which managed US$454
billion of assets at the end of December,
is also increasing its exposure to beaten-down currencies of countries such as
Russia and Brazil because of attractive
valuations, said Olga Yangol, a vice-president and senior product specialist for
emerging markets. HSBC said assets
under management at its emerging
market-focused fund rose 30 percent
last year and were continuing to grow.
Ukraine see Russia’s
gas lower
Ukraine is confident Russia will have to
sharply lower the price it charges Kiev
for gas as increased imports from the
European Union have greatly reduced
Ukraine’s reliance on supplies from Gazprom, Ukraine’s energy minister said
on Saturday. Volodymyr Demchyshyn
was speaking after gas supply talks in
Brussels on Friday with Russia and the
European Commission. As expected,
the meeting stopped far short of a deal,
but the three sides said the atmosphere
was constructive and they would meet
again next month.
Namibia’s new
president sworn in
Hage Geingob was sworn in as Namibia
‘s new president on Saturday in the
country’s capital city Windhoek, vowing
to make poverty eradication one of the
major objectives of his administration.
In his first speech as president, Geingob declared all-out war on poverty,
he reiterated poverty eradication would
be one of the major objectives of his
administration and he stressed, “no
Namibian should be left out.”
The potential of fair
African development
Massive corruption and a lack of economic
integration are barriers to success
Joris Fioriti
A
cross Africa, where many
nations show high economic
growth rates but with little
benefit to their populations, the notion
of social and economic “emergence” is
taking hold as a remedy for perennial
pessimism.
The term has become a buzzword
among international donors and
African politicians who take it to mean
a fairer distribution of wealth and
other measures that benefit society
at large.
About 30 countries on the
continent have signed up to the
doctrine, according to the United
Nations. Ivory Coast’s President
Alassane Ouattara, who hosted a
regional conference on the theme this
week, has grabbed on to the promise
of economic emergence as he plans
to seek re-election in October.
Emergence, modelled on the
success of the “baby tigers” of Asia
-- Indonesia, Malaysia and Vietnam -as well as Brazil, Chile and Colombia
in South America, is presented as
the opposite of a capitalist and
dehumanised economic vision.
“For me, the goal of emergence
is not GDP (gross domestic product)
growth per se: it is the pursuit of greater
human health and happiness so that
each one of us can fulfil our potential
and participate fully in our societies,”
said Helen Clark, administrator for
the UN Development Programme.
Ivory Coast, the world’s leading
cocoa producer, barely four years ago
came out of a political and military
crisis after a bloody decade. It has
since achieved an annual growth
rate of 9.0 percent and is due to be
an “emerging” economy by 2020,
Ouattara told the conference, though
the Ivorian opposition considers that
goal far-fetched.
Leaders elsewhere in Africa are less
ambitious but equally determined.
Chad was aiming to emerge in 2020
but has revised the date to 2030,
like Togo. More cautiously, Senegal’s
In addition to being
strong and sustainable,
the growth that leads
us to emerge should
generate jobs, force
down unemployment
and reduce social
inequalities
Macky Sall, President of Senegal
rulers are looking to 2035 to attain
key goals.
“In addition to being strong and
sustainable, the growth that leads
us to emerge should generate jobs,
force down unemployment and
reduce social inequalities,” Senegalese
President Macky Sall said during
the forum.
The UN’s Clark envisaged that
“by 2050, an ‘emergent Africa’ would
have tripled Africa’s share of global
GDP, enabled 1.4 billion Africans to
join the middle class, and reduced
tenfold the number of people living
in extreme poverty. These are exciting
prospects.”
I n v es tm en t i n h e a l t h a n d
education and reducing inequalities
between cities and the countryside
and between men and women, along
with diversifying the economy and
appropriate infrastructure projects,
are among means cited by experts
to reach emergent targets.
‘Bet on the future’
On a continent where 300
million inhabitants were considered
middle-class citizens by the African
Development Bank (ADB) in 2011,
out of an overall population of around
one billion, “Afro-pessimism is now
giving way to optimism,” Ivory
Coast’s Planning Minister Albert
Toikeusse Mabri asserted.
“The African narrative has
changed. Just a while ago, Africa
was a place which was exceptional,
but for negative reasons. It was a
place where there was no growth,
no law,” said ADB vice-president
Steve Kayizzi-Mugerwa.
“People would say, ‘Yeah, that’s
Africa’, where there was war, quick
death, no accountability,” he said,
before adding how things have
changed.
“We can no longer blame it on
geography, we can no longer blame
it on disease, we can no longer blame
it on the colonial legacy, because
many people have emerged,” the
ADB official said, though conflict
rages in Somalia and South Sudan
and parts of the Democratic Republic
of Congo.
South Africa, Botswana,
Mozambique, Kenya and more
recently, Ivory Coast, have sparked
a more positive outlook on the
continent, impressing the financial
community with their success in
development terms.
“Emergence is a bet on the
future,” declared UNDP regional
director Abdoulaye Mar Dieye.
The ideas discussed at the
conference mean that “economic
growth without social benefits
isn’t inevitable”, said Makhtar
Diop, vice-president of the World
Bank for Africa, adding that the
“redistribution of wealth” was vital
for “social wellbeing”.
However, participants pointed
out that emergent development is
hampered by undue dependence
on a single resource, like Nigeria
and Angola which rely on their oil
exports. Massive corruption and a
lack of economic integration are also
barriers to success.
Capital flight costs Africa between
60 and 100 billion dollars a year,
said Dieye of the UNDP. “With
good governance, you see what
could be injected back into African
economies.”
AFP
Santander makes non-binding
offer for Novo Banco
Portugal’s central bank said last month that 15 banks had
pre-qualified for the sale
S
pain’s Santander said it had
presented a non-binding
offer for Portugal’s Novo
Banco, the successor to rescued
Banco Espirito Santo (BES), in the
second phase of a sale process that
has attracted 14 other potential
bidders.
Last August, the government
rescued what was once Portugal’s
biggest lender by market value with
a 4.9 billion euro (US$5.3 billion)
bailout, using mostly public funds,
after the business of its founding
family collapsed. Analysts estimate
it has assets worth around 70 billion
euros.
The Portuguese state is hoping to
recover the rescue funds from the sale,
expected to be finalised by mid-year.
Portugal’s central bank said
last month that 15 banks had prequalified for the sale, although the
list was not made public.
A spokesman for Santander, the
eurozone’s biggest bank, on Saturday
did not give any further details on
the non-binding offer.
Among other possible bidders,
Spain’s Banco Popular, was not
available to comment, while a
spokesman for BBVA, Spain’s second
largest bank that banking sources
have said was likely to have at least
studied the initial phase of the sale,
declined to comment.
Banco BPI, whose largest
shareholder is Spain’s Caixabank,
has expressed interest, while China’s
Fosun Group may also take part in
the bidding, according to local media.
Reuters
Business Daily | 15
March 23, 2015 Opinion
The
Fed
versus
price
stability
wires
Business
Leading reports from Asia’s
best business newspapers
Robert Heller
PHILSTAR
Former member of the US Federal Reserve Board of Governors
The country’s current account
surplus reached a record high
US$12.6 billion last year,
up from US$11.4 billion in
2013, the Bangko Sentral ng
Pilipinas (BSP) said in a report.
“This was mainly due to the
narrowing of the trade-in-goods
deficit and to gains in the
primary and secondary income
accounts,” the BSP said in its
latest Balance of Payments
Quarterly report. The trade-ingoods deficit during the period
narrowed by 10.3 percent as
the growth in exports outpaced
the increase in imports. The
central bank also said country
raked in US$1.1 billion in net
receipts in primary income.
THE JAPAN NEWS
Pay scale hikes that had been
agreed in this year’s “shunto”
labour-management negotiations averaged ¥2,466 per
month, the Japanese Trade
Union Confederation (Rengo)
said the same day. The average pay scale hike grew from
¥1,218 at a similar stage of the
previous year’s spring wage
negotiations. Rengo President
Nobuaki Koga told that a broad
trend of constant pay increases
has been taking shape. But
the umbrella organization for
labour unions in the country
has failed to achieve its target
of 2 percent or more, as the
¥2,466 rise represents a 0.8
percent increase.
THE KOREA HERALD
The market cap of South Korea’s top 10 business groups
listed on the main bourse has
gained 29.1 trillion won (US$25.8
billion) so far this year, a 4.26
percent jump from the end
of last year, strongly led by
Samsung Group companies,
data showed yesterday. The
10 conglomerates’ market cap
reached 712.2 trillion won as
of Friday, accounting for 51.2
percent of the total, according
to the data from market tracker
WISEfn. South Korea’s No. 1
conglomerate, Samsung Group,
increased its share value by 5.41
percent, or 17.4 trillion won.
THE NEW ZEALAND
HERALD
Six months after an unprecedented government raid
on Hawke’s Bay Seafoods,
investigations by several government agencies continue.
Alleged inconsistencies in the
Napier company’s catch numbers resulted in a Ministry of
Primary Industries-led (MPI) raid
of 88 officials from Customs,
Immigration and the Ministry
of Business Innovation and
Employment in September.
The Labour Inspectorate and
Immigration New Zealand
have confirmed they are still
investigating the Pandora-based
company, as is MPI. The family
fishing firm is a quota owner,
vessel operator, processor,
wholesaler, exporter and retailer. It exports to China and
its online business employs
several of its 150 staff.
T
here is a big difference
between the Federal
Reserve’s mandate to
maintain “stable prices” –
as enunciated in the Federal
Reserve Act – and the Fed’s
self-selected target of 2% annual inflation. So how is it that
policymakers have managed
to substitute the latter for the
former?
The term “stable prices” is
self-explanatory: a bundle of
goods will cost the same ten,
50, or even 100 years from
now. By contrast, if a country
experiences 2% inflation over
a ten-year period, the same
items that US$100 can buy
today will cost US$122 at the
end of the decade. After 100
years, the price tag will be a
whopping US$724.
In her recent Congressional
testimony, Fed Chair Janet
Yellen referred several times
to the mandate of maintaining
“stable prices”; but she mentioned the Fed’s 2% inflation
objective twice as often. “US
inflation continues to run below
the Committee’s 2% objective,” she said, and the current
“high degree of policy accommodation remains appropriate
to foster further improvement
in labour market conditions and
to promote a return of inflation
toward 2% over the medium
term.”
Does the Fed really want to
increase annual inflation to 2%,
such that the price level of the
country will increase by more
than 700% over the next century? Is that what Congress had
in mind when it tasked the Fed
with achieving “stable prices”?
Former Fed Chairman Alan
Greenspan knew that it did
Does the Fed really
want to increase
annual inflation
to 2%, such that
the price level of
the country will
increase by more
than 700% over
the next century?
not. On July 2, 1996, at a
meeting of the Federal Open
Market Committee (FOMC),
which was devoted to extensive discussion of the appropriate inflation target for the
Fed, Greenspan posed a simple question: “Are we talking
about price stability or are we
talking about zero inflation?” he
asked. “As we all know, those
are two separate things.”
The discussion quickly turned
to the difficulty of measuring inflation accurately and the need
to build in a “safety cushion”
to avoid deflation. According
to Greenspan, “Price stability
is that state in which expected
changes in the general price
level do not effectively alter
business and household decisions.” Yellen, then a Fed governor, was not satisfied: “Could
you please put a number on
that?” she asked. Greenspan
did: “I would say that number
is zero, if inflation is properly
measured,” he replied.
At the time of that FOMC
meeting, the consumer price
index was increasing at about
3% per year. Most of the discussion focused on whether
the Fed should slow annual
price growth to 2% or even
lower, thereby consolidating
the gains made in the difficult
fight against inflation that policymakers had waged for the
previous 15 years. Greenspan
summarized the consensus:
“...we have now all agreed
on 2%...”
Thus, the Fed’s 2% inflation
objective was born. During
the ensuing discussion, several FOMC members argued
that the inflation rate might be
reduced to less than 2%, but
nobody argued that inflation
should be pushed higher if a
lower, but still positive, rate
was achieved.
Following the discussion,
Greenspan exhorted the FOMC
members to keep the discussion of the inflation target secret. “I will tell you that if the
2% inflation figure gets out of
this room,” he warned, “it is
going to create more problems
for us than I think any of you
might anticipate.” The official
minutes of the meeting make
no reference to the entire discussion of the inflation target,
which took up several hours,
and the FOMC never formally
announced its 2% target for
annual inflation until Chairman
Ben Bernanke, Yellen’s predecessor, finally did so in 2012.
The 2% inflation target now is
at the forefront of FOMC decision-making. For example,
while annual inflation stood at
0.8% in December 2014, the
minutes of the January 2015
FOMC meeting refer several
times to the Committee’s need
to make “progress toward its
objectives of maximum employment and 2% inflation” by
maintaining a highly accommodative policy stance. Increasing
the rate of inflation is now the
stated objective of Fed policy.
Congress did not give the Fed
a mandate to pursue that goal.
The Federal Reserve Act is explicit: the Fed should achieve
“price stability” for the US currency, along with moderate interest rates and maximum employment. As long as inflation
is somewhere between zero
and 2%, the Fed should declare
victory and leave it at that.
Project Syndicate
16 | Business Daily
March 23, 2015
Closing
China punished 151 officials in 2014
Sinopec profit falls to lowest since 2008 crisis
The discipline watchdog for China’s central
government departments handed out punishment to
151 officials last year, the Communist Party of China
(CPC) Central Commission for Discipline Inspection
(CCDI) said on its website yesterday. The State Organs
Work Committee of the Communist Party of China
(CPC) and its discipline inspection work commission
have handled more than 3,000 tip-offs regarding
officials’ violations against Party discipline and
rules, concluding 208 cases. The commission, which is in charge of discipline for central
government departments, inspected the work style of 20 ministries and departments.
China Petroleum & Chemical Corp. posted the
lowest annual profit since the global financial
crisis in 2008 as slumping crude oil prices took
a toll on Asia’s biggest refiner. Net income for
2014 at the company known as Sinopec dropped
to 46.5 billion yuan (US$7.5 billion), or 0.397
yuan a share, from 66.1 billion yuan, or 0.53
yuan, a year earlier, according to a statement
to the Shanghai stock exchange. That compares
with a 53.5 billion-yuan mean of 23 analyst estimates compiled by Bloomberg.
Sales were 2.83 trillion yuan.
Rapid growth isn’t what
China’s economy needs
Vice Premier said reducing the growth rate is “prudent”
as the government seeks to improve the economy’s structure
Chinese Vice Premier Zhang Gaoli (R) greets Christine Lagarde (2-R), Managing Director of the International Monetary Fund (IMF),
as Jean-Pascal Tricoire (L), Chairman and CEO of Schneider Electric and Li Wei (2-L), Chair of the China Development Forum look on
during the China Development Forum 2015 at the Diaoyutai Guesthouse in Beijing, China 22 March 2015
C
hina doesn’t need the rapid
economic growth of the past
and will instead focus on
tasks including returning the blue
to Beijing’s skies, Vice Premier Zhang
Gaoli told global executives gathered
in the city.
“It is both impossible and
unnecessary to maintain the very
high growth of the past,” said Zhang,
a member of the seven-man Politburo
Standing Committee, the nation’s top
decision-making body. “We’ve paid
the price for that,” he said yesterday.
“It’s not sustainable.”
China’s growth has cooled as
officials rein in local-government debt,
crack down on graft and strengthen
environmental laws after economic
expansion averaged about 10 percent
annually over 30 years. Premier Li
Keqiang’s targeted gain of about 7
percent in gross domestic product this
year would be the smallest increase
since 1990.
“Maintaining a growth rate of
7 percent for the next few years is
not possible,” Nouriel Roubini, an
economist who teaches at New York
University’s Stern School of Business,
said at the China Development
Forum on Saturday. “The only way
you could do so is by increasing
further the amount of credit relative
Modi appeals to farmers on
controversial land reforms
I
to GDP and that increase of leverage
eventually is going to lead to massive
losses.”
President Xi Jinping and other
leaders describe the slowdown as a
“new normal” and a “higher quality”
of expansion. Yesterday, Zhang said
reducing the growth rate is “prudent”
as the government seeks to improve
the economy’s structure and tackle
challenges such as large wealth gaps
between regions.
Economic boom
The country’s leaders unleashed
an unprecedented boom by
channelling millions of people
from the countryside to factories
making shoes, toys and electronics
for export, and by spending on the
roads, power plants and ports that
allowed China to become the world’s
largest trading nation. That model
is no longer sustainable.
China’s advantages have
weakened as labour costs increase,
Zhang told the forum attended by
chief executives including Microsoft
Corp.’s Satya Nadella, HSBC
Holdings Plc’s Stuart Gulliver,
International Business Machines
Corp.’s Virginia Rometty and
Ford Motor Co.’s Mark Fields.
International Monetary Fund
Managing Director Christine
Lagarde said in a speech that China
“badly needed” structural reforms.
Separately, commenting on
anti-monopoly cases, Zhang
said the government won’t treat
foreign companies differently than
domestic ones. In February, Chinese
regulators fined Qualcomm Inc.
US$975 million and set licensing
rates for the company’s mobilephone chip technology after finding
it guilty of antitrust violations.
‘Going stronger’
Executives said they continued to
see great opportunities in the nation,
with DuPont Co.’s Ellen Kullman
saying China was “going stronger”
and 7 percent growth was “still very
good.”
Rio Tinto Group’s Sam Walsh
echoed that sentiment, saying that
he’d read many reports “lamenting”
that growth last year was the worst
in about 25 years. “But we forget
just how extraordinary that quartercentury has been, and how distorted
our reference point has become,”
Walsh said.
Bloomberg News
China to keep prudent
monetary policy
Top industrial firm eyes
farming amid slowdown
C
C
ndian Prime Minister Narendra Modi appealed
to farmers yesterday to support his planned
changes to rules on land purchases, amid
rising opposition to a key reform of his rightwing government.
Modi, who swept to power in general elections
last May, has made changing the rules a major
part of his plans to kick-start industrial projects
and accelerate growth to create much-needed
jobs.
But opposition parties joined forces last week
to march on parliament against the proposed
legislative changes in a rare show of unity, saying
India’s millions of poor farmers will be hard hit
in favour of big business.
On his monthly radio show yesterday, Modi
urged farmers not to be “misled by the lies and
rumours” spread by his political opponents, saying
“I will not break your trust”.
“Rumours were spreading that Modi is bringing
in a law that is unfair to farmers. My farmer brothers
and sisters, I cannot even think of committing
such a sin,” he said.
hina could undermine structural reforms if it
adopts an excessively loose monetary policy,
central bank governor Zhou Xiaochuan
said yesterday, pledging to relax capital controls
to help make the yuan currency fully convertible.
Zhou also sought to soothe concerns over the
impact of volatile capital flows on China’s economy,
saying a war chest of foreign exchange reserves
provides a buffer and the country has the capacity
to deal with short-term speculative outflows.
Zhou reiterated that the central bank still
maintains its prudent monetary policy, despite
recent cuts in interest rates and bank reserve
requirement ratios.
China’s central bank has maintained the policy
since 2011, raising or cutting interest rates in
line with shifts in the economy. But it has been
stressing the need to fine-tune policy to support
growth, which in 2014 recorded its slowest pace
in 24 years, at 7.4 percent.
“If we adopt excessively loose monetary policy,
it will not be favourable for structural reforms,”
Zhou told a conference in Beijing.
AFP
Reuters
hina’s leading construction machinery
producer Zoomlion has contracted
a large rice field in central China’s
Hunan Province as the company launches into
mechanical farming.
A 253-hectare farm that will demonstrate
modern agriculture and be operated by Zoomlion
Heavy Industry Science & Technology Development
Co., Ltd. in the outskirts of Changsha, Hunan’s
provincial capital, was officially inaugurated on
Friday.
The company plans to develop more machinery
to carry out intensive cultivation on the farmland,
Li Jiangtao, deputy executive manager of Zoomlion,
said yesterday.
Zoomlion specializes in making large
construction machinery and has eyed the
agricultural sector as a new growth area amid
decreasing income from industrial manufacturing.
It signed a deal worth US$340 million in August
last year to purchase a majority share in farm
machinery maker Chery Heavy, paving the way
for its march into the agricultural sector.
Xinhua