19 April 2019

HKEJ Today: Highlights

Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Monday, Dec. 30:


China to take tougher stance on loss-making SOEs

The Chinese government has pledged to step up efforts next year in evaluating the performance of state-owned enterprises, in a move aimed at improving the firms’ profitability and operational efficiency. Relevant disciplinary action will be taken against SOEs that have made losses continuously, the state-backed Xinhua news agency reported, citing officials at the State-owned Assets Supervision and Administration Commission. Economists expect SOEs in the energy and grain production industries to face increased pressure. State firms with structural problems in their incomes are likely to be affected the most, but those listed in Hong Kong are unlikely to see much impact from the move as they rarely post prolonged losses, according to the economists.

New Hope Liuhe aims to boost overseas business

Interview: New Hope Liuhe Co. Ltd. (000876.CN), a leading mainland enterprise involved in agriculture and livestock breeding, is seeking to raise the contribution from overseas business to 20 percent from the existing 5 percent in five years, tapping into opportunities arising from potential supportive measures endorsed by top leaders in Beijing, said co-chairwoman and chief executive Chen Chunhua {陳春花}. The company is planning to establish a presence in Russia and seek more opportunities in imports of crops and meats. It is also considering an overseas listing after consolidating its businesses in countries such as Vietnam, Indonesia, the Philippines, Egypt and Bangladesh.


Hong Kong mulls fiscal measures to cope with aging population

The Hong Kong government may resort to raising taxes or debt issuance in an attempt to cope with the issue of aging population in the city that is possibly taking a toll on the fiscal reserve, Financial Secretary John Tsang wrote in his blog. The city can hardly maintain its 4.5 percent annual growth given an aging population, while the government has a recurrent fiscal expenditure of about HK$400 billion (US$51.58 billion) every year, Tsang said, adding that the city should be ready for the suggested move as a potential precautionary measure, even though it may not be undertaken in the near future. A report on a government-led review on the issue is due to be released in February.

Hong Kong may lose advantage in logistics amid slow infrastructure devt, Yeo warns

Interview: Hong Kong’s slow pace in the construction of new infrastructure, such as the third runway at the airport, is putting the city at a disadvantage in competition against rivals in the regional logistics market, said Kerry Logistics Network Ltd. (00636.HK) chairman Yeo Yong Boon. Yeo warned that business will adjust to the market. He was responding to a question whether his company will move its headquarters out of Hong Kong although the city is at the heart of the regional logistics market. The company, however, sees greater opportunities from the mainland, given closer ties with other countries in Southeast Asia.

Loss-making SOEs continue window-dressing through asset sales

At least five state-owned enterprises in Hong Kong have kept selling assets to make up for their prolonged losses. The SOEs include Aluminum Corp. of China Ltd. (02600.HK), China COSCO Holdings Co. Ltd. (01919.HK), and Angang Steel Co. Ltd. (00347.HK). Aluminum Corp. and China COSCO remained in red for the first nine months this year, with loss of 1.85 billion and 2.03 billion yuan (US$334.47 million) respectively, despite the asset sales. Angang Steel, meanwhile, has turned around to a profit of 765 million yuan.


Beijing’s refusal to hear people’s views risks civil disobedience, Tai says

Interview: A key organizer of the civil disobedience Occupy Central movement in Hong Kong has warned that Beijing would risk prompting people to take to the streets if it insists on forcing its views on universal suffrage in the city. Benny Tai, who is also a University of Hong Kong law professor, said Beijing’s reference to the so-called “legislative intention” during the drafting of the Basic Law in mid-1980s in interpreting universal suffrage provisions in the Law such as the functioning of the nomination committee has been abandoned in many Western countries. 

New Year rally organizers urge police to prevent clashes

Organizers of the New Year’s pro-democracy march has called on the Hong Kong police to help prevent clashes between participants and a pro-Beijing group, which plans to set up booths along the route of the procession. The Civil Human Rights Front has also urged participants to exercise restraint and not confront with the patriotic groups. The group said it expects more than 50,000 people to join the rally, during which the Occupy Central organizers would hold a referendum via mobile phone on three questions relating to the universal suffrage for 2017 chief executive election. One question concerns whether the element of civil nomination should be included in the nomination system.


Room for rise in RMB value may be limited next year

The People’s Bank of China set the renminbi’s daily midpoint at 6.1050 per US dollar on Friday, its strongest level since a landmark exchange rate reform in 2005. The reference rate has risen 2.96 percent this year, much higher than the 1.3 percent increase in 2012. Following this year’s rise, the exchange rate between RMB and the US dollar is close to its equilibrium level. As China will further widen the band of rise and fall of the reference rate next year, the room for rise of the value of RMB will be limited next year. A market-driven exchange rate system could become the norm.


Beijing may benefit from Abe’s shrine visit, Shi says

The strength of rightwing forces and anti-China voices looks set to rise further in Japan next year as its economy is expected to see marked growth after almost two decades, Stanford University researcher Shi Litai wrote. With the confidence of the Japanese people rising, their aspiration for stronger defense is also likely to grow. But the visit of Prime Minister Shinzo Abe to the Yasukuni Shrine has rubbed the sensitive nerves of the United States, which may adopt a tougher strategy towards Tokyo. China may indeed benefit from the Abe visit.

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