Knife attacker capturedon video cameraSurveillance footage revealedthat a man who went on a kniferampage at Guangzhou RailwayStation on Tuesday waitedoutside for two hours beforerandomly slashing passengers. Asource close to local police saidthe man had three accompliceswho fled the scene. > CHINA A8

HSBC profits down20pc, outlook muted

HSBC revealed a 20 per centyear-on-year fall in profits for thefirst quarter of 2014, and profitsare likely to remain underpressure for at least two morequarters because of a change inthe way it accounts for certainareas of business. > BUSINESS B1

Shopping tycoon givesHK$100m to the arts

The US-born founder of the DFSGroup, a Hong Kong shoppingchain, will give HK$100 millionto the Asia Society Hong KongCentre to promote the arts. Themoney will go towardscommissioning new works orstaging performances at thecentre in Admiralty. > CITY C1

Protests scupper latestvote on waste plans

The environment minister madeanother appeal for HK$20 billionproposals to be approved totackle the city’s growing wastepile, but lawmakers again failedto vote. A Legco subcommitteemeeting was forced to endbecause of filibustering andprotests. > CITY C2

DIGEST

Inside the mind of thefearsome leader of BokoHaram extremists > PAGE A13

Allah hastold me tosell your girls

WORLD

Singapore’s online lynchmobs expose the ugly side ofits expat population > PAGE A10

Let’s get thiswhite trashOUT!!!!

ASIA

‘Time to bury the blue dress’Monica Lewinksy breaks the long silence on her affair with Bill Clinton> W O R L D A1 2

Take that!Outcry after Chinese womancaptured brawling withofficial at Manila airport> A S I A A11

Day of reckoningCorruption trial opens offormer chief secretary andbillionaire Kwok brothers> L E A D I N G T H E N E W S A 3

Asian golf has hit a rough patchbut will roar back, says tour chief

> S P O R T B AC K PAG E

Let the goodtimes roll

Thursday, May 8, 2014 / See live updates at www.scmp.com / HK$9PUBLISHED SINCE 1903 / VOLUME LXX / NO 126

BRIDGING THE HIMALAYAN DIVIDE > PAGE A4

FOCUS

Tensions in the South China Seaflared up yesterday as China ex-changed harsh rhetoric with thePhilippines and Vietnam afterconfrontations in the waters.

Hanoi said its vessels collidedwith Chinese ships near watersoff the Paracel Islands, where aChinese oil company is establish-ing a rig. And in the SpratlyIslands, a Chinese fishing boatwas apprehended by Philippinemaritime police.

The three countries have hadincreasingly tense disputes over

areas of the South China Sea. TheChinese foreign ministry re-buked both nations for disturb-ing the “normal operations” ofvessels in Chinese waters.

Ministry spokesman HuaChunying said the move-ments in the Paracel Islands were“within China’s sovereignty andnot related to Vietnam”.

Hanoi said the drilling was il-legal and sent patrol vessels to thearea, resulting in at least threecollisions with Chinese boatssince Beijing said it was drillingon Saturday.

The deputy commander ofVietnam’s maritime police, NgoNgoc Thu, said the Chinese “ac-

tively used water cannon toattack Vietnamese law enforce-ment vessels”.

“Some Vietnamese peoplewere injured by broken glass as aresult of the clash,” he said.

In the other flashpoint, Bei-jing sent a maritime police vesselto the Half Moon Shoal in theSpratly Islands, where the Chi-nese fishing boat was seized byPhilippine maritime police, andmade representation to Manila.

The vessel with 11 crew wasseized on Tuesday along with 350marine turtles. Charges of catch-ing endangered green sea turtleswould be laid, the Philippine gov-ernment said, calling it a move to“uphold sovereign rights”.

Hua hit back, saying: “We de-mand the Philippines give a rea-sonable explanation, and imme-

diately release the vessel and thecrew members on board.”

Chinese fishermen said sev-eral armed men forced them-selves onto two fishing vessels,one of which escaped.

“Up to 10 warning shots werefired,” said a crew member.

Observers said the incidentsindicated there would be moreconfrontations, though militaryclashes were unlikely. “The sus-picions among these nations arewidening,” said Zhang Mingliang

, an expert in regional af-fairs at Jinan University.

Du Jifeng , of the Chi-nese Academy of Social Sciences,said: “New conflicts will emergewhen old ones are not resolved.”Additional reporting by AssociatedPress, Agence France-Presse,Reuters

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Teddy Ng in Beijingand Agencies in Hanoi and Manila

Beijing hits out after Philippines seizes fishingvessel and collision with Vietnamese boats

Tensions surge in South China SeaMARITIME DISPUTES

Macau is facing a major capital-flight crackdown amid Beijingconcerns that tens of billions ofyuan in illicit funds are being fun-nelled out of the mainland andinto casinos in contravention ofnational currency controls.

China’s state-backed bankpayment card UnionPay lastnight announced a raft of mea-sures in what it described as a“committed” drive to “combatoverseas money laundering, cap-ital flight and other illegal bankcard use” in the former Portu-guese enclave.

Gaming insiders and securitysources in Macau told the SouthChina Morning Post that the anti-corruption drive launched byPresident Xi Jinping hadtaken the problem of paymentcard transactions to worryinglevels, much of it driven by hun-dreds of illegal hand-held pay-ment devices used in and aroundthe booming casinos.

Analysts say the amount in-volved could have been morethan 40 billion yuan (HK$50.3 bil-lion) last year.

Mobile UnionPay paymentdevices from the mainland haveillegally entered Macau at a rapidrate and are being used for un-authorised dealings that appearas domestic transactions, there-by circumventing currency con-

trols. The mobile swipe devicesare also used to evade tax on themainland, which is why they re-quire authorisation for use there.

Macau police have carried outa handful of raids in and aroundcasinos in recent months andseized devices and cash, but theproblem has reached dimen-sions that the central govern-ment could no longer ignore, saida well-placed gaming analyst.

“The growth in paymentcards is huge, because of China’scorruption crackdown. Main-land gamblers in Macau don’twant to reveal how much theygamble, so they use cards,” theanalyst said. The phenomenonmeant under-reporting of gam-ing revenue, he added.

Officially reported gamingrevenue in Macau stood at US$45billion last year, but the analystestimated there was a furtherUS$90 billion unreported.

A Macau consultant familiarwith the pawnshop industry esti-mated 200 billion yuan of trans-actions are conducted in Macaueach year through UnionPaycards, around 20 per cent of themthrough mobile devices.

Yesterday the Macau GeneralChamber of Pawnbrokers saidthe multibillion-yuan illicit tradehad caused their business toslump by as much as 40 per cent.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Toh Han Shih and Niall Fraser

State-backed UnionPay announces measures tostem massive flight of capital from the mainlandthrough illegal payment devices used by visitors

SWIPE-CARD CRACKDOWN IN MACAU CASINOS

GAMBLING

> CONTINUED ON A3

> HARRY’S VIEW A16

A Thai court yesterday foundPrime Minister Yingluck Shina-watra guilty of violating the con-stitution and said she must stepdown, prolonging a political cri-sis that has led to violent protests.

The decision is bound toanger Yingluck’s supporters, butthe court did allow ministers notimplicated in the case to stay inoffice, a move that could takesome sting out of any backlash.

After the ruling, the cabinetsaid Commerce Minister Niwat-thamrong Bunsongphaisan, whois also a deputy prime minister,would replace Yingluck, and thecaretaker government wouldpress ahead with plans for anelection on July 20.

Yingluck, who faced sixmonths of sometimes deadlyprotests in the capital, Bangkok,thanked the Thai people in a tele-vised news conference.

“Throughout my time asprime minister I have given my all

to my work for the benefit of mycountrymen … I have never com-mitted any unlawful acts, as Ihave been accused of doing,” shesaid. “From now on, no matterwhat situation I am in, I will walkon the path of democracy. I amsad I will not be able to serve youafter this.”

There is still no obvious end insight to Thailand’s turmoil, withprotesters still pushing for politi-cal reforms before new elections.

The judge who delivered theverdict in the ConstitutionalCourt said Yingluck had abusedher position by transferring a se-curity chief to another post in

2011so that a relative could bene-fit from subsequent job moves.

“The accused was involved inthe transfer of Thawil Pliensrifrom his position as National Se-curity Council head,” the judgesaid, adding this was done so thatPriewpan Damapong, a relative,could “gain a new position”.“Thetransfer wasn’t done for the ben-efit of the country,” he added.

Yingluck, the sister of oustedpremier Thaksin Shinawatra, de-nied wrongdoing in court onTuesday. She was not present foryesterday’s ruling.

> RESILIENT ‘STOOGE’ A11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Reuters in Bangkok

Yingluck Shinawatra is given roses in a Bangkok suburb yesterday after a court found her guilty of violating the constitution . Photos: AFP

Court orders Yingluck to stand down from top job

THAILAND

From now on, no matter whatsituation I am in,I will walk on the path ofdemocracyYINGLUCK SHINAWATRA

Anti-government supporterscelebrate the court’s ruling.

Thursday, May 8, 2014 A3

LEADING THE NEWS

A Shenzhen court sentencedHong Kong publisher Yiu Man-tin to 10 years in jail yesterday for“smuggling ordinary goods”, hislawyer said.

The retired engineer-turned-publisher, 73, who is also knownas Yao Wentian, was detained onOctober 27. Prior to his arrest hehad been preparing to publish abook entitled Godfather Xi Jin-ping by dissident and writer YuJie , according to his familyand friends.

“The verdict is unfair,” DingXikui , Yiu’s lawyer, said.

Yu Jie said: “It’s a persecutionof intellectuals for their wordsand a blow to Hong Kong’s free-dom of speech and press.”

Yiu’s 74-year-old wife, whorecently underwent foot surgeryin Hong Kong and could notmake it to the Shenzhen Interme-diate People’s Court, said she wascontemplating an appeal: “Ofcourse I think the verdict isunjust. He did nothing wrong. I

want to appeal, but I have to dis-cuss that with the lawyers first.”

Yiu was formally arrested onNovember 12. Due to his declin-ing health, which includes asth-ma and heart problems, he hadbeen held in the medical ward ofa detention centre. His lawyer’srequest for medical parole wasrejected.

Authorities in Shenzhen saidYiu brought in bottles of industri-al paint from Hong Kong withoutpaying import duties.

But his son, Edmond YiuYung-chin, believed his fatherhad been set up to prevent himfrom publishing “subversive”books on Chinese leaders.

In January, the younger Yiuwrote an open letter that calledon President Xi Jinping tostop the “political persecution” ofhis father and honour HongKong’s press freedom.

In the letter, he noted that Yiuhad been harassed before forcollaborating with Yu on hisearlier book, Hu Jintao: HarmonyKing, an examination of theformer president and his “har-monious” rule.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Angela Mengangela.meng@scmp.com

Shenzhen court jails HKpublisher for 10 years

COURTS

Indebted gamblers traditionallypawn their valuables but nowhave another readily availableoption.

Chou Chin-leong, presidentof the pawnbroking body, saidthey would seek help from theMacau government. “We wantthe government to take enforce-ment action to combat such ille-gal transactions and set up a newlaw if necessary,” Chou said.

Last night a UnionPayspokesman told the Post they hadfully implemented a series ofstringent risk-prevention mea-sures and were establishing “aneffective mechanism with regula-tory and law enforcement bodiesacross borders to share risk intel-

ligence and investigate suspi-cious practices”.

Payment cards were widelyused in Macau casinos, said JohnBruce, Macau director of riskconsultancy Hill & Associates.“It’s to circumvent China’s cur-rency controls. Otherwise main-land gamblers cannot get enoughmoney to gamble,” he said.

A Macau government spokes-woman said: “UnionPay cardsare not allowed to be used inMacau casinos. The recent spo-radic cases of individuals carry-ing mobile machines for swipingpayment cards were of a criminalnature and were dealt with by thepolice.” Additional reporting by Clifford Lo

Casino card crackdown

CONTINUED FROM A1

All eyes will be on the Court ofFirst Instance today as the city’sformer No 2 official and the co-chairmen of one of the world’smajor real estate firms face trial inthe biggest corruption court casein Hong Kong’s history.

At issue is the HK$34 millionin bribes and other financial in-ducements that former chief sec-retary Rafael Hui Si-yan allegedlyreceived from billionaire broth-ers Thomas Kwok Ping-kwongand Raymond Kwok Ping-luen,the chairmen of Sun Hung KaiProperties (SHKP).

Prominent names in govern-ment and business are amongthe 82 prosecution witnesses list-ed for a case that has become acause célèbre for the Indepen-dent Commission Against Cor-ruption and prosecution officials.

Scheduled to last 70 days, thetrial before Mr Justice AndrewMacrae begins more than twoyears after Hui and the Kwokswere arrested in March 2012.

Listed as the first defendant,Hui stands accused of receivingfinancial inducements that in-cluded HK$28.8 million in cash,HK$5.4 million in loans and therent-free use of two luxury flats inHappy Valley when he held keygovernment positions between2000 and 2009. Hui, 66, is thehighest-ranking former officialever to face trial in the city.

According to the latest indict-ment issued by the prosecution

in February, Hui faces eight crim-inal charges, five of which heshares with either or both of theKwoks. They include conspiracyto offer an advantage to a publicservant, misconduct in public of-fice and conspiracy to commitmisconduct in public office.

The oldest accusationsagainst Hui date back to 2000when, it is alleged, he failed to dis-close negotiations with SHKP fora “consultancy agreement” whilehe was managing director of theMandatory Provident FundSchemes Authority, a govern-ment body. The prosecution alsosays Hui received HK$2.4 millionin unsecured loans from a com-pany owned by SHKP.

As he rose to be chief secretaryin 2005, under the administrationof chief executive Donald TsangYam-kuen, the Kwoks allegedlybribed him with cash. The elderbrother, Thomas, is alleged tohave given Hui a cheque forHK$5 million in return for his

being “favourably disposed” tothe property magnate duringHui’s tenure as chief secretaryfrom 2005 to 2007.

Raymond Kwok is accused ofbribing Hui with HK$4.125 mil-lion in the same period. Ray-mond Kwok and Hui are jointlycharged with conspiracy to com-mit misconduct in public office.

Raymond Kwok and Hui alsoface a charge of furnishing falseinformation contained in an in-voice for the same sum. The in-

voice was “in respect of services ...from April 2005 to February 2006,and to be paid in recognition ofRafael Hui’s excellent perfor-mance over the past 13 months”,according to the indictment.

Two other bribery chargesalso concern other defendants,and cover Hui’s tenure as chiefsecretary and, subsequently, as anon-official member of the Exec-utive Council until 2009.

The brothers and Hui are ac-cused of conspiring with SHKPexecutive director Thomas ChanKui-yuen and former Hong Kongstock exchange official FrancisKwan Hung-sang to commit mis-conduct in public office. The fourare alleged to have arranged a se-ries of payments totalling HK$8.5million to induce Hui to remainfavourably disposed to SHKP.Another charge facing all five isconspiracy to offer an advantage– HK$11.182 million worth of pay-ments – to Hui as a publicservant.

The eldest Kwok brother, Wal-ter Kwok Ping-sheung, was ar-rested by graft-busters in 2012but was not named as a defen-dant or witness by the prosecu-tion. Walter Kwok resigned fromhis position as a non-executivedirector of SHKP in January.

The list of witnesses submit-ted by prosecutors includes twoex-ministers who served along-side Hui: former housing andeducation minister Michael SuenMing-yeung and ex-commerceminister Rita Lau Ng Wai-lan.

Former Hong Kong Ex-changes and Clearing chairmanCharles Lee Yeh-kwong, AdelineWong Ching-man, formerundersecretary for constitutionaland mainland affairs and Hui’sadministrative assistant, andAlice Lau Yim, permanent secre-tary in Chief Executive LeungChun-ying’s office, will alsotestify.

> BIG LEGAL NAMES C3

COURTS

STAGE SET FOR BIGGEST GRAFTTRIAL IN HONG KONG HISTORYFormer chief secretaryRafael Hui andproperty tycoon Kwokbrothers face multiplecharges in HK$34mcorruption case

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stuart Laustuart.lau@scmp.com

Former chief secretary Rafael Hui Si-yan is alleged to have received millions of dollars in bribes and other inducements. Photo: Sam Tsang

82Number of prosecutionwitnesses who are listed forthe city’s biggestcorruption trial

> P R O P E R T Y P O S T

Price pickupNew home prices on the mainland

rise further in recovery sign

Graft campaignFormer HuJintao aide’sarticle adds to confusion over his fate

> N E W S A 3

A city mourns Sydneysiderscome to termswith loss of twoof their own incafe tragedy

> N E W S A 9

Dropped shotRoyal Trophytournamentpostponed daysbefore tee-off in Guangzhou

> S P O R T B AC K PAG E

Wednesday, December 17, 2014 / See live updates at www.scmp.com / HK$9PUBLISHED SINCE 1903 / VOLUME LXX / NO 349

Mainland to amend wildlife protection lawWild animals will get enhanced protection under planned changes tothe 1988 law that are aimed at recognising animal welfare for the firsttime. While the current law protects some endangered species, thereare no specific ways to punish cruelty to wildlife. > CHINA A6

Illicit cash outflows from mainland at US$1.25trThe money from tax evasion, crime and corruption that illegally leftthe mainland between 2003 and 2012 was the largest among 151developed nations in a survey by a US advocacy group. Suchoutflows rose 53 per cent in 2012 alone over the previous year.> BUSINESS B1

Power price rise to be less than expectedConsumers in Kowloon, Lantau and the New Territories will pay 3.1per cent more for their power next year, less than the 11.8 per centCLP had originally projected. A fall in international fuel prices isbehind the lower rise, the company said. > CITY C1

Donor pays respect to tsunami victimsA donation to Operation Santa Claus of HK$500,000 came with aletter dedicating the money to victims of the 2004 Boxing Daytsunami that killed over 200,000 people. The anonymous donor andfamily had miraculously survived the catastrophe. > CITY C2

Former Nazi tourist resort gets makeoverAn enormous complex on the Baltic Sea coast originally designed bythe Third Reich as a vacation spot for workers but largely abandonedin recent years has been taken over by investors seeking to turn itinto a luxury resort for a new age. > WORLD A10

DIGEST

The government’s new homestarget for the next 10 years hasbeen boosted by 10,000 – mean-ing a total of 480,000 public andprivate units are planned by 2025.

But critics said even the moreambitious proposals would dolittle to bring down property pric-es and some doubted the targetwould even be met.

Transport and housing secre-tary Professor Anthony CheungBing-leung conceded that HongKong had difficulties findingenough land for residential de-velopment, as he released thelong-awaited Long Term Hous-ing Strategy report yesterday.

Cheung added the revised tar-get would have an impact on local communities and called forpublic support.

It is not guaranteed the targetwill be met as some public hous-ing sites have yet to secure plan-ning permission.

“Local communities oftenworry about the impact of hous-ing development on traffic, theenvironment and the provisionof community facilities,” Cheungsaid. “We have to accept that‘zero impact’ is simply impossi-ble in any housing project.”

The ambition now is to build480,000 new homes between2015/16 and 2024/25. That marks

a step up from the plan for470,000 new flats from 2014/15 to 2023/24 announced in ChiefExecutive Leung Chun-ying’spolicy address in January.

The new goal was based on projections that took into account demographic changes,redevelopment plans and data on those living in inadequatehousing, the Transport andHousing Bureau said.

All the extra 10,000 homes will be subsidised flats for sale, in the form of the Home Owner-ship Scheme or any new pro-grammes. Yesterday’s report revealed the administration was studying ways to “expand the forms of subsidised homeownership”.

Among the 480,000 homes,200,000 will be public rental flats,90,000 will be subsidised flats

for sale and 190,000 will be private homes.

The government has foundsites for 254,000 of the 290,000public flats so far, according tohousing director Stanley YingYiu-hong. However, not all thosesites have planning permission.

Stanley Wong Yuen-fai, vice-chairman of the Town PlanningBoard who also sits on the LongTerm Housing Strategy SteeringCommittee, described the newtarget as “pragmatic” but saidmore needed to be done to findenough land.

Andy Kwan Cheuk-chiu,director of the ACE Centre for Business and Economic Research, said it would not be difficult to find enough land tomeet the target if the political will was there.

“Now that the latest estimateis that 480,000 flats are needed in the next decade, the questionis, how committed is the govern-ment to fulfilling this?” Kwanasked.

But Professor Raymond SoWai-man from the Housing Au-thority was more pessimistic.

“It is quite likely the new targetwon’t be reached. Even Secretaryfor Development Paul Chan Mo-po has earlier said land supplywon’t be able to meet the previ-ous target to build 470,000 flats.”

Victor Lui Ting, deputy man-aging director of Sun Hung KaiProperties, welcomed the newtarget. “It is beneficial to buyers,developers and also to the prop-erty market.”

> MORE REPORTS C1

More public and private flats are to be built inthe next decade – but critics say it’s not enough and not all of the sites have been secured

TARGET FOR NEWHOMES RAISED TO480,000 BY 2025

HOUSING

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Fanny W.Y. Fung and Phila Siu

Hitting homeHousing supply targetfrom 2015/16 - 2024/25

Total: 480,000

Source: Transport and Housing Bureau SCMP

Subsidisedflats for sale Public

rentalhousing200,000

90,000

Privatehousing

190,000

Taliban gunmen stormed aschool in Pakistan and shot deadat least 141 people, mostly chil-dren, in the worst attack to hit thecountry in years.

Officials said 132 of the victimsat the army-run school, in thenorthwestern city of Peshawar,were children, some as young as12, while nine others were staffmembers. All seven attackerswere also killed.

The horrific attack, carried outby militants from the Tehreek-e-Taliban, a group trying to over-throw the Pakistani government,also sent dozens of woundedflooding into hospitals as terrifiedparents searched for their chil-dren.

Pakistani Prime Minister Na-waz Sharif condemned the as-sault and rushed to Peshawar.

Nobel peace laureate MalalaYousafzai, 17, who was shot in thehead by the Taliban in 2012 for in-sisting girls had a right to an edu-

cation, said she was “heartbro-ken” by “the senseless and coldblooded” killing.

United States President Ba-rack Obama condemned the“heinous attack” saying “terror-ists have once again shown theirdepravity.” He said the US standsby the people of Pakistan andsupports the country “in its ef-forts to combat terrorism and ex-tremism and to promote peaceand stability in the region.”

Tahir Ali, arriving at the hospi-tal to collect the body of his 14-year-old son Abdullah, said: “Myson was in uniform in the morn-ing. He is in a casket now. My sonwas my dream. My dream hasbeen killed.”

The attack began in the morn-ing, when the seven gunmenwearing explosive vests enteredthe school and started shootingat random, police said. Armycommandos exchanged fire withthe gunmen and students wear-ing their green school uniformscould be seen fleeing the area.

Outside the school, two loud

booms were heard coming fromthe scene in the early afternoon,as Pakistani troops battled withthe attackers.

The prime minister vowedthat the country would not becowed by the violence and thatthe military would continue with an aggressive operationlaunched in June in the NorthWaziristan tribal area to routmilitants.

“The fight will continue. Noone should have any doubt aboutit,” Sharif said.

The Pakistani military said allseven gunmen had been killed,but bombs they planted werehampering the speed of the clear-ance.

Taliban spokesman Moham-med Khurasani claimed respon-sibility for the attack, saying sixsuicide bombers had carried outthe attack in revenge for the kill-ings of Taliban members at thehands of Pakistani authorities.

This appeared to be the worstattack in the nation since the2008 Karachi suicide bombingkilled 150 people.

> PLAYING DEAD A8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Associated Press in Peshawar

The coffin of a pupil, killed in the school attack by militants, is carried from a hospital in Peshawar. Photo: Xinhua

Children are majority of victims in Pakistan’s worst attack in years

Taliban kill 141 in school massacre

PAKISTAN

My son was inuniform in themorning. He is in a casket nowTAHIR ALI, FATHER OF ONE OF THE VICTIMSAT THE ARMY-RUN SCHOOL

PAKISTAN

INDIA

✪Islamabad

200km

SCMP

Peshawar

Beijing is to launch a major crack-down on the multibillion-dollarflow of illicit funds through Ma-cau casinos in a coordinated se-curity drive that will see the coun-try’s powerful Ministry of PublicSecurity play a leading role.

The unprecedented move –confirmed by documents seen bythe Postthat were sent to Macau’sbanks late yesterday by the city’smonetary authority – turns upthe heat on controversial VIP junket operators who generatethe bulk of Macau gaming reve-nues as they come under increas-ing law enforcement scrutinyamid the “tigers and flies” anti-corruption drive by President Xi Jinping .

It also piles more pressure onthe Macau government to comeup with a plan to diversify itscasino-reliant economy as it pre-pares for a visit by Xi on Friday tomark the 15th anniversary of the

former Portuguese enclave’sreturn to Chinese sovereignty.

Macau casinos are goingthrough one of the most signifi-cant slumps since the market wasliberalised in 2002 and the dropin revenues – linked directly tothe anti-corruption drive – hasprompted a series of warningsfrom senior mainland figuresthat the situation poses a dangernot only to the city’s economicfuture but to the interests of thenation “as a whole”.

According to sources withknowledge of the situation, thenew security drive will give theministry’s Economic CrimesInvestigation Bureau electronicaccess to all transfers through thestate-backed China UnionPaybank payment card to identifysuspicious transactions.

The bureau is spearheadingthe “Fox Hunt” operation aimedat securing the return of corruptparty officials who have fled

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Niall Fraserniall.fraser@scmp.com

Beijing launches majorcrackdown on flow ofillicit funds to Macau

CRIME

> CONTINUED ON A4

>HARRY’S VIEW A12

A4 Wednesday, December 17, 2014

FOCUS

overseas and funnelled millionsof dollars worth of illicit funds outof the country in contravention ofcurrency controls.

The key involvement of theMinistry of Public Security –which met with senior Macauofficials last month to hammerout the details of the crackdown –also provides confirmation of thelong-held belief by many in lawenforcement that Macau casinosare a major conduit for capitalflight from the mainland.

When told of the plan yester-day, a senior casino industry in-sider told the Post: “This is big.They’re calling it the ‘new nor-mal’ here in Macau. This is directcontrol over transactions by theMinistry of Public Security. It’sserious and key people are goingto be scared.”

A Macau-based analyst who

asked not to be named said: “Thisseems directed at the junketsmore than the mass floors. But I think the casinos’ own VIP marketing teams ought to becautious, too. If the Public Secu-rity Ministry is involved, this ismost likely part of Fox Hunt. Theyare looking for big guys, not therank and file.”

The move follows actiontaken earlier this year to restrictillicit money flows into Macauthrough China UnionPay. Themove was aimed at identifyingsuspicious transactions. It alsofollows a coordinated effort bylaw-enforcement authorities inBeijing, Hong Kong and Macauto combat money-launderingactivities, according to sources.

The trigger for the enforce-ment campaign was a reportcarried by the Post in May, detail-

ing concerns at the highest levelsin Beijing about how the ChinaUnionPay system in Macau wasbeing used to conduct fake orfraudulent transactions.

The concerns sparked a high-level visit by a delegation from the Ministry of Public Security to Macau on November 20. Atthis meeting, the issue of money-

laundering controls in Macauwas discussed, and it was agreedto establish a more effectivecross-border enforcement re-gime with the cooperation of several of Macau’s key regulatoryagencies.

Representatives from thePeople’s Bank of China andChina UnionPay on the main-

land side, and Macau’s monetaryauthority, judiciary police andpublic prosecutor’s office were atthe meeting.

The Post has learned fromsources with an understanding ofthe situation that the assistanceof Hong Kong’s law-enforcementagencies has also been sought.They cited renewed moves to freeze the assets of alleged triad boss Cheung Chi-tai in connection with alleged money-laundering in Macau, whereCheung operates a leading junketbusiness.

The sources point to recentannouncements of increased cooperation with other coun-tries, most notably the UnitedStates and France, in the effort totrack down corrupt officials andtheir associates who have fledoverseas.

Macau targeted on flow of mainland funds

$28bTotal casino revenue forOctober, in patacas – down 23 per cent from a year ago

CONTINUED FROM A1

When inaugural chief executiveEdmund Ho Hau-wah threw theliberalisation dice that took Ma-cau’s flagging gaming industryinto the 21st century in 2002, fewcould have predicted its stellarrise to become the top city for glo-bal gaming, leaving Las Vegas inthe dust.

Heady double-digit growthyear after year over the past dec-ade had industry watchers andcasino bosses alike salivating thata seemingly unending flow ofcustomers and cash from themainland would continue to de-liver the riches to the former Por-tuguese enclave.

But this year is one that mostinvestors would rather forget. “Aperfect storm” and “death by athousand cuts” are how some in-dustry insiders are describing it;2014 saw the largest year-on-yearrevenue drop on record, and, sig-nificantly, in October – usually apeak season. Overall, Macau ispoised to record its first full-yearcasino revenue decline.

Macau also finds itself at acritical juncture. Both central andlocal governments have made itclear that the city must diversifyinto areas other than gaming.That refrain has grown louderwith warnings in recent weeksfrom senior officials that Macaushould be able to evolve into ahub for entertainment, meetingsand conventions alongside near-by Hengqin Island as part of theZhuhai special economic zone.

In July, Pansy Ho Chiu-king,daughter of the original Macaucasino tycoon Stanley Ho Hung-sun, identified global competi-tion as the biggest threat to Macau’s future and pledged topromote Macau as a world-classtourist destination.

More than a decade ago, thecity’s fate and ambitions seemedmarkedly different. As Macau’shandover to Chinese rule in 1999 loomed, the city plodded onunder an ineffectual Portugueseadministration that struggled toquash organised crime groupscoming in to cash in on the twi-light years of Stanley Ho’s 40-yearcasino monopoly.

Gangs battled for control oflucrative VIP rooms in Ho’s casi-nos, sparking a four-year under-world war that cost the lives ofgovernment officials, police offi-cers and dozens of gangsters.

The shrewd Ho, at 93 one ofAsia’s richest men, managed todistance himself from the ram-

pant organised crime within hiscasinos and remains very muchin the game – owning one of thethree casino concessions handedout after liberalisation.

The enigmatic Ho’s dynasty isnot about to disappear any timesoon either. Pansy and son Law-rence now run lucrative casinosub-concessions with Americanand Australian partners.

By 2006, five more casino lic-ences had been awarded – to Gal-axy Entertainment Group, SandsChina, MGM China, MelcoCrown Entertainment and WynnMacau. Macau now rakes in sev-en times the revenue of Las Ve-gas, with gaming accounting for80 per cent of the city’s income.

Its unemployment rate is the

lowest in the world, thanks torules that allow only permanentMacau residents to operate gam-ing tables. At the end of last year,only 2 per cent of its permanent-resident labour pool of 570,000was unemployed. Once seen as apoor country cousin by Hong-kongers, the city now enjoys thehigher average wage.

But now the bracing pace ofgrowth and the “build-it-and-they-will-come” model is understrain. First, Macau has been hitby the overall macroeconomicslowdown on the mainland, thesupply stream for about 70 percent of its gamblers. Second, ris-ing wage costs are affecting bot-tom lines.

The labour crunch looks set to

continue to 2017. Bloomberg Intelligence estimates more than50,000 workers are needed for thenew resorts opening over thenext three years.

Local Macanese protestedseveral times this year for higherwages, and a 14-month salary isnow a standard package, withmany companies throwing instock options and other benefitsto retain workers.

A clampdown on liquidity hasalso hurt Macau badly. With eachperson only allowed to bring amaximum of 20,000 yuan acrossthe border and withdraw 10,000yuan a day from ATMs, highrollers got round the currencycontrols mainly by relying onshadowy junket operators.

These middlemen bring inplayers, lend them credit to playand collect the debts later. An-other common way to accesscash was via UnionPay. Retailstores simply charge a custom-er’s card and issue cash for acommission.

Those two avenues dried up,however, after the high-profiledisappearance of junket operatorHuang Shan, leaving a US$1.3 bil-lion debt trail, in May. Tightenedcredit in the aftermath of thatscandal caused the collapse ofsmaller junket operators.

Macau’s anti-corruptioncampaign continues to run fullthrottle. Just last month, news

broke that a top Macau junket figure was being investigated by Hong Kong authorities formoney laundering. Assets ofCheung Chi-tai, formerly a majorshareholder of Neptune Guang-dong Group, were frozen.

The consensus forecast is thatthe first half of next year will begloomy and that the clouds willonly lift later in the year. GalaxyPhase II is due to open mid-2015,followed months later by MelcoCrown’s Studio City and The Pa-risian by Sands China.

Even as new casinos open,Macau has been warned to diver-sify its economic sources. Earlierthis month, Li Fei, deputy secre-tary general of the National Peo-ple’s Congress Standing Com-mittee, said the SAR governmentshould not be overly reliant onthe gaming industry. Then, LiGang, director of the governmentliaison office in Macau, said acerbically that the governmentcould “create another Macau”.

Plans to diversify are in theworks. These include newprojects in Cotai that will boastmore non-gaming facilities suchas Wynn Diamond’s 15,000-seatColiseum arena. Whether thesewill be enough of a game-chang-er to keep Macau ahead of theglobal pack is uncertain.

Some early signs of headwaycame in October, when main-land visits and casino takings di-verged. Despite a record 17 percent year-on-year growth in thenumber of mainland Chinese

tourists during Golden Week, ca-sino revenues lagged, suggestingthat there were tourists who wentto Macau purely for leisure.

CLSA gaming and consumeranalyst Aaron Fischer is confi-dent that the location and scale ofMacau will help it maintain itsposition as the premier destina-tion for Chinese gamblers.

“There are 33 casinos in Ma-cau. By 2017, the total investmentin integrated resorts is roughlyUS$35 billion. Contrast that withthe two casinos in Singapore thatcost US$10 billion. Most othermarkets would be in the low sin-gle-digit billions. It seems reallyhard for other destinations tocompete,” he said.

Like Hong Kong, Macau hasseen a decreasing spend from itstourist base. This is due not just tothe currency and other curbs, butsheer visitor fatigue.

Singapore presents an attrac-tive alternative for Chinese gam-blers given its proximity and thecommon use of Putonghua. Evenso, Singapore too is feeling the effects of the drop-off and Fischerbelieves the Philippines andSouth Korea may be the next bestbets for Chinese gamblers.

“The Philippines can poten-tially attract visitors from south-ern parts whereas Korea wouldappeal to Chinese from thenorth,” he said.

On the way ahead, Fischersaid: “I wouldn’t look at Las Vegas. I’d look at Singapore as agreat example. The integratedresort model was pioneeredthere and the governmentplanned it exceptionally well.”

One Singapore site is in thedowntown Marina Bay area,ideal for conventions and meet-ings and close to malls and muse-ums. The second site, on SentosaIsland, is a theme park with Uni-versal Studios as a centrepiece.

“The Macau government hasdone a fairly good job of expan-sion of the gaming industry but ifwe were honest, they should’veplanned it a bit better and dedi-cated certain parts of Cotai – onearea to a theme park or otherforms of non-gaming,” he said.

On a more encouraging note,analysts say Hengqin, with itsfamily attractions such as OceanKingdom, plus education sectorprojects via the expansion of theUniversity of Macau, could actu-ally help Macau in the long-term.

But there is much Macau itselfcan do to diversify its offerings,said analyst Brett McGonegal,CEO of the Reorient group, a bou-tique investment firm.

“Macau is worlds ahead of LasVegas in turnover profit and suc-cess but far behind in maturityand breadth of offering,” he said.

Growth of gambling in Macau is captured (clockwise from top left) in two aerial shots of Taipa and another two of the building and completion of the City of Dreams resort on the Cotai Strip. Photos: Dickson Lee and Jerome Favre

As Macau marks 15th anniversary of handover, its heavy bet on casinos is showing signs of strain

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tiffany Aptiffany.ap@scmp.com

Tired gamersMacau stocks in 2014

Source: Bloomberg Intelligence SCMP

BI Macau/China Gaming Market Competitive PeersMSCI AC Asia Pacific Index

110

100

90

80

70

Jan Dec

If we werehonest, theyshould’veplanned it a bit better AARON FISCHER

Model of the now-popular SandsCotai Central resort. Photo: AP

80%

The gambling industry nowaccounts for around thispercentage of Macau’sincome

DIVERSITY THE NEW GAME WHEN

chips are down

Thursday, December 18, 2014 A3

LEADING THE NEWS

State media presented mainlanders with a rare casual view of Premier Li Keqiang and topofficials at a summit between China and 16 central and eastern European states in Belgrade. Instead ofthe usual deeply serious portrayals, the photos suggested the delegation were spirited and at ease, withthe group discussing meeting points and sometimes breaking into laughter. In the left photo, Li

(centre) talks with Finance Minister Lou Jiwei (second from left), and People’s Bank of Chinachief Zhou Xiaochuan (second from right); in the middle photo, Xiao Jie, deputy secretarygeneral of the State Council, looks over the premier’s shoulder; in the right photo, Li laughs as ForeignMinister Wang Yi stands behind him (second left). Photos: CNS > US$3B EUROPE FUND – A6

A lighter side

The constitutional affairs minis-ter is under fire after claiming thatBeijing alone promised to keepHong Kong’s way of life intact for50 years, rather than forming partof its deal with Britain.

Arguing that Britain has “nomoral duty” towards its formercolony, Raymond Tam Chi-yuengave his interpretation of the keyconcept in the 1984 Joint Declara-tion that paved the way for the1997 handover and underpinned“one country, two systems”.

The comments come amid aninquiry by British lawmakers intothe implementation of the decla-ration which – against the back-drop of the Occupy protests andbattle over political reform – infu-riated Beijing and the Hong Konggovernment, who say the city’saffairs are a domestic matter.

Taking questions in the Legis-lative Council yesterday, Tam re-iterated earlier remarks by theForeign Ministry that Britain had“no sovereignty over, no gover-nance of, and no superinten-dence” over the city after 1997.

Democrat Albert Ho Chun-yan asked Tam: “If Hong Kongmatters are all domestic affairs asyou said, what did [Britain andChina] sign the Joint Declarationfor? Is the no-change-in-50-yearspart of the declaration?”

Ho was referring to Article 3 ofthe treaty, which states that cer-tain basic policies of the People’sRepublic of China towards HongKong, including rights and free-doms for Hongkongers, “will re-main unchanged for 50 years”.

“That article is a declarationby the PRC, not a joint one withLondon,” Tam said. “We have tolook at the articles carefully.”

Tam’s reading of the treatywas “ridiculous”, DemocraticParty chairwoman Emily LauWai-hing said after the meeting.

“China and Britain signed theJoint Declaration to try to reas-sure the jittery Hong Kong peopletheir lifestyles would be guaran-teed for 50 years,” Lau said. “IfBeijing does not respect thistreaty … how can other countriesbe confident that Beijing will notrenounce other treaties?”

Professor Michael Davis, ofthe University of Hong Kong, said Tam’s argument “erased theessential purpose of the treaty”and was “nonsense and has nobasis in international law”. It ig-nored the fact one article of thetreaty stipulated London andBeijing “agreed to implement” allarticles. It was “incredible” that“the autonomous government inHong Kong wants to degrade thevery basis for its autonomy”.

Meanwhile, a long-awaitedsecond round of consultation onpolitical reform could be an-nounced on January 7, Tam said.Additional reporting by Gary Cheung

> LEUNG SNUBS INQUIRY C3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Joyce Ng and Peter So

Minister lambasted forclaiming pledge toprotect freedoms wasnot a matter for Britain

‘Beijingalone’ made50-yearpromise

The autonomousgovernment …wants to degradethe very basis forits autonomyPROFESSOR MICHAEL DAVIS

The flagship mouthpiece of thePeople’s Liberation Army dis-missed speculation the graftcrackdown in the military was onits last legs and accused interestgroups of standing in the way.

In a rare candid commentary,the PLA Daily said that a properunderstanding of the campaignwas needed if the “pernicious in-fluence” of former Central Mili-tary Commission vice-chairmanXu Caihou was to beeradicated.

It pointed to misperceptionswithin the army and the publicabout whether the drive couldcontinue or might lose the sup-port of rank-and-file officers.

There were now two opposingsides in the campaign, which hadreached a critical point, and themilitary should know therewouldn’t be any let-up in thefight.

“If even big tigers like ZhouYongkang and Xu Caihouhave been investigated, whocan’t be investigated?” said thecommentary, titled “The waragainst corruption cannot belost”.

Xu was investigated for bri-bery in March and expelled fromthe Communist Party in June.Zhou, a former security chief andmember of the Politburo Stand-ing Committee, was also expelledand will soon face prosecution ongraft charges.

A retired senior colonel in Bei-jing who didn’t want to be named

said the commentary hinted thatthe campaign to clean up themilitary would temporarily shiftfocus from big “tigers” – Presi-dent Xi Jinping’s term forpowerful officials – to the middleand lower ranks, where graftwould be more difficult to wipeout as it was commonplace. Theywere like “cockroaches and flies,which are everywhere”.

Other prominent military fig-ures targeted include Ma Xiang-dong, a senior colonel and direc-tor of the political department atthe PLA Nanjing Political College,who was recently taken away byauthorities, and Major GeneralDai Weimin, a deputy dean at thecollege detained last month.

Shanghai-based militarycommentator Ni Lexiong said the article served to remindmiddle and lower-ranking offi-cers that they would inevitably betargeted because their corrup-tion had directly undermined theimage of the army and the party.

“The public and grass-rootssoldiers might not be concernedwith how much Zhou and Xu re-ceived in bribes or how manymistresses they kept because thatdoesn’t directly affect their dailylife,” Ni said. “But any wrong-doing by middle and lower-rank-ing officials would definitely hitthe morale of frontline officersand soldiers.”

The commentary also saidcorruption was hindering reformof national defence and themilitary.

“Why have reforms in theseareas failed to launch after somany years? It all lies in corrup-tion,” the commentary said.

“Anti-corruption is crucial tothe survival of the party and thearmy, as well as the fate of thepeople and the nation … we can-not afford to retreat or lose in thebattle of life and death.”

The party pledged reforms inthe military last year, promptingspeculation that the PLA mayoverhaul its structures and beefup its own anti-graft agency. Butso far, few of the rumouredchanges have taken place.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Angela Meng and Minnie Chan

If ‘big tigers’ can be caught, so too can rank andfile, military mouthpiece says in commentary

Graft fight willmarch onward,PLA troops told

CORRUPTION

2.3mThe number of members ofthe PLA, making it theworld’s largest standingarmy

Financial regulators have calledtop bankers in Macau to a keymeeting next month as part of aBeijing-inspired dirty-moneycrackdown that has rocked thecity’s under-pressure casinosector and sent gaming stockstumbling.

In a note sent out late on Tues-day, Monetary Authority chiefstold city bankers they would “explain a live monitoring sys-tem” which the South ChinaMorning Post yesterday revealedwill give Beijing’s powerful Min-

istry of Public Security unprece-dented access to all transfersthrough the state-backed ChinaUnionPay bank payment card.

All Macau casino stocksdropped in trading yesterday inthe wake of news of the crack-down, which comes just 48 hoursbefore President Xi Jinping

arrives in Macau to leadceremonies marking the 15thanniversary of the former Portu-guese enclave’s return to Chinesesovereignty.

Galaxy Entertainment Groupsuffered the most, dropping 8.2 per cent, while MGM Chinafell 7 per cent and Sands China

6.18 per cent. SJM Holdingsdropped 6.17 per cent and WynnMacau by 4.30 per cent whileMelco Crown Entertainment wasdown 3.86 per cent.

In comparison, the bench-mark Hang Seng Index lost 0.37 per cent.

The note sent to banks, seenby the Post, also asked banks toprovide a list of names and infor-mation on high-risk businesseswho use the China UnionPaybank card system.

These include stores sellingwatches and jewellery, wine,pharmaceutical products, driedseafood and telecommunica-

tions businesses, the note said,adding that “high-risk business-es” in nearby casinos were alsoincluded.

The key involvement of theministry’s Economic Crimes Investigation Bureau – which isspearheading the “Fox Hunt” operation aimed at securing thereturn of corrupt party officialswho have fled overseas – pro-vides confirmation of the long-held belief by many that Macaucasinos are a major conduit forcapital flight from the mainland.

A senior gaming insider saidyesterday: “This is causing a lot ofconcern; it seems Beijing meansbusiness, and it’s not just the VIPjunket operators who bring in thehigh-rollers who are nervous.”

The latest move deals another

blow to the gaming industryfollowing six months of decliningrevenue, due in large part to Xi’s“tigers and flies” anti-corruptiondrive.

Analysts forecast a year-on-year drop of around 20 per centthis month that will push the cityto register its first full-year casinorevenue decline.

It is unclear how deeply thenew measure will affect VIPvolumes, Bloomberg gaminganalyst Tim Craighead said.

However, he added that thenews comes in a month when in-stitutional investment managersreview their year-end portfolios.

“If there’s even more concern,do they want to back off posi-tions? It can have an amplifiedimpact,” he said.

GAMBLING

MACAU REGULATORS TO MEETBANKERS OVER DIRTY MONEY Watchdog to explain live monitoring of mainland transactions amidBeijing-prompted crackdown that has seen gaming stocks plunge

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Niall Fraser and Tiffany Ap

Russia could fall back on its 150billion yuan (HK$189.8 billion)currency swap agreement withChina if the rouble continues toplunge.

If the swap deal is activated forthis purpose, it would mark thefirst time China is called upon touse its currency to bail out an-other currency in crisis. The dealwas signed by the two centralbanks in October, when PremierLi Keqiang visited Russia.

“Russia badly needs liquiditysupport and the swap line couldbe an ideal tool,” said Bank ofCommunications chief econo-mist Lian Ping.

The swap allows the centralbanks to directly buy yuan androuble in the two currencies,rather than via the US dollar.

Two bankers close to the Peo-ple’s Bank of China said it wasmeant to reduce the role of theUS dollar if China and Russianeed to help each other over-come a liquidity squeeze.

China has currency swapdeals with more than 20 mone-tary authorities around theworld. Swaps are generally usedto settle trade.

“The yuan-rouble swap dealwas not just a financial matter,”said Wang Feng, chairman ofShanghai-based private equitygroup Yinshu Capital. “It haspolitical implications as it is a signof mutual trust.”

The rouble has lost more than50 per cent against the US dollarthis year, pushing Russia to thebrink of a currency crisis, thoughmeasures announced by the cen-tral bank helped it recover someground yesterday.

Li Lifan, a researcher at theShanghai Academy of Social Sci-ences, said the swap would notbe enough for Russia even if it isused in its entirety. “The PBOCmight agree to extend somethinglike 15 billion yuan initially as away of showing China’s commit-ment to Russia.”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daniel Ren in ShanghaiRen.wei@scmp.com

Russia mayseek Chinahelp to dealwith crisis