01/04/2014 Asia Business Report

insisted the policy was a success. Now on BBC News all the latest

business news live from Singapore. Mild expansion. Chinese companies

show an increase in activities. Higher sales tax, is Japan's Prime

Minister on the right track and how will it impact consumers?

Welcome to Asia business report broadcasting around the world. A

potential reprieve for investors as the latest data from China shows the

manufacturing sector is registering a mild expansion in the month of

March, with the government's official PM are coming in at 50.3,

with a reading above 50 indicating an expansion. Let's look at the

reaction right now. Hong Kong is in positive territorial

by about 157 points but we have seen a volatile period for the likes of

Japan, South Korea and Australia. Let's get the latest from our

Shanghai bureau. We have seen a volatile time for the markets trying

to digests how this PMI will affect the Chinese economy going forward?

As you say, 50 is the number that separates growth from contraction.

This is a measure of factory activity based on a survey of

purchasing managers and as you see the official figures look pretty

good today, a slight increase on where we where in February. There

have been some people seeing this as something to celebrate, signs as

well on the currency markets with the Australian dollar being up

slightly after the figures were published, but the picture on some

markets is mixed because in parallel to this, we have the HSBC Private

survey of purchasing managers and that is very much in negative

territorial, the figure coming and 48. That is a slightly different

group of companies. The HSBC survey takes on smaller and medium`sized

businesses whereas the official figures take in the large

state`owned companies, but I think the reason we are seeing the mixed

reaction is because nobody is convinced yet that Chinese growth is

back on track for further expansion through this year. Analysts expect

the government to take additional steps to jump`start the economy but

they have basically ruled out a huge stimulus package? The Chinese

premier is still speaking about infrastructure and there is no doubt

that although we saw growth slowing in the last quarter of 2013,

suggestions that left the HSBC figures are the more accurate ones,

we may have seen slowing even further than quarter one of this

year. Some people will suggest that there is a signal of an engineered

slowdown, something everybody has been talking about in China and

which many people see as necessary. The spike that, there is no doubt

the Chinese economy is still heavily dependent on infrastructure

spending, making up a huge proportion of GDP and despite all

the talk of rebalancing, infrastructure still remains key

going for Rod and I think these figures people will suggest will add

a further boost to the viewpoint. Over to Japan where business

confidence improved in the three months to March, marking five

quarters or 15 months of positive sentiment among Japanese

manufacturers, but according to the latest sentiment it is most likely

to weaken over the next three months due to worries that the country's

hike in sales tax will be heartening future growth. `` hurting. This was

released as the country marks a brand`new financial year and

effective today, the sales tax goes up to 8% from 5%. It was a campaign

promise by Shinzo Abe when he was seeking the office more than one

year ago. He's hoping revenues from the sales tax will help reduce the

debt load, over twice the size of the economy. They also want to use

the sales tax as a means to provide for rising welfare costs. The last

time the country made an adjustment to the sales tax was almost 20 years

ago won a lot of people held back on spending, fostering a prolonged

period of falling prices and the relation. I asked earlier whether

the latest sales hike could have the same effect. Everybody was extremely

worried about the impact in particular because of the bad impact

of the last hike, almost 20 years ago, but this time it seems to be

widely accepted. People have been picking up big`ticket items before

and that is smart but we did not see any panic buying. That means that

while demand is strong now it will not drop that much. Does hoarding

raise industrial production but industrial production numbers saw a

dip at the fastest pace for eight months, showing people are very

nervous about the sales tax? It rather shows that companies as much

as consumers seem to be quite a bit more relaxed about the impact and

the negative impact on them of the sales tax. Countries have been

preparing for the big rush but they did not expand production in terms

of new investment, so they are just smoothing out the impact and

otherwise business as usual. A lot of economists feared after the last

hike that Japan lacks an engine of growth so there will be pressure to

come up with additional growth policies and basically more reforms?

We had a very strong year of Abenomics. They promised growth

policies would be in place and they have been spending a lot and

balancing. For this year, it becomes much trickier. Structural reforms

are still very hard to implement so something has to be done when

exports are slow as they already are and that is missing debt will be

investments or companies are asking, what is there to invest in? What are

the incentives? Thank you. Corporate news and Singapore's

second`largest lender has made the formal offer to purchase Hong Kong's

bank for $425 million. If they reach a deal with the biggest shareholder,

the takeover, widely anticipated, will give OCBC a gateway to doing

business in China. Chinese Rongsheng heavy industries

may be too big to fail. They received financing after reporting a

loss for last year. It amounted to more than $1 billion. The

shipbuilder are grappling with debts of around Rongsheng are leveraging

loans that have not been paid worse in total 20 billion US dollars.

Electricity bills are set to go up for households and businesses in my

own mark with the effect set to kick in today. `` Myanmar. Electricity

bills could rise by as much as 50% which some feel will raise the price

of goods and services. Only a quarter of the population has

access to electricity aren't they are frequent power shortages. I

asked earlier whether these power price rate hikes are indeed

necessary? Deeply unpopular but very necessary and prices will rise 25 to

50%. This will affect heavy residential users on some businesses

but the government also claims 55% of all households and businesses

will not be affected, so they will continue to pay subsidised rates.

Power demand is rising by 15% a year in a Myanmar. This is necessary to

bring an adequate investment. In the medium term, could this stifle

fledgling growth? It does not look as if it will because as I mentioned

55% will not be affected than consumers will not be affected. You

mentioned only a quarter of households are connected to the

grid. Those households are probably not the lowest income households in

the first place, so bringing more people onto the grid is probably

more important. On the flip side, could it attract more foreign direct

investments in to the country? Exactly. This sort of raising prices

makes financing for an adequate supply possible and keeps the

country of the diesel power generation bread, and that is

better. `` power grid. Making that more viable means you get more

foreign investors coming in and more factories and people connected to

the grid. Before we go look at Asian stock

markets, currently mixed. The reserve bank will today decide on

the cost of borrowing at about 1130 Singapore time. Thanks for watching.