26/08/2014 Asia Business Report

The leaders of the campaigns for and Online video game streaming, could

it be the next big thing after Amazon buys Which? And how will

Japan's rising loan problem impact that the banks?

Welcome to Asia Business Report. The world's biggest online retailer

Amazon has bought video games service Twitch for nearly $1

billion. The deal is the biggest acquisition since 2009, when it

bought an online shoe retailer. Twitch allows users to what other

people play video games. It's not the first time it was an acquisition

target. Delivery at `` earlier in the year you tube was reported to be

in talks to buy the firm as well at over 55 million `` as well. It had

over 55 million viewers this year. Thank you so much for joining us,

David. This is a surprise move by Amazon. What do they gain from this

acquisition? You have to ask yourself is, if you are a retailer,

what do you do? You need to go where the people are. If there are 55

million users on Twitch, you want to be there. How do you get that? By

buying the company. Therefore, you owned 55 million people.

They want to compete on all fronts. They compete against the likes of

Netflix, Google, Microsoft and Walmart. This is not their core

business. It's not but if your customers are on your side, they

can't be anywhere else. What is on bonds `` wants is to engage people

on their website survey on shopping somewhere else. And see if these

gamers, in the millions, will buy their products online. That is the

first thing. The second thing of course is when people are playing

video games, compulsive video gamers, like myself, we want to know

how other people have done certain things. So they might watch to see

what they have done. When you see how they have done it, they might

want to improve themselves. As you said, you will buy some of the games

at the same time. I am your opposite, I don't play any video

games. I should! The website is trying to gain a foothold in Asia.

Will the strategy allow Amazon to lure the Asian gamer? They are no

different to gamers other places in the world. They are compulsive, they

want to improve their skills, therefore they want to learn how

other people do things. The first thing is to engage the user. To get

the use of familiar with your website. If you get them there, the

next thing is to start selling to them, to start cross selling. Do you

think online gaming streaming is the next big thing? Because Google and

YouTube passed it up. It is for now. If you look at my son for instance,

who is also a compulsive game, he will have his friends together and

that's what they want to do. When they play a particular game, there

might be something they are especially proud of. A particular

move. They upload it and Sheraton other people to save, I'm good at

this. `` share it. This might make Amazon profitable going forward.

Thank you so much. For the first time, mobile phones

can be used on planes but only if you are flying Qantas and Virgin

Australia. Passengers on those flights will be able to use their

mobile phones on`board starting today. Carriers considered phones

and other mobile devices safety risk. Other airlines are expected to

follow but the devices are expected to be put in flight mode when the

plane takes off. The new Foreign Minister in Vietnam

met with counterparts to boost trade links.

Rising learnt in China have put the spotlight squarely on the earnings

of the country's against banks. The latest to report, the Agricultural

Bank of China, unveiling half`year numbers they do today. An increase

in non`performing loans has been a cause for concern for both China's

policymakers and foreign investors. Loans at Chinese banks total $80

billion at the end of 2012. `` total. That climbed to nearly 100

Ilium dollars US, one year later. One of the reasons is it has made it

harder for businesses to repay their debts. `` 100 billion dollars. I

spoke earlier about the rise in the bad loans. To put it in perspective,

$100 billion is just about a little less than 2% of the total loan book

of all Chinese banks combined. It's not a big number but it has been

growing quite rapidly. That is of concern. On the other hand, when you

think about it, the Chinese banking system is highly regulated. How the

banks make profits is that they have a big spread between the deposit

rates they pay and the rate at which they get on their lending. That

spread a allows them to make sufficient profits to write down

these bad loans. That's the way forward. Look at the other side. Who

are the big borrowers whose loans are going back? Mainly the

municipalities, the big cities that build a lot of infrastructure and

real estate, which isn't giving them returns. Those in `` municipalities

are starting to issue bonds. As of August, we saw the NPC giving $400

billion worth of room for these issuers to go ahead and raise bonds.

That will fund some of these potential bad debts. If you do

curtail these new projects of the municipalities and cities which have

been over the past decade been the linchpin for growth in the Chinese

economy, this could further slowdown the economic growth of the Chinese

economy, which has been between 7% ` 7.5% over the past year. We have

seen the Jacqueline Hyde character of the Chinese economy, which has

been mixed data. Basically the Chinese economy used to grow at over

10%. That has come down to 7.5% and a drop is a reflection of this

overreliance on investment. And the creation of new real estate and

infrastructure, which has been perhaps excessive. Now the Chinese

are trying to be balanced the economy and moving to consumption.

They are trying to get the Chinese to consume all, which is hardly

expect the economy to grow. `` consume more. To be more consumer

reliance and less reliant on investment. Briefly, with this new

strategy, in terms of how to handle bad debts, you think we could see

the Chinese economy going beyond its 7.5% target this year? I don't think

so. I think the Chinese are quite comfortable with the economy growing

at 7.5%. There hasn't been any sign of social unrest as a consequence of

the economic slowing. If anything, the anticorruption policy and others

are keeping things on an even keel. I think upto 8% on the outside would

be the target for the medium term. There could be concerned about bad

loans in China. And plenty of businesses are still betting on the

willingness of the Chinese to spend money. As a result, Mainland

consumers are told they can look forward to thousands of new shopping

more thing is to come. According to new research, the number of balls

could rise as much as 70% over the next five years that brings own

challenges. `` malls. I spoke to a retail consultant in Hong Kong. If

you look at the penetration rate of malls in China compared to other

countries, like the US or maybe France, the actual penetration of

malls is up to one fifth. In terms of the total number of malls that

are being developed, based on the penetration rate you would argue

it's not that extreme. There's a lot of opportunity but at the same time

there is a lot of risk and that's where the problem becomes relevant.

There will be 1000 more malls built in the next few years. But the Ricoh

`` retail market in China isn't as developed as that of the US or

Europe. We are already seeing retail sale numbers slowing down in China

in the first few months of this year. That's correct. I think that

in itself presents a problem. There is a retail slowdown but the market

is still growing, so there's a lot of opportunity based on this group.

Success will rely on a whole load of different factors. One factor is

obviously making sure you are the right location. That's. Also

creating a mall with a unique offering, tenants or something

unique that draws people to the mall. That will be one of the key

success factors for these thousands of malls being built. What happens

to the malls that don't succeed? They owed banks debt, which could

add to the mounting debt problem. Because many of these malls are

mixed use of elements, there is a business building, a residential

building, often the financing and income that comes from the actual

office building or the residential building in that caters for the mall

itself. Therefore, while it may not have many people inside, it was the

development isn't caught up in terms of progress, the actual financing of

the mall is such that the other components can actually find it.

Therefore, it will take some time before there is a big shakeup in the

marketplace. Thanks for watching and goodbye for now.

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