Shenzhen’s Science Technology and Innovation Committee has unveiled its 2015-2017 action plan to attract future hardware projects from abroad during a five-day trade fair. Shenzhen Maker Week drew thousands of manufacturers and 100,000 visitors, making it the biggest fair of its kind to date in China. The city aims to attract 100,000 high-tech companies by 2017. The Committee plans to establish over 200 “makerspaces,” or idea-sharing workshops in the city over the next few years. Shenzhen already has about 40. New makerspaces will be able to apply for financial help of up to CNY5 million each, whether foreign or local. The government will also sponsor equipment upgrades and servicing. The city will offer permanent residency to the top performers, and manufacturers will be able to enjoy some free services. The move comes after Chinese Premier Li Keqiang went on an inspection tour of the city recently to spur innovation and help counter the economic slowdown that China is facing after three decades of unchecked growth.

So far this year, 241 companies have listed in China, raising an aggregated USD40 billion, according to the quarterly Ernst & Young Global IPO Trend report. China ranked first in both the number of deals and capital raised, followed by the U.S., which saw 101 IPOs raising USD19.7 billion, the report said. The Chinese A-share market drew 190 new listings in the first half, up 265% year-on-year, raising a total of CNY147 billion, a 316% increase year-on-year. “The Chinese mainland’s strong IPO activity can be attributed to the robust capital market, faster approvals for IPOs, a swath of reforms to liberalize the market and favorable monetary policies supporting the economy,” said Tang Zhenhui, EY Assurance Partner. The Shenzhen and Shanghai bourses ranked first and second in the world by number of IPOs, while the Shanghai and Hong Kong exchanges were the top two by proceeds, the report said. In China, financial companies raised the most funds at USD15.9 billion, followed by USD5.1 billion by industrial firms and USD3.7 billion by technology enterprises, the Shanghai Daily reports.

About CNY200 billion will be spent to develop 51 civil aviation projects linked to the “Belt and Road Initiative”. China built 15 new airports and expanded 28 existing ones in provinces involved in the initiative during the past two years. A total of CNY4.7 billion was allocated to these provinces over the same period to upgrade air traffic control installations and equipment. Twenty-four out of 83 new air routes planned to be opened this summer and autumn by Chinese airlines will link cities in China and areas covered by the initiative, including four countries that now have no air links with China.

China and the U.S. held another round of their Strategic and Economic Dialogue (SED), paving the way for President Xi Jinping’s visit to the United States in September. U.S. Secretary of State John Kerry and Treasury Secretary Jack Lew hosted Chinese State Councilor Yang Jiechi and Vice Premier Wang Yang for a private dinner ahead of the two-day talks at the State Department. The U.S. complained about alleged Chinese cyberespionage and land reclamation on some of its islands in the South China Sea. China focused on the bilateral investment treaty (BIT) and on the yuan becoming part of the International Monetary Fund’s international basket of reference currencies. Vice Premier Liu Yandong and John Kerry also held the sixth China-U.S. High-Level Consultation on People-to-People Exchange. In a message to the SED, Chinese President Xi Jinping said that the priority for China’s foreign policy is to build a new type of major country relationship with the U.S. based on non-confrontation, non-conflict, mutual cooperation and the win-win principle. About 400 Chinese officials were in Washington for the talks.

Chinese and American negotiators bridged some differences over the bilateral investment treaty (BIT). Washington also appeared more ready to support the yuan’s inclusion in the IMF’s SDR basket. However, there was little sign that Washington was ready to embrace the new Asian Infrastructure Investment Bank (AIIB). U.S. Treasury Secretary Jacob Lew said at the end of the two-day SED that China had agreed to hold off on interventions in the foreign exchange markets to manage the yuan’s value, except in situations of “disorderly market conditions”. Lew acknowledged that China’s foreign exchange intervention had declined over the past year. Progress was also made towards negotiating a code of conduct for cyberspace. Following the talks, U.S. claimed progress with China on a range of topics including currencies, further progress on a bilateral investment treaty, cooperation on combating climate change, and shared concerns about the nuclear programs in Iran and the North Korea.

Automotive

• A second attempt to test Shanghai’s new online license plate auction system went relatively smoothly. A total of 76,865 people registered to bid for 5,000 mock plates in the simulation, about 7,400 more than the number of participants in a similar event on June 14, which resulted in the system’s servers crashing due to a data overload after 44 minutes.
• South Korea’s Hyundai Motor Co began construction on its fifth Chinese plant, in Chongqing, to manufacture a new compact car and increase the production of sport-utility vehicles (SUVs). Hyundai has been struggling with slow sales in China partly due to an absence of new SUV models to compete with its rivals’ latest releases. Hyundai will invest USD1 billion with its Chinese partner BAIC in the plant, which will have an annual capacity of 300,000 units. Hyundai will also expand its dealer network by 300 dealerships to 2,000.

Finance

• Song Min, Finance Professor and Director of the Center for China Financial Research at the University of Hong Kong, has warned China about the risks of turning the yuan into a global currency while pursuing the Silk Road Economic Belt and 21st Century Maritime Silk Road initiatives (One Belt, One Road). “China should find out which countries are worth investing in, rather than promoting the globalization of yuan for the sake of it,” he said.
• China will hold the biggest share of voting rights in the Asian Infrastructure Investment Bank (AIIB), but Beijing will be cautious before exercising any power of veto, according to Soegeng Rahardjo, Indonesia’s Ambassador to China. “We should learn from the successes and failures of the International Monetary Fund and the World Bank. This is a good teacher for the AIIB to move forward,” he said. Indonesia would get about 3.1% of the voting rights and Asian members 75% in total based on the size of their economy and their contribution to the bank. The AIIB’s founding charter will be signed on June 29 in Beijing.
• Prosecutors in Florence have formally asked for Bank of China’s Milan branch and 297 individuals, mostly Chinese living in Italy, to be tried for smuggling money and other crimes. The request stems from an investigation called “River of Money”, which started in 2008 and points to the growing influence of Chinese criminal groups in Italy’s Tuscany region. Investigators said money sent to China through agencies of the Money2Money (M2M) transfer service in several Italian cities included proceeds from crimes such as counterfeiting, embezzlement, exploitation of illegal workers and tax evasion.
• Suma Chakrabarti, President of the European Bank for Reconstruction and Development (EBRD), said he wants to work in partnership with the China-led Asian Infrastructure Investment Bank (AIIB) on future projects and investment. “The potential for synergy and for making a real, lasting difference on the ground is huge,” he said. The two lenders are already involved in wide-ranging discussions about how they might cooperate in the future.
• The People’s Bank of China (PBOC) has cut its benchmark lending rates by 25 basis points to 4.85% on June 27, the fourth reduction since November, as it gears up to lower borrowing costs and support a slowing economy. It also reduced one-year benchmark deposit rates by 25 basis points to 2%. The reductions took effect on June 28. The PBOC last cut interest rates on May 10.
• The Australian government said it would contribute AUD930 million over five years to the new China-led Asian Infrastructure Investment Bank (AIIB), making it the institution’s sixth-largest shareholder. Treasurer Joe Hockey will attend the Articles of Association (AoA) signing ceremony in Beijing on June 29.
• The National Audit Office (NAO) has uncovered systematic and widespread misuse of state lottery funds. Questions have been raised about the use of CNY16.9 billion, or 25% of the audited public lottery fund in 18 provinces, including fabricated financial records, misappropriation and even the operation of illegal betting branches. Lottery sales have surged more than threefold from CNY100 billion in 2007 to CNY320 billion in 2013.
• Demand for bank loans hit a record low over the past three months, according to a survey from the People’s Bank of China (PBOC). The loan demand index fell 8.4 percentage points to 60.4% in the second quarter compared with the quarter before, the lowest reading since the central bank began compiling the data in 2004. Medium to long-term corporate loans slowed for the fourth consecutive month to CNY255 billion last month.
• China is expected to introduce a yuan-denominated gold fix soon. It could then compel buyers in the mainland and foreign suppliers to pay the local price, making the London fix less relevant in the world’s biggest gold market. However, given the yuan is not fully convertible, the two fixes could exist side by side globally.
• Total credit card receivables, the actually amount borrowed by customers on their credit cards, increased to CNY2.55 trillion in the first three months of the year, up 35.49% from a year earlier. The People’s Bank of China (PBOC) also reported that the average consumer credit line was CNY14,700 in the first quarter, compared with CNY12,300 during the same period last year. The total number of credit card accounts in circulation was slightly down at 424 million in the first quarter from 455 million in 2014.
• Central government spending on overseas visits, official vehicles and receptions dropped sharply last year as China stepped up austerity efforts. Spending in the three categories decreased by 27% year-on-year in 2014 in a random audit of 44 central government agencies carried out by the National Audit Office (NAO). The final accounts showed that the central government spent CNY5.88 billion on the three areas last year, CNY1.27 billion less than was budgeted.

Foreign investment

• China’s direct investment in countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road reached USD2.56 billion during the first quarter of the year, accounting for about 10% of the country’s total ODI during the period. China also exported USD144.5 billion to countries along the road during the period, a 10% rise year-on-year. China has more than 70 projects under construction in countries along the land-based and maritime roads, worth a total investment of more than USD8 billion, according to China’s Ministry of Commerce (MOFCOM).
• Investors should avoid chasing the latest trends and be humble. “No matter how confident you are in anything, there is a good chance you could be wrong,” Greg Jensen, Co-CEO of Bridgewater told a wealth forum hosted by the Qingdao government. “It’s not about chasing the newest products and the newest things, but about thinking in the right way to invest and the right way to trade,” said Jensen. He recommended longer-term investments.

Foreign trade

• Shanghai’s pilot free trade zone (FTZ) unveiled several measures aimed at improving customs services for high-technology companies in the zone. An air cargo service center will be set up in the Zhangjiang High-Tech Park to provide one-stop customs services. The center will cut customs clearance time to six to eight hours from at least two working days previously. In the first five months of this year, trade in the FTZ totaled CNY287.1 billion, accounting for 26% of the city’s total.
• Russia became China’s biggest crude supplier in May, overtaking Saudi Arabia, as the global competition for oil intensified. China imported a record 3.92 million metric tons of Russian crude during the month, or 927,000 barrels a day, according to data from the General Administration of Customs, a 20% increase on April. Saudi Arabia has slipped to China’s third-largest crude supplier, after Russia and Angola. China will account for 11% of world demand this year.

Health

• China’s customs has impounded more than CNY3 billion worth of illegal frozen chicken, beef and pork – some up to four decades old – shipped to the mainland through Hong Kong. 20 people were arrested during a customs operation in Changsha. The origin of the frozen meat was not disclosed, but some of it had been stamped with packing dates as far back as the 1970s. The meat might contain large amounts of cancer-causing chemicals to keep it preserved for such long periods, or it might carry bacteria that could cause food poisoning.
• China’s Food and Drug Administration (FDA) has asked three milk producers in Shaanxi province to recall substandard infant milk powder and urged local authorities to severely punish the firms if they have broken the law. Excessive nitrate was found in five batches of milk powder products made by Shaanxi Guanshan Dairy and tested earlier this year. Higher-than-standard levels of selenium were found in another two batches of milk powder produced by Xian Guanshan Dairy and Shengtang Industry. All the products were made from goat’s milk.
• China was the world’s biggest consumer of antibiotics in 2013 with 162,000 tons, or almost half the global total, according to a recent study by the Guangzhou Institute of Geochemistry under the Chinese Academy of Sciences (CAS). Humans accounted for 48% of the total consumption and animals the remainder. About 50,000 tons of antibiotics are discharged into waterways and the soil every year in China.

Macro-economy

• The HSBC flash manufacturing purchasing managers index for June stood at 49.6, a slight improvement on the 49.2 in May but still below the 50-point mark that distinguishes expansion from contraction. Tom Orlik, Chief Asia Economist at Bloomberg, warned against reading too much into slight movements in a small sample survey, saying that a 0.4-point improvement could represent a change of view by just a handful of companies. HSBC and Bloomberg economists said the temporary recovery is fragile. New orders returned to positive territory at 50.3 and new export orders fell at a much slower pace, but companies stepped up layoffs, shedding jobs at the fastest pace in over six years.
• China’s consumer confidence remained subdued in June, but consumers’ expectations of business conditions showed some initial signs of recovery, according to the latest survey by Market News International (MNI) Indicators, a part of Deutsche Bourse Group. The June Westpac China Consumer Sentiment Indicator (CSI) rose 1.1% year-on-year to 112.3, which is below the 12-month average of 112.4 since last June, but slightly up from 111.1 in April and May. A reading of 100 represents a neutral position.
• Salaries for experienced and skilled employees are expected to rise between 5% and 10% this year from a year ago as China experiences a shortage of senior level talent, human resource agency ZW HR Consulting said. Information technology professionals, human resource managers, and mechanical and technical engineers are leading the salary increase this year.

Science & technology

• Up to 1,000 universities in 14 popular overseas destinations for Chinese applicants now accept gaokao test scores as admission criteria, according to a report by London-based MyOffer, which helps international students with university placement. Italy and France, according to MyOffer, are the most welcoming destinations. All of France’s more than 180 universities and colleges accept gaokao scores.

Stock markets

• The rise of the Chinese A-share market is unsustainable without the support of both solid economic fundamentals and substantial reform measures, Ha Jiming, Chief Investment Strategist of Goldman Sachs Group’s Investment Management Unit told the China Wealth Forum in Qingdao, Shandong province. “Current stock prices are too high and will fall if the government does not take substantial reform measures to change the economic structure and improve economic benefits, rather than trying to stimulate the stock market with policies,” he said, adding that the Chinese capital market is overvalued, leverage is too high and investors are over-zealous – three factors likely to cause a bubble.
• Shares in China Aircraft Leasing Group Holdings rebounded on hints that state-owned China Everbright Group could take over the shares held by former Chief Executive Mike Poon, who went missing. Everbright is the biggest stakeholder in the aircraft leasing company with a 42.91% stake. Its Chief Executive Chen Shuang took up Poon’s position recently.
• Senior executives and large shareholders of listed companies have been dumping shares in their own firms which could have exacerbated the current selling pressure in the market, prompting fears of possible malpractices or insider trading. As of June 17, 1,234 listed companies had seen their executives and large shareholders reduce holdings worth CNY477.2 billion since the beginning of the year. The largest share sale took place during May as shares worth CNY150.8 billion were offloaded.
• The financial security index (FSI) of Chinese non-financial listed companies in 2015 reached its lowest level in 10 years, the Ministry of Commerce (MOFCOM) said in a report. The FSI would be 5,227.35 in 2015, a 2% year-on-year decrease. The FSI has continuously declined for four years since 2012. “The Chinese government should pay attention to the increasing financial risks of listed companies,” said Pu Xiaolei, Deputy Director of the Credit Management Department under the Chinese Academy of International Trade and Economic Cooperation.
• Chinese stocks plunged more than 7% on June 26, with the CSI300 index recording its biggest fall since 2008, hit by tight liquidity toward the end of the second quarter and uncertainty over the central bank’s easing policy. The market is down more 18.8% from a seven-year high on June12, with selling accelerated by investors rushing to unwind positions built on borrowed money. Many investors were keen to lock in profit now, rather than in the second half of the year, because they had made enough in the first half, according to Jiang Chao, Strategist at Haitong Securities. About 2,000 of the roughly 2,800 listed companies in Shanghai and Shenzhen slumped by the 10% daily limit.

Travel

• Didi Kuaidi, China’s largest car-hailing service provider, plans to launch a separate service targeting corporate and government users by mid-August with the aim of cutting transport costs. The market is estimated to be worth at least CNY100 billion. As many as 3,184 official cars, used to be owned by central government institutions, are going to be auctioned. An estimated CNY150 billion to CNY200 billion is spent on official cars in China every year.
• China has decided against a much-hyped plan to build a high-speed railway to Thailand, and instead opted for a medium-speed alternative that can support cargo transport. Construction of the dual-track railroad between Kunming and Nong Khai would likely start in November. The two sides had yet to reach an agreement on funding as Thailand considers the interest rate offered by China’s Export-Import (Exim) Bank too high.

VIP visits

• Premier Li Keqiang will attend the 17th China-EU leaders’ meeting on June 29 in Brussels, the first since the change of EU leadership. From June 28 to July 2, Li will visit Belgium and pay an official visit to France, visiting the headquarters of the Organization of Economic Cooperation and Development (OECD) in Paris.