A weaker yuan may reduce profits of China’s three major airlines, industry experts predict. “The three largest carriers in China could lose between CNY2 billion and CNY4 billion each in net profit this year,” Geoffrey Cheng, head of transportation and industrial research at BOCOM International, which is part of the Bank of Communications, said. “But this year’s decline in fuel prices will help counteract the carriers’ exchange loses,” he added. Airlines’ high dollar-denominated debt will increase because of the cheaper yuan. China Eastern Airlines reported a net profit of CNY3.564 billion in the first half of this year, and Air China one of between CNY3.8 billion and CNY4 billion for the same period. China Southern Airlines has predicted a net profit of between CNY3.4 billion and CNY3.6 billion. But while the fall in the yuan has yet to show up on their books, it has already had an impact on the share prices of airlines on the Shanghai Composite Index. Aviation shares had fallen on average by 2.25% by Aug 14.

The Chinese government has announced a guest list of more than 40 foreign representatives who would attend the military parade to mark the 70th anniversary of the end of the second world war on September 3. State leaders to attend the event include Russian President Vladimir Putin, South Korean President Park Geun-hye, South African President Jacob Zuma and Pakistan’s President Mamnoon Hussain. The only head of state or government from the EU on the list is Czech President Milos Zeman. The Foreign Ministers of France and Italy will also attend. Japan will be represented by former Prime Minister Tomiichi Murayama. The parade will involve 12,000 soldiers and 500 pieces of hardware passing along the south side of Tiananmen Square.

U.S. National Security Adviser Susan Rice held talks in Beijing with Chinese State Councillor Yang Jiechi to help lay the groundwork for President Xi Jinping’s visit to Washington next month. She was also received by President Xi. Washington hopes to see President Xi Jinping’s upcoming visit to the United States become “a milestone” in relations, Rice said. Both sides said it is necessary to manage and control points of difference. The September trip will be the first state visit to the U.S. by Xi as President. Xi said that negotiations should be accelerated over the Bilateral Investment Treaty, military-to-military cooperation should be reinforced, and the two countries should strive for progress in fields such as energy and infrastructure. China is willing to work with the U.S. to “manage and control sensitive issues in constructive approaches”, and the two should “expand common ground and narrow divergence”, Xi said.

Automotive

• The Chengdu Motor Show (CDMS), one of the largest and most influential auto shows in West China, will run from September 5 to 13 at the Century City New International Convention and Exhibition Center. After 17 years of development, CDMS stands out from other second-tier city auto shows and is regarded as one of the top four shows in the country.
• Toyota is gradually restarting operations in Tianjin after halting production in the wake of deadly explosions at a hazardous goods facility. At least 67 employees at the Toyota plant were injured in the blasts. The explosions happened while the plant was closed for the summer vacation. One of two Toyota dealerships heavily damaged by the blasts also reopened. The value of Toyota’s lost output may be more than CNY660 million a week, according to Bloomberg.
• BYD Co posted a 29% jump in first-half net profit to CNY466.7 million on rising sales of its hybrid and electric vehicles. Sales of its “new-energy” vehicles more than doubled. The carmaker took in CNY31.6 billion in revenue, up 18% year-on-year.

Finance

• China may remove a 75% loan-to-deposit ratio stipulation. The ratio will instead be regarded as a liquidity-monitoring indicator, according to a draft amendment to China’s Law on Commercial Banks, which was deliberated by the National People’s Congress Standing Committee. China has kept the 75% ratio since the law was enacted and put into effect in 1995. Shang Fulin, Chairman of the China Banking Regulatory Commission (CBRC), said the stipulation of loan-to-deposit ratio no longer meets the needs of the current development of commercial banks.
• Ping An Insurance (Group) Co is boosting overseas assets with about CNY16 billion of deals in the pipeline this year, which would raise total investments abroad to as much as CNY50 billion by year-end. More than CNY10 billion of the new deals are property related, including two projects in the United Kingdom and a USD650 million asset-backed-securities project in the United States.
• Police in China have launched a two-month crackdown against “underground banks” amid concerns about cash flowing in and out of the country illegally and fueling speculation in the country’s volatile stock markets. The campaign will focus on illegal financing in stock markets, plus funding for terrorism and banking connected to corrupt officials.
• The People’s Bank of China (PBOC) announced cuts in interest rates and reserve requirements for banks. The one-year lending and deposit rates were lowered by 25 basis points to 4.6% and 1.75% respectively. It was the fifth interest rate cut since November 2014. Even after the cuts, China’s interest rates are still higher than those of the world’s major economies. Economists said the policy easing is likely to release around CNY700 billion of liquidity immediately.
• China’s insurance industry’s gross premium income surged 20% year-on-year in the first seven months of this year. The revenue for life insurance jumped 24.2% to CNY1.04 trillion in the January-July period, while that for non-life insurance such as property and casualty expanded 11.7% to CNY493.04 billion. Gross premium income rose 17.4% last year, up from only 9.4% growth in 2013. However, the current bearish capital market may hurt the industry’s investment returns.
• Premier Li Keqiang said that the yuan will “remain basically stable” and in equilibrium. Li added that China recently improved its system of setting the daily yuan reference rate against the U.S. dollar – part of efforts to better reflect global market developments. There is no longer any basis for continued depreciation of the renminbi, he said.
• The Standing Committee of the National People’s Congress (NPC) has approved the local government debt quota for this year, a step necessary under the new Budget Law to better control local government debt. After the overall ceiling is determined, the central government can allocate limits for each region. Based on the national auditor’s survey results, as of mid-2013, local governments have amassed CNY17.9 trillion of liabilities, and they have to repay CNY1.86 trillion maturing debt this year.
• The Chinese government has asked the country’s leasing industry to facilitate financing to bolster the real economy. Stronger leasing services can provide capital to support investment on equipment and industrial upgrades. It demanded less red tape, including no threshold for the minimum capital of financial leasing companies to establish subsidiaries and easier procedures for leasing equipment like ships, farming machinery, medical devices and aircraft.
• China Merchants Bank’s net profit grew by a slower 8.3% in the first six months of 2015 to CNY32.98 billion while its bad loan ratio rose 0.39 percentage points to 1.5% amid the economic downturn. Its total assets climbed 10.3% to CNY5.2 trillion by June, as net interest income increased 17.7% to CNY66.1 billion and net non-interest income jumped 35.1% to CNY38.3 billion.
• China Cinda Asset Management Co was the sole bidder for Hong Kong lender Nanyang Commercial Bank in an auction that drew tepid interest. If it pays close to the reserve price of HKD68 billion, it would be the largest purchase of a Hong Kong lender, surpassing DBS Group Holdings’s USD5.4 billion takeover of Dao Heng Bank in 2001.
• The People’s Bank of China (PBOC) has removed the ceiling on bank rates for fixed deposits with terms ranging from two to five years. The cap on demand deposits and other deposits with terms ranging from seven days to one year remains unchanged. Previously, commercial banks offered deposit rates of 1.2 to 1.3 times the benchmark deposit rate, although the ceiling was 1.5 times the benchmark rate. But the adjustment of deposit rates will take two to three years because banks can remove the rate ceiling only after the relevant deposits mature.
• Industrial and Commercial Bank of China’s net profit of CNY74.7 billion for the second quarter was 0.13% lower than in the same period last year. It was the second time since 2009 that the bank posted negative quarterly profit growth and a sign that China’s state-owned banks were feeling the pressure of China’s slowing economy. A year earlier, the bank posted 7% year-on-year growth. ICBC’s non-performing loan ratio climbed 11 basis points in the three-month period to 1.40%.
• Insurer Ageas is selling its life insurance business in Hong Kong to China’s JD Capital for €1.23 billion. Ageas plans to focus on six growth markets: Malaysia, China, Thailand, India, the Philippines and Vietnam. The regional office of Ageas Group will remain in Hong Kong.
• A nationwide audit of government cash and spending has found nearly CNY56.5 billion in funds sitting idle in the coffers of governments and other entities, despite calls by the central government for funds to be put to productive use. The National Audit Office (NAO), which discovered the money, also found that 36,000 hectares of land allotted to local governments remained unused because the governments changed plans or mortgaged the land to raise money.

Foreign investment

• Panasonic Corp is shutting down its lithium battery factory in the Beijing Economic and Technological Development Area amid weakening global demand for smartphones and tablets. The Beijing factory was built in 2000 by Panasonic’s unit Sanyo Electronics. 1,300 workers will be sacked. Panasonic also operates two other lithium battery factories in Suzhou and Wuxi, Jiangsu province.

Foreign trade

• China will allow the import of live cattle from Australia. The agreement will be finalized within a few months after technical details have been sorted out. Andrew Robb, Australia’s Minister for Trade and Investment, said the Free Trade Agreement (FTA) between the two countries had created a framework for business deals to be finalized and for decisions and problems to be addressed more quickly between the two countries.

Health

• The Department of Sociology at Renmin University of China and Kangmei Pharmaceutical Co have released a price list of 513 raw materials used in traditional Chinese medicine (TCM). Those prices usually fluctuate a lot. Caterpillar fungus was the most expensive at about CNY195,000 per kilogram. The university plans to issue the report quarterly.
• All certified genetically modified foods that are sold on the Chinese market are safe, according to the Ministry of Agriculture. China has established a safety supervision system that covers the complete chain of GM products, including research, production and trading, the Ministry said.

IPR protection

• Goldman Sachs (Shenzhen) Financial Leasing Co has been operating in Shenzhen using a nearly identical English and Chinese name as the New York-based financial institution, Goldman Sachs Group, but is not affiliated with it. The company uses the same Chinese characters as the real Goldman Sachs, and its English font is evocative of the U.S. bank’s.

Macro-economy

• Goals have been set for more coordinated Beijing-Tianjin-Hebei regional development in the next 15 years, mainly by transferring non-essential functions in Beijing to neighboring areas. By 2017, major breakthroughs will be achieved in transport integration, environmental protection and industrial upgrading in the integrated region, the relevant document says. The medium-term target of the strategy is, by 2020, to control the permanent population of Beijing within 23 million.
• Premier Li Keqiang is considering adopting pioneering technologies such as three-dimensional printing and modern manufacturing to upgrade low value-added domestically-made products. Li said China had to “make up for missing lessons” in industrial development, which is large in terms of volume, but lacks competitiveness.
• “The 2015 growth target of around 7% is achievable,” said Zhu Baoliang, Economist at the State Information Center (SIC) under the National Development and Reform Commission (NDRC). “The country has the potential to keep the growth momentum in the next few years, given its solid economic fundamentals, better external conditions, and a government determined to deliver on its reform promises,” he added.
• Weak industrial activity, hampered by overcapacity and growing inventories, will not significantly rebound in the second half of the year, the government’s top economic think-tank has warned. Year-on-year industrial output growth should remain at a slower 6% to 6.5% in the third quarter, and should have improved slightly to 6.5% to 7% in the last three months, the Chinese Academy of Social Sciences (CASS) said.
• China’s steel sector can expect to face increasing international trade friction as inventories and output continue to rise amid weakening demand driven by the economic slowdown, according to Wang Liqun, Vice Chairman of the China Iron and Steel Association (CISA). He added that overcapacity would remain in the second half of the year, and companies should not expect exports to rise to counter the situation.
• Profits at Chinese industrial companies in July slid 2.9% from a year earlier as falling prices eroded earnings. Companies in July suffered their second-biggest drop in industrial profits this year since a total 4.2% decrease in January-February. Profits were down 1% in the first seven months of the year to CNY3.3 trillion, compared with the same period a year ago.

Real estate

• The People’s Bank of China’s decision to cut the reserve requirement ratio (RRR) and the benchmark interest rates will encourage more homebuyers to buy bigger, newer homes and help developers reduce inventories in first- and second-tier cities, analysts said. “The cumulative decrease in interest rates, and subsequently mortgage rates, will reduce financing costs and downpayment requirements. The RRR reduction will make more financing available for home purchasers,” Savills East China said in a research note.
• China’s richest man Wang Jianlin said his firm Wanda Commercial Properties will list on the mainland soon, in addition to its existing Hong Kong listing, which raised about HKD28.8 billion. Wanda Commercial owns 112 shopping malls and 64 hotels in China.The firm plans to add 22 malls and 10 hotels by the end of this year. Wang Jianlin said that “China needs to drop the fantasy of keeping a high growth rate of 7% or 8% and just accept 6%, 7% or even 5%.”
• Restrictions on property purchases by overseas institutions and individuals have been eased. Overseas institutions with branches and representative offices in China, and individuals working or studying in the country can now buy property for their own use in line with their practical needs. Previously, would-be buyers had to be in the country for at least a year to qualify. In Shanghai, the average cost of a new apartment had risen to CNY3.24 million last year from CNY1.33 million in 2007, according Shanghai Homelink Real estate Agency Co figures.

Science & technology

• Beijing’s Tsinghua University, one of the two most prestigious institutions for higher education in China, has been crowned the country’s wealthiest school, with annual revenues reaching CNY12.36 billion, followed by Zhejiang University, Peking University and Shanghai Jiao Tong University, according to a list of 76 universities. Though Chinese universities are getting closer to the top global institutions in terms of investment, gaps still exists in their funding, said Xiong Bingqi, Vice President of the 21st Century Education Research Institute in Shanghai.

Stock markets

• One in five college students in Shanghai play the stock market, according to a recent survey. More than half had dabbled in the market for less than six months, the study by students of the Shanghai University of International Business and Economics found. Only 10% had more than two years’ experience. Researchers polled nearly 500 students at some 20 city universities.
• Asia’s richest person lost USD3.6 billion on August 24, the most among all billionaires worldwide, as China’s stock markets experienced their biggest plunge since 2007. Wang Jianlin saw USD2 billion wiped from his stake in Dalian Wanda Commercial Properties, after the Hong Kong-listed property developer tumbled 17% to its lowest level since it went public in December. Mainland Chinese billionaires lost more than USD14 billion on August 24 collectively, or 6% of their total net worth.
• Chinese analysts and fund managers said China should not be blamed for the global stock market crash. The U.S. Federal Reserve (FED) and its policy direction were the real “enemy within”, they said. Zhang Ming, Researcher at the Chinese Academy of Social Sciences (CASS) said that emerging markets, including China, were the main victims of the FED’s rate increases as they led to a wave of currency devaluations that triggered capital outflows from those countries.
• China’s stock market volatility does not pose a major risk to Australia’s economy or undermine a landmark free-trade deal struck with Beijing that remains on target to be ratified by Canberra before the end of the year, Australian Minister for Trade and Investment Andrew Robb said. “The current uncertainty is likely to encourage more investment out of China into Australia because we are seen as a safe haven,” he added.
• The China Securities Regulatory Commission (CSRC) has referred 22 cases of suspected market manipulation, insider trading, fabricating and spreading false information to the police. The number of cases now under investigation has risen to 48 so far this year.

Travel

• Transport app Citymapper – already available in several European cities – has now launched in Hong Kong, offering ways to navigate the city’s public transport in the fastest time possible with the benefit of real-time updates. A new feature called Go behaves like a co-pilot, providing step-by-step navigation and pushing out useful alerts to guide users to their destination. Hong Kong is the second Asian city covered by the app, following Singapore.
• The number of people taking public transportation reached a record high for the year as Beijing imposed traffic restrictions in advance of the September 3 military parade, prompting an increase in subway train capacity and safety measures. On August 20, the first day the odd-and-even license plate rule was imposed, more than 24 million people traveled on public transportation, a record high for this year, the Beijing Commission of Transportation said. The number of cars on the city’s roads was expected to drop by 35% to 50% from August 20 to September 3.
• Boeing Co raised its forecast for China’s aircraft demand over the next 20 years to 6,330 aircraft, a 5% rise from last year’s two-decade estimate. It valued the aircraft demand at USD950 billion. Boeing estimates that China’s commercial airplane fleet will nearly triple over the next 20 years, from 2,570 aircraft in 2014 to 7,210 aircraft in 2034.
• China’s first home-developed ARJ21-700 short/medium-range regional jet completed a demonstration flight from Beijing to Nanjing in Jiangsu province. The jet has eight first-class seats and 70 economy-class seats. The first plane will be delivered to Chengdu Airlines.
• Beijing topped the traffic congestion list of 45 major domestic cities in the second quarter, and the frequent use of ride-hailing services was cited in a report as a major reason. Commuters in Beijing spent on average 32 minutes per hour in traffic jams while traveling during rush hours, according to AutoNavi Software Co, a mobile web-mapping service provider. Following the capital, the top five most congested cities were Hangzhou, Guangzhou, Jinan and Dalian.
• A record 117 million Chinese travelled overseas in 2014, according to the Sydney-based Center for Asia-Pacific Aviation (CAPA) – more than double the 57 million in 2010 – and experts expect that trend to continue. “The short-term outlook for Chinese outbound visitors remains strong and the long-term is bright,” CAPA said in a report.

• China and Taiwan signed two agreements on the safety of civil aviation and avoidance of double taxation in China, 18 months after the two sides held the last high-level talks to seal bilateral deals.
• The once-hot smartphone market in China is expected to cool this year, growing a meager 1.2%, according to the International Data Corp’s Worldwide Quarterly Mobile Phone report. The China smartphone market grew 19.7% last year and accounted for nearly a third of all new handsets shipped. But Apple Chief Executive Tim Cook said he is still seeing “strong growth” in China.
• A number of VPN services used to get around Chinese internet restrictions have been disrupted in the run up to the military parade planned for September 3. China is cracking down on IPSec VPNs, Astrill said in a message to users.
• The three major telecommunications network operators in China have reshuffled their senior management. China Mobile named Shang Bing, previously a Vice Minister of Industry and Information Technology as its new Chairman, replacing Xi Guohua, who is retiring. Unicom Chairman and Chief
• Executive Chang Xiaobing has resigned to take on the same roles at China Telecom, while Wang Xiaochu is going to assume the same positions at China Unicom. The changes may signal the start of consolidation in the industry.
• Citic plans to consolidate its real estate operations and combine its mining-related units. “We expect to launch the real estate restructuring next month,” Deputy Chairman Wang Jiong said, after Citic posted a 46% rise in net profit in the first half to HKD37.68 billion. Revenue was HKD201.46 billion, flat compared to HKD200.62 billion in the year-earlier period.
• The U.S. Department of Energy and China’s National Energy Administration (NEA) reached an agreement to promote clean coal technology at an industry forum in Billings, Montana. The discussions took place near one of the largest coal reserves in the world, the Powder River Basin of Montana and Wyoming, where massive strip mines produce roughly 40% of the coal burned in the U.S.
• Yang Dongliang, who is under investigation for corruption, has been dismissed from his post as Director of the State Administration of Work Safety. He served as Vice Mayor of Tianjin from 2001 to May 2012. The investigation was announced six days after warehouse explosions in Tianjin.
  CNOOC, China’s biggest offshore oil and gas explorer, posted a 56% decline in profit for the first six months of this year to CNY14.73 billion.
• PetroChina Co’s net profit plunged 63% in the first half of the year as falling oil prices squeezed earnings. Net income dived to CNY25.4 billion in the half year ended on June 30 from CNY68.1 billion a year earlier. The company’s turnover dropped 24% to CNY877.6 billion as an increase in sales volume failed to offset the impact of slumping oil prices. The company’s average realized price of crude oil dropped 45% while average natural gas prices rose 0.4%. PetroChina’s production of oil and natural gas rose 2.9% to 75.9 million barrels of oil equivalent (BOE).