- The China Securities Regulatory Commission (CSRC) introduced new restrictions for financial institutions seeking to outsource fund management to external fund managers. Regulators are worried that such funds are used as a shadow banking channel by lenders to make risky bets in corporate bonds or equities, without effective management by the external fund house.
- Bank of China’s overseas corporate loan growth surpassed domestic corporate loan growth in 2016 for the first time, signaling a new stage of internationalization. The contribution of its overseas loans to total loans rose from 19% to 23%. The bank supported Chinese companies in about 3,200 “going global” projects from 2009 to the end of 2016. Currently, BOC has nearly 600 overseas branches and representative offices.
- Lufax, China’s biggest peer-to-peer (P2P) lender backed by Ping An Insurance, is planning to set up a platform to facilitate global asset allocation for middle income earners in Asia and Chinese investors. The Singapore-based platform will be launched this year. Lufax, originally established as a P2P platform five years ago, aims to transform itself into the largest wealth tech company in China.
- CITIC, China’s largest state-backed conglomerate that acquired McDonald’s mainland and Hong Kong business in January, saw net profit for 2016 rise 3% on-year to HKD43.1 billion, partly thanks to a gain of HKD10.3 billion by selling its mainland residential property assets to China Overseas Land and Investment. Total revenue slid 4% to HKD380.8 billion. Citic Bank, China’s eighth-largest commercial bank that made up around 90% of CITIC’s assets, reported a 1.1% increase in net profit, while Citic Securities saw net profit fall 48% due to the high base in 2015 and a lackluster A-share market last year.
- Ping An Insurance Group’s net profit rose 15% year-on-year to CNY62.4 billion last year, the biggest annual profit since 2003. Retail business contributed 65.4% of the total net profit last year, an increase of 7.3 percentage points from a year ago. The number of customers rose 20% year-on-year to 131 million, while profit per customer increased 7.8% to CNY311.51.
- China’s large state-owned banks are expected to disappoint when they report earnings for 2016 this week. The Agricultural Bank of China (ABC) is expected to post the largest profit decline of 2% to CNY177.3 billion, according to a poll of 21 analysts by Bloomberg. This will mark the lender’s first earnings drop since 2010. Industrial and Commercial Bank of China (ICBC), Bank of China (BOC) and Bank of Communications (BoCom) may even have slipped into a loss. Meanwhile, China Construction Bank (CCB) is set to perform the best with a 0.2% rise in profit to CNY228.1 billion. The poor performance was caused by falling interest income, which traditionally provided the bulk of the banks’ revenues.
- Robert Bosch plans to open a new joint venture for gasoline engine management systems in Chongqing, an automotive electronics plant in Changzhou, Jiangsu province, a power tools plant in Chengdu, and a thermo-technology joint venture with Guangdong Vanward New Electric, a gas appliance exporter based in Foshan. Bosch Chairman Volkmar Denner told China Daily that his company would develop connected mobility, smart city and smart home products from a long-term perspective. In 2016, Bosch invested around CNY5.4 billion in China, including establishing a research and development (R&D) facilities in Suzhou and Nanjing.
- Frontier Services Group (FSG) is planning to built two operation bases in Xinjiang and Yunnan, Erik Prince, Executive Chairman of the firm, said. He is better known as the founder of the private military company Blackwater, now known as Academi, which provides executive security services and specialized training. FSG will provide Chinese companies protection services abroad.
- Morocco and the Haite Group signed a memorandum of understanding (MOU) to invest USD1 billion to build an industrial and residential park in Morocco’s northern city of Tangiers. The park will host hundreds of Chinese companies in numerous industries, including car manufacturing, aerospace, aviation spare parts, electronic information, textiles, and machinery manufacturing. The project will cover an area of 2,000 hectares and generate 100,000 jobs.
- Huawei is making a massive investment in research and development (R&D) in New Zealand. The plans include the building of a cloud data center and establishment of innovation labs in Christchurch and Wellington. The company plans to spend NZD400 million over five years on the projects.
- China’s centrally-administered SOEs have 9,112 business entities operating in about 185 countries and regions. The SOEs have total overseas assets of more than CNY5 trillion and 346,000 employees operating overseas, Xiao Yaqing, Director of the State-Owned Assets Supervision and Administration Commission (SASAC) said.
- Foreign companies have no obligation to transfer their technologies to local partners under a joint-venture format in China, the Ministry of Commerce (MOFCOM) reiterated. Spokesman Sun Jiwen said there are no compulsory technology transfer obligations for foreign investors, and most industries are completely open for them. Only a few sectors deemed sensitive have equity share limits and restrictions. These were reduced from 43 to 15 in 2015.
- The Trump administration has announced sanctions on 30 foreign companies and people from 10 countries, including China, accusing them of engaging in nuclear or missile proliferation activities with Iran, North Korea, and Syria.
- A team of Chinese scientists in Chongqing have developed a method to determine a blood type within two minutes, a procedure which now takes about half an hour. The researchers at the Southwest Hospital affiliated with the Third Military Medical University said that they have designed a dye-assisted paper-based procedure that is not only quicker, but also more cost effective. The procedure could be suitable for use in emergencies.
- Police detained eight executives – including one foreigner – of French bakery Farine in Shanghai for allegedly using expired flour. Four bakeries of the chain were sealed by local authorities. They also confiscated bread and white flour. The bakeries violated China’s food safety law by using food items beyond their expiry date.
- Beijing has announced a plan to end markups on drug prices and adjust the cost of 435 medical services in the boldest move yet to improve China’s health care system. From April 8, a medical service fee will replace drug markups, registration and treatment fees. Drug prices were previously marked up by as much as 15%, but this will now not be allowed in more than 3,600 hospitals and medical institutions in the capital. Most prices for the 5,300-plus medical services offered at the city’s public hospitals were set in 1999, 75% of which have been below cost.
- The Australian operation of Alibaba Group is using the blockchain technology to track the product life cycle of food products and curb the spread of counterfeit food online. Blockchain technologies are mainly used to track transactions of bitcoin and other cryptocurrencies.
- The Intellectual Property Court in Beijing has overturned a ruling by the Beijing Intellectual Property Office that Apple violated a patent of Shenzhen Baili, which led to an order to stop selling the iPhone 6 and 6 Plus in Beijing. Sales, however, were not suspended while Apple appealed against the administrative order. The Shenzhen firm had accused Apple of having “copied” the exterior design of Baili’s 100C smartphone, which has a curved edge and rounded corners.
- According to a survey by the People’s Bank of China (PBOC), the percentage of bankers feeling confident about the economy jumped to 64.9% in the first quarter, from 53.7% in the preceding three months. However, 20.3% of bankers said monetary policy was “relatively tight” in the January-March quarter, up from 5.7% the previous quarter. Business confidence among entrepreneurs improved notably in the first quarter, to 61.5% of respondents from 54.1% in 2016’s fourth quarter.
- Chinese cities are becoming cheaper to live in globally following the yuan’s depreciation against the U.S. dollar, the Economist Intelligence Unit (EIU) Worldwide Cost of Living Survey showed. Shanghai’s ranking fell five places but it remained the most expensive city in mainland China, followed by Shenzhen and Dalian. Beijing dropped the most in the past year, falling 16 places to 31st in the global ranking. Singapore topped the global ranking for the fourth year running, with Hong Kong at no. 2. The biannual survey compared the prices of over 160 items in 140 cities around the world with the collated prices converted into U.S. dollar. New York was used as the basis for comparison.
Mergers & acquisitions
- Zhonghong Group has bought Blackstone Group’s 21% stake in SeaWorld Entertainment. Zhonghong is paying a 33% premium, but the deal includes licensing and consulting deals for theme-park development in China. Two Zhonghong Executives will join SeaWorld’s board.
- Air Products & Chemicals, based in Pennsylvania in the U.S., is pulling out of its bid to buy control of Yingde Gases Group Co, which would have given it as much as a 22% share of China’s market for industrial gases. PAG Asia has acquired a 47.2% stake in Yingde and is seeking total control of the company.
- HNA Group agreed to buy a 25% stake in Old Mutual’s U.S. asset management unit for about USD446 million. Old Mutual is selling down its holdings in OM Asset Management to HNA in two tranches. The first, comprising 9.95%, would be completed within 30 days, with a second 15% stake taking place in the second half. After the transactions with HNA, Old Mutual’s holding of OM Asset Management would drop to about 26% from about 51% now.
- Developer China Aoyuan Property is looking to expand into more cities in China’s booming Greater Pearl River Delta (PRD) to reach its goal of CNY50 billion in annual sales by 2019. Aoyuan already has a presence in most cities in the delta, and is speeding up land acquisition in Shenzhen and neighboring cities such as Huizhou. While a number of big cities further tightened home-buying policies over the weekend to cool the market, Aoyuan is “cautiously positive” about the overall market, as there is still an under-supply of new-homes in China’s first- and leading second-tier cities.
- Over half of Chinese households (52.2%) think housing prices are too high and more than a quarter worry they will rise more, according to a survey by the People’s Bank of China (PBOC). That was a slight decline from the previous quarter but higher than in the first three months of 2016. The survey showed 27.2% of households expect housing prices to rise in the second quarter. Despite steep prices, 22.9% of households plan to buy properties in the next three months. The PBOC also asked banks to appropriately adjust mortgage lending policies in 2017 to match local housing conditions.
- HNA Group Co and at least one partner are bidding to acquire Manhattan’s 245 Park Avenue for USD2.21 billion, one of the highest prices ever paid for a New York skyscraper. The 158,000-square-meter office tower, with tenants including JPMorgan Chase & Co, is being sold by Brookfield Property Partners and its 49% partner in the property, the New York State Teachers’ Retirement System. If completed, the deal would bring Chinese ownership to the heart of midtown Manhattan’s financial core.
- Country Garden, China’s third largest developer, has reported better-than-expected profit growth for 2016, driven by strong house sales, especially in smaller cities. Core profit rose 22% from a year earlier to CNY12 billion, and net profit was up 24% to CNY11.5 billion. The Guangdong-based developer has set a 2017 contract sales target of CNY400 billion, a 30% jump from 2016.
Science & technology
- The highest sea level along China’s coast in decades has prompted scientists to warn of a greater risk of marine disasters. The average sea level recorded last year was 82 mm higher than the average for the period covering 1993 to 2001, according to the State Oceanic Administration (SOA). It was 38 mm higher than that of 2015.
- Wu Jianguo, 49, a former stockbroker who fled Shanghai 14 years ago with CNY3.6 million stolen from clients, has been sentenced to 13 years in prison for embezzlement and misappropriation of funds.
- Chinese brokerages, including the country’s biggest, CITIC Securities Co, reported a sharp drop in profits in 2016 as lackluster stock market activity dragged down commission incomes. Brokers in China have been struggling after a stock market boom came to a turbulent end in 2015. Two of China’s top listed brokerages – GF Securities and Changjiang Securities – saw their 2016 net profit drop 39.2% and 36.8%, respectively, last week.
- The number of flights landing and taking off from Beijing Capital International Airport will be cut by more than 300 a day in April to allow for runway maintenance. The world’s second busiest airport will close one of its three runways between April 2 and April 29. About 40% of flights take off or land on this runway every day. The closure will reduce flights by about 20% and the number of passengers by 10% to 15%.
- China Southern Airlines, Asia’s biggest carrier by passengers, is in advanced talks to sell a stake to American Airlines for about USD200 million. The sale likely would take place through a private placement. China Southern has a market value of about USD10 billion. An investment in China Southern would allow American to strengthen its presence in the Chinese market. Rival Delta Air Lines acquired a minority stake in China Eastern Airlines in 2015. China Southern and Delta are members of the SkyTeam global airline alliance. American is in the competing Oneworld group, which doesn’t have a China-based partner.
- China is expected to get moving soon on construction of Indonesia’s beleaguered high-speed rail project. China Development Bank (CDB) could disburse pre-agreed loans for the 142 km Jakarta-Bandung rail line as early as the end of this month. The project has been stalled for over a year amid delays in government clearances and local resistance to the route, but if it does go ahead, it will be a milestone in China’s ambitions to export its high-speed rail technology.
- Domestic and foreign airlines plan to open more than 100 new international routes linking China with regions along the Belt and Road Initiative in the coming aviation season, the Civil Aviation Administration of China (CAAC) announced. The routes are mostly to Russia, countries in Central, Southeastern and Southern Asia, as well as the southern Pacific Ocean region. The 2017 summer and autumn civil aviation season started on March 26 and will end on October 28.
- China Railway Corp said that it had replaced all cables provided by Shaanxi Aokai Cable Co that supplied a substandard product that might ignite and release toxic gases. The problematic cables were first found to have been used on subway Line 3 in Xian. Eight people at the private company have been detained, and local police also shut down the company’s production sites. Beijing metro said no lines in the capital used Aokai’s products.
- The board of the Southeastern Pennsylvania Transit Authority in Pennsylvania in the U.S. approved the purchase of 45 multi-level rail carriages from CRRC MA for its regional rail network, saying they offered the best value. The multilevel coaches will meet “Buy America” requirements, with 60% or more of the parts, labor and fabrication done in the U.S. CRRC beat Bombardier and Hyundai Rotem to win the order. The carriages will be produced primarily at CRRC MA’s main U.S. manufacturing facility in Springfield, Massachusetts.
NPC & CPPCC sessions
- The National People’s Congress (NPC) passed the General Provisions of the Civil Law, the opening chapter of a civil code planned to be enacted in 2020. The provisions, which take effect on October 1 this year, were adopted with 2,782 of 2,838 National People’s Congress Deputies present voting in favor. The compilation of five books that deal with property, contracts, tort liability, marriage, and inheritance, began late last year and work on the books is progressing.
- Of the 2,838 Deputies to the National People’s Congress (NPC) who attended the closing ceremony, the overwhelming majority voted in favor of documents submitted, including the Government Work Report, the work report of the NPC Standing Committee, the work reports of the top court and top procuratorate. Lawmakers filed 514 motions: 492 on legislation, 16 on NPC supervision and six on other issues, according to the NPC.
- A pledge to contain fast rising home prices was added to the Premier’s annual work report on the closing day of the NPC session on March 15. Several lower-tier cities have raised the bar for home purchases this month as speculators from outside flood smaller markets, with home prices nationwide continuing to rise.
- The government will cut business taxes and administrative fees at a faster pace to ease the burden on the nation’s enterprises, Premier Li Keqiang said at the first meeting of the State Council since the annual gatherings of the National People’s Congress and the Chinese People’s Political Consultative Conference.
- An international new energy vehicle expo scheduled for late May in Nanjing, Jiangsu province, is expected to attract nearly 1,000 new energy vehicle manufacturers as well as suppliers of batteries and charging equipment from China and abroad.
- Qingdao Doublestar Group, one of the oldest rubber companies and a leading tire manufacturer in China, may acquire a 42.01% stake in South Korean tire maker Kumho Tire, becoming its largest shareholder. Doublestar has two tire production plants – one in Qingdao, Shandong province, and the other in Shiyan, Hubei province with a combined annual production capacity of 15 million tires.
- China’s policymakers support opening financial markets for capital and investment to flows both in and out of the country, according to People’s Bank of China Vice Governor Pan Gongsheng. Scrutiny of foreign companies transferring profits out was “not excessive”, he added. A healthy foreign-exchange market helped all participants, said Pan, who also heads the State Administration of Foreign Exchange (SAFE), which executes currency policy. Funds in yuan aren’t fully convertible to other currencies under current capital account rules. Companies must provide supporting documentation including tax records and audit reports when they plan to transfer profit out of the country.
- Hong Kong could become a member of the Beijing-led Asia Infrastructure Investment Bank (AIIB) at a meeting at the end of June as long as lawmakers’ approve a HKD1.2 billion share buy-in, payable over five years. The buy-in will secure an approximate 0.7% stake in the AIIB. Hong Kong would like to become the corporate treasury center for the AIIB. Over 30 countries are applying for membership.
- China’s holdings of U.S. Treasuries have declined to USD1.05 trillion in January, down USD7.3 billion from December, but the drop could be underestimated as the tally of Belgium, which analysts say is holding Chinese custodial accounts, dropped USD8.2 billion to USD112 billion, the lowest since August 2015.
- Guo Shuqing, Chairman of the China Banking Regulatory Commission (CBRC), urged banks to draft new rules on wealth and asset management, and to more tightly control risky leveraged investments. Funds raised from wealth management products should support real economic activity, he added. Guo made the comments in a speech at a meeting of the China Banking Association.
- Russia’s central bank has opened its first overseas office in Beijing, marking a small step forward in forging a Beijing-Moscow monetary alliance to bypass the U.S. dollar in the global monetary system. It is a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia, said Dmitry Skobelkin, Deputy Governor of the Central Bank of Russia. Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan.
- Net foreign exchange sales by Chinese banks continued to drop in February signaling a let-up of capital outflow. Banks bought USD108.8 billion worth of foreign currency and sold USD118.9 billion, resulting in net sales of USD10.1 billion last month, according to the State Administration of Foreign Exchange (SAFE). The deficit fell from January’s USD19.2 billion and USD46.3 billion in December.
- The China Banking Regulatory Commission (CBRC) has eased licensing rules for foreign-owned banks on investment banking services in the country, and their investment into domestic banking institutions. Wholly-owned foreign banks, joint ventures and their branches can now cooperate with their parent groups overseas to assist Chinese companies expand globally through overseas bond sales, IPOs, mergers and acquisitions (M&As), and other financing activities. They can also invest in some domestic financial institutions. By the end of last year, foreign banks had set up 39 locally-incorporated entities in China, 121 subsidiaries and 166 China representative offices.
- China sent its Special Representative on Latin American Affairs Yin Hengmin to a high-level dialogue on Asia-Pacific economic integration in Chile, but Foreign Ministry Spokeswoman Hua Chunying said that the gathering was “not a meeting of the Trans-Pacific Partnership as some media have said”. Representatives from 15 countries, covering all signatories of the Trans-Pacific Partnership (TPP), all members of the Pacific Alliance, as well as China and the Republic of Korea, were invited to the two-day meeting in Vina del Mar.
- Private investors will be encouraged to play a bigger role in upgrading the manufacturing sector, as China steps up efforts to widen access to key industries, Miao Wei, Minister of Industry and Information Technology said. Speaking at the three-day China Development Forum in Beijing, he said investment in manufacturing grew by only 3% last year, partly because the sector yields lower returns than the real estate and financial sectors.
- China will continue to deepen its supply-side structural reform to address economic imbalances while holding the bottom line to contain risks in the financial and property markets. He Lifeng, Chairman of the National Development and Reform Commission (NDRC), warned about capital abandoning real economic activities and engaging in financial speculation, as well as excessive funds flowing into the property sector.
- Baoneng Group subsidiary Jushenghua has pledged 182 million in China Vanke A-shares as collateral to Ping An Securities in a repurchase agreement. The shares represent 1.65% of Vanke’s total issued capital. The pledge comes amid a ban on Baoneng Group Chairman Yao Zhenhua from working in the insurance industry for 10 years, a move announced by the China Insurance Regulatory Commission (CIRC) last month when Foresea Life Insurance, a unit of Yao’s Baoneng group of companies, was found to have provided “fake materials” and “violated rules for using an insurance fund”.
- The planned re-election of China Vanke’s 11-member Board of Directors on March 27 is likely to be delayed until at least early May amid an unsettled fight among shareholders for control of the company. Currently Baoneng Group, Vanke’s largest shareholder with a 25.4% stake, and China Evergrande, the third-biggest shareholder with a 14.07% holding, have no seats on the board. China Resources, formerly the second largest shareholder which this year transferred its entire 15.29% stake to Shenzhen Metro Group, still occupies three seats.
- Hong Kong-listed homebuilder Agile Group Holdings, which is very active in Hainan province with a huge tourism property project, posted better-than-expected 2016 core earnings. Pensioners from China’s Northeastern provinces flock to Hainan every winter to escape the smog and cold in their home provinces. Agile bought another two Hainan sites, in Clearwater Bay and Haikou, recently where land costs are around CNY3,000 per square meter, bringing its total land resources on the island to 5.74 million sq m. Agile’s core earnings for 2016, excluding foreign exchange losses, increased 13% to CNY2.7 billion. Net profit grew 32.5% to CNY3 billion, while revenue was up 8.5% to CNY46.7 billion.
- Milway Development, a unit of HNA Group, has paid HKD7.44 billion for its fourth plot of development land at Hong Kong’s former Kai Tak airport. The site sold at a price slightly exceeding the market expectation of between HKD6.1 billion to HKD7.4 billion, raising concern it could add fuel to the already hot residential market. After combining all four sites into a big plot, it will yield a total gross floor area of 2.02 million sq ft with an average land cost of HKD13,416 per sq ft.
- Between January and February, CNY912.1 billion of new homes, excluding government-funded affordable housing, were sold across the country, a year-on-year increase of 22.7%, the National Bureau of Statistics (NBS) said. But the gain slowed from the 36.1% rise in 2016. The area of new homes sold during the two-month period rose 23.7% from a year earlier to 124.39 million sq m. The rise accelerated from the 22.4% gain last year, according to the Bureau’s data. China’s investment in property development grew 8.9% year-on-year in the first two months of this year, 2 percentage points faster than the overall growth rate of 2016. For residential properties, investment rose 9% year-on-year, and the floor space of new housing construction grew 14.8% from a year ago.
- February home prices in China’s 70 largest cities jumped 12.4% from a year ago. Compared to a month earlier, February prices rose 0.4% after seasonal adjustments by Goldman Sachs, based on data released by the National Bureau of Statistics (NBS). Sanya, the tourism city in Hainan province, attracted the most buying interest, with February prices gaining 1.3%, while Hefei, the provincial capital of Anhui, reported a 40.5% annual gain in prices.
- Since March 15, Beijing, Qingdao, Nanjing and Ningbo have stepped up their home-purchase restriction policies. Nationally, home sales by volume for the first two months of this year were up 26% year-on-year, reflecting a slowdown from 34.8% growth for 2016, according to the National Bureau of Statistics (NBS).
Science & technology
- China is developing a system to recover parts of rockets used in space launches to bring down costs and make its space program more commercially competitive. The parachute system would bring the rocket engine and booster safely back to the ground so they can be reused in future launches. The recovery system is under development at the China Academy of Launch Vehicle Technology in Beijing.
- An airline in Inner Mongolia is offering an all-you-can-take “subscription” service on its new flight route for CNY500 a month. The flight from Urad Middle Banner to Baotou was inaugurated last week. Previously, the only way to travel between the two places was by car or a three-hour bus ride. The flight cuts the travel time down to just 50 minutes. The Cessna 208 Caravan used on the route can take only 8 passengers at a time.
- Boeing and Chinese plane manufacturer Commercial Aircraft Corp of China (COMAC) will start to build a Boeing 737 completion center in Zhoushan at the end of March, set to make its first delivery in 2018. This is Boeing’s first overseas facility as part of its 737 production system, and aimed to deliver 100 Boeing 737 planes a year.
- It is estimated that more than 280,000 rental bikes are in service in Shanghai, with the number expected to reach 500,000 by June, according to Guo Jianrong, Secretary General of the Shanghai Bicycle Association. Shanghai is the first city to issue draft guidelines to regulate the bike-sharing industry.
- Train and rail equipment manufacturer China Railway Rolling Stock Corp made a major breakthrough in overseas markets in 2016. Its total value of orders from abroad surged by 40% year-on-year to USD8.1 billion in 2016. Exports reached 102 countries and regions and about 83% of countries with railroads are using CRRC products.
- Chinese railcar manufacturer CRRC Sifang America broke ground in Chicago at a USD100 million plant that will build railcars for the city’s transit authority and become the company’s North American hub for the assembly of railcars. CRRC Sifang will supply more than 840 new railcars to replace approximately half of the agency’s fleet.
- Chinese Vice Premier Wang Yang paid a four-day official visit to the Philippines, where he attended the opening ceremony of the China-ASEAN Year of Tourism and the China-Philippines Economic and Trade Forum. Chinese companies signed agreements with their Philippine counterparts to purchase USD1.7 billion worth of fruit and other products. As many as 73 trade deals were signed in Manila, also regarding lumber, copper cathodes and nickel ore. Philippine President Rodrigo Duterte plans to attend the Belt and Road Forum for International Cooperation in Beijing in May.
- The Chinese government encourages more companies to invest in Rwanda’s major infrastructure construction projects in such areas as transportation and energy, President Xi Jinping said while meeting with Rwandan President Paul Kagame. Xi added that China would like to support Rwanda’s construction of special economic zones. He added that China’s policies toward Africa will not change and the steps to push forward China-Africa cooperation will not slow down.
- Premier Li Keqiang will make official visits to Australia and New Zealand this week to boost economic ties with the two countries. The visits will be the first to the two countries by a Chinese Premier since 2006. In 2008, New Zealand was the first developed economy to sign a free-trade agreement (FTA) with China.
NPC & CPPCC sessions
- 112 of this year’s NPC Deputies are on Hurun’s list of the richest Chinese, accounting for 3.7% of the total number of deputies, and 97 Members of the CPPCC National Committee are on the list, accounting for 4.3% of the total number of political advisors. Zhang Yong, Vice Chairman of the National Development and Reform Commission (NDRC) said that the private economy accounts for about 60% of China’s economy, 80% of employment and more than 50% of tax revenue.
- China’s fiscal deficit this year is projected to be 3% of GDP, or CNY2.38 trillion. “China’s government debt ratio is relatively low compared with other countries, which leaves enough leeway for further adjustment,” the Minister of Finance said. China will cut taxes and administrative fees by CNY550 billion this year to further reduce the corporate burden and will roll out favorable tax policies to support small innovative and technology companies, Finance Minister Xiao Jie said.
- The economic growth target of around 6.5% set for 2017 is both “necessary and attainable”, He Lifeng, Chairman of the National Development and Reform Commission (NDRC) said. “According to our experience, each 1 percentage point of GDP growth will help create about 1.7 million jobs,” he added. Without quality growth at a reasonable level, China would find it hard to meet the job creation target of over 11 million. He also said that China had invested more than USD50 billion in countries along the Belt and Road since the nation proposed the initiative in 2013.
- China’s mobile phone operators will eliminate charges for domestic roaming and long-distance calls as data services become their major source of revenue. The fees will be canceled as of October 1, said Vice Minister of Industry and Information Technology Chen Zhaoxiong. In 2016, some 9.36 billion gigabytes of data were consumed through mobile internet use, up 123.7% year-on-year.
- President Xi Jinping urged Northeast China to depend on the real economy and push forward supply-side structural reform to revitalize the region’s economic growth, which has slowed in recent years with overcapacity cuts in heavy industries. The northeastern region, consisting of Liaoning, Jilin and Heilongjiang provinces, largely relies on heavy and chemical industries, energy resources, raw materials and a large proportion of state-owned enterprises (SOEs).
- China plans to promote more public-private partnership (PPP) projects, which are still in their infancy in China. A total of 1,351 PPP projects worth CNY2.2 trillion had been signed by the end of last year, with the time frame for implementing such projects growing shorter.
- More young people will go abroad to study in the next five years, according to Yu Minhong, CEO of the New Oriental Education and Technology Group and a Member of the Chinese People’s Political Consultative Conference’s National Committee. He estimates that the number of Chinese studying abroad each year will peak at between 700,000 to 800,000. According to Education Ministry statistics, 544,500 Chinese studied abroad last year, more than triple the 179,800 that sought out education overseas in 2008.
- A proposal was submitted to the CPPCC to translate more of China’s official documents. The number of translation companies in China surged from 18 in 1980 to roughly 73,000 in late 2014. More than 104,000 candidates sat for the China Accreditation Test for Translators and Interpreters (CATTI), rising from about 5,000 in 2004, while the pass rate was less than 20%. Introduced in 2003, the CATTI is the country’s official test for future translators and interpreters of English, French, Japanese, Russian, German, Spanish and Arabic.
- He Yu, Chairman of China General Nuclear Power Corp, has called for the mass production of Hualong One reactors and priority to be given to China’s third-generation nuclear technology in future nuclear power projects. China should build four to six nuclear reactors annually based on the Hualong One design, he said. China added about 8 GW of nuclear power capacity last year,.
- Baidu’s CEO Robin Li has urged the Chinese government to further ease visa restrictions to attract overseas tech workers. He added that U.S. President Donald Trump’s immigration policy offered China “a great opportunity” to attract skilled workers.
- The Chinese government has promised the strictest assessments yet to make sure that its poverty alleviation policies are effective, and warned against irregularities such as the manipulation of figures. Poverty reduction is a key policy aim for the Communist Party and the central government. The official goal is to eliminate poverty, defined as annual income of less than CNY2,300, and build a “moderately affluent society” by 2020.
- China plans to digitalize the registration and licensing of new firms so they could start their businesses quickly. The deregistration process will also be made quicker, simpler and cost-effective, Zhang Mao, Director of the State Administration for Industry and Commerce (SAIC) said.
- China will not suffer labor shortages in the years ahead even though its society is rapidly ageing, Wang Pei’an, Vice Chairman of the National Health and Family Planning Commission, said. He added that the population would peak at 1.45 billion in 2030, 1.4 billion in 2050 and more than 1.1 billion by the end of the century. The labor force, or those aged 15 to 64, accounted for 73% of the population in 2015 and would number 952 million in 2030 and 800 million in 2050.
- China’s court system last year concluded 45,000 graft cases, involving 63,000 people, according to the work report of the Supreme People’s Court. Defendants included 35 former officials at the provincial and ministerial level or above. Courts convicted 2,862 criminals of bribery and concluded 15,000 cases involving corruption in poverty alleviation.
- Google is still in talks with Beijing over its plans to return to the Chinese market, according to Liu Binjie, Standing Committee Member of the National People’s Congress and former Director of the General Administration of Press and Publication (GAPP). Google Scholar is on the priority list for re-entry. “The academic sector will be the first to get through,” Liu said. “China’s focus is on making academic progress, such as academic exchanges as well as exchanges in science and culture, instead of news, information or politics.”
- Premium sedans manufactured at the Volvo Cars Daqing plant, in Heilongjiang province, are expected to start selling abroad in May. The plant’s product – Volvo’s new S90 saloon – is selling well in the Chinese market. Staff at the plant increased from 600 to 2,000, with more than 30 foreign nationals. Volvo said it sold 534,332 vehicles globally in 2016, with 99,030 units going to the Chinese market.
- Great Wall Motor, China’s biggest sport-utility vehicle (SUV) maker, is reconsidering its plan to build a plant in Mexico that would have made its bestselling cars for the U.S. market, after tax threats by U.S. President Donald Trump. The company might choose the U.S. instead for its first North American plant, General Manager Wang Fengying said.
- Citigroup will include China’s bonds in its three government bond indexes – Emerging Markets Government Bond Index, Asian Government Bond Index, and Asia Pacific Government Bond Index – in the wake of the Chinese regulator’s recent signals over a wider opening of the interbank bond market to overseas investors. The U.S. bank said it also plans to add China, South Korea and Israel to a new sub-index of the World Government Bond Index. The sub-index will track 26 global major bond markets, up from 23.
- Dianrong.com, one of China’s largest peer-to-peer (P2P) lending companies, has partnered with Taiwan’s Foxconn Technology Group to expand supply chain finance in China. Their Joint venture Chained Finance plans to create a new online marketplace based on blockchain, the technology behind the digital currency bitcoin. Jacky Lee, Chief Executive of FnConn, a subsidiary of Foxconn, said that Chained Finance would target suppliers of all sizes. Supply chain finance refers to credit given to the small- and medium-sized enterprises that act as suppliers to a large blue-chip buyer.
- Alipay, the mobile payments operator run by Alibaba Group affiliate Ant Financial Services, has further expanded its presence at popular European destinations for Chinese tourists, with the number of stores and restaurants accepting Alipay up tenfold from three months ago. More than 2,000 merchants and restaurants in Europe now accept Alipay payments, compared with just 200 at the end of November. Alipay will also expand the roll out its real-time tax refund services to as many as 12 European airports.
- Banks in China lent more than expected in February as companies started to show signs of a recovery. A total of CNY1.17 trillion in new yuan loans were extended last month, beating market expectations. Although the amount was CNY910 million less than in January, it was CNY439.1 billion more than a year ago.
- M2, a measure of money supply, rose 11.1% year-on-year, slightly slower than January’s 11.3%. “New yuan loans were larger than expected, reflecting strong demand for credit,” Guotai Junan Securities said in a note, adding that there was rapid growth in medium and long-term loans to companies.
- Shanghai is likely to ease limits this year on foreign investment in the banking, securities brokerage, securities fund management, futures trading and insurance sectors, in the China (Shanghai) Pilot Free Trade Zone. The move is in line with the launch of updated guidance on foreign investment in the free trade zone.
- Foreign-invested companies in Shanghai boosted their profitability last year. Their profits jumped 12.3% year-on-year in 2016 while revenue rose 5.5%, said Shang Yuying, Vice Chairwoman of the Shanghai Commission of Commerce, citing a survey of 15,200 foreign-invested companies in the city. These companies contributed two-thirds of Shanghai’s industrial production as well as two-thirds of foreign trade and a third of tax revenue.
- Sun Jiwen, Spokesman for the Ministry of Commerce (MOFCOM), urged support for the World Trade Organization (WTO), warning that defiance of WTO rules could lead to a trade war. He added that China firmly supports the WTO and will defend the authority of its rules.
- China’s largest listed telecom equipment maker ZTE has reached a settlement with U.S. authorities over sanctions related to trade with Iran. ZTE agreed to pay a criminal and civil penalty of USD892 million and an additional penalty of USD300 million, which will be suspended for a seven-year probationary period to deter future violations. ZTE Chairman Zhao Xianming said ZTE has established sound relations with its U.S. suppliers and created 130,000 high-tech jobs in the United States. ZTE currently holds about 7% of the U.S. smartphone market.
- China urged the United States to act prudently in the anti-dumping case filed by the Aluminum Association of the U.S. against Chinese aluminum foil product exporters, the first such case this year. The petition concerns the aluminum foil used in a variety of daily and industrial applications, including household foil, flexible and semirigid cookware, product packaging and automotive manufacturing.
- Chinese companies are filing a record number of patents in Europe, in preparation for their international expansion, according to the European Patent Office. The office said Chinese companies filed 7,150 patents with it in 2016, a year-on-year increase of 24.8%. It was the fastest growth rate among the top 10 countries on the office’s patent-filing league table. Huawei Technologies filed 2,390 patents, which was the second-biggest filing by a company globally, after Philips with 2,568 patents.
- Tianjin Seagull Watch Group recently took out insurance for legal fees concerning patent disputes in overseas exhibitions, becoming the first company to file for this type of insurance in China. The insurance was launched by PICC Property and Casualty Co to help Chinese companies to go abroad. It will cover attorney and litigation fees and other legal costs.
- Sales of excavators in China nearly quadrupled in February from a year ago to the highest monthly growth. A total of 14,530 excavators were sold domestically last month, a surge of 297.65% year-on-year and in line with an annual growth of 17.4% for the government’s infrastructure spending in 2016, GF Securities said in a report. Infrastructure construction “contributes nearly 70% to the heavy machinery demand in many regions in China.” Sany Heavy Industry Co posted a 360% jump in excavator sales from a year earlier in February, its highest monthly growth since it started operation in 1994.
- China’s consumer inflation cooled in February because of lower food prices. The Consumer Price Index (CPI) rose 0.8% year-on-year in February, the lowest since January 2015 and down from January’s 2.5%, the National Bureau of Statistics (NBS) said. The CPI for January and February combined rose 1.7%. The Producer Price Index (PPI) surged 7.8%, the fastest year-on-year increase in more than eight years.
- China’s industrial output for the first two months of the year grew by more than 6%, the National Bureau of Statistics (NBS) said in the latest sign that the economy is stabilizing. Output in the service sector rose more than 8%. Output of most industrial products rose compared with the same period last year. Power generation rose 6.3% year-on-year in the first two months, and freight volume was up 6.9%. Railway cargo volume saw double-digit growth.
Mergers & acquisitions
- China’s technology, media and telecommunications (TMT) overseas merger and acquisitions are expected to increase steadily in 2017, said Deloitte. They grew by a compound annual growth rate of 27% from 2012 to 2016, far exceeding North America, Europe and other regions, according to Deloitte’s “China TMT industry Overseas M&A Report 2017.” “China is showing a growing interest in overseas advanced technology,” said Keat Lee, Deloitte China Consulting Partner.
- HNA Group has acquired an 80% stake in a media company – Beijing Lianban Caixun Cultural Media – that runs the website of Caijing Magazine, one of the most popular and influential Chinese business magazines. HNA’s business now spans aviation, finance, real estate, logistics, hospitality, tourism, ecological technology, and it has now added media.
- Yingde Gases Group’s shareholders voted to end a four-month long boardroom tussle, dismissing Chairman Zhao Xiangti and reappointing to the Board Mark Sun and Trevor Strutt – two co-founders of the company – to pave the way for a sale to Hong Kong buyout fund PAG Asia Capital.
- Eldridge Industries, the U.S. owner of Dick Clark Productions, said that one of its affiliates terminated an agreement to sell off the TV production company to Chinese conglomerate Dalian Wanda Group, after Wanda failed to honor contractual obligations. Dalian Wanda had agreed to a take-over in November of Dick Clark Productions, the company that runs the Golden Globe awards and Miss America pageants.
- Avic International Holdings, an electronics manufacturing unit of state-owned aerospace firm Aviation Industry Corp of China (AVIC), has agreed to buy Xiamen Tianma Microelectronics, the country’s largest flat product display supplier, for CNY10.6 billion. Xiamen Tianma, also the world’s fourth-largest supplier with a 12% share in 2015, supplies displays used in electronic products such as smartphones.
- Shanghai posted sales of under 10,000 pre-owned homes for the second straight month in February, and there is no sign of a major recovery soon. Last month, around 9,600 units of pre-occupied houses were transacted, up 2.4% from January but a year-on-year plunge of 64.1%, Shanghai Centaline Property Consultants Co reported.
- China’s land sales in 50 major cities surged 73% in the first two months of 2017 despite measures to cool the red-hot property market. The city governments received a total of CNY452.8 billion from land auctions during the period, up from CNY262.5 billion in the same period of 2016, Centaline Property data shows.“Property developers’ enthusiasm for land-buying is still high,” said Yan Yuejin, Research Director at the Shanghai-based E-house China R&D Institute.
Science & technology
- Chinese scientists have broken two world records in the Mariana Trench in the Pacific Ocean. China became the first country to collect the artificial seismic stratigraphy of the Challenger Deep, the deepest section of the trench measured at more than 10 kilometers. China also set a new world diving record for underwater gliders at 6,329 meters with Hai Yi, a glider designed by the Institute of Automation in Shenyang, Liaoning province.
- The Mila Mount Tunnel on the Lhasa-Nyingchi Highway is expected to be opened in September, when it will become the world’s highest super-long tunnel. The tunnel is located at the junction of Lhasa and Nyingchi in Tibet at an average altitude of 4,740 meters above sea level. As a key section of the Lhasa-Nyingchi Highway, the two lanes of the tunnel are 5,727 meters and 5,720 meters long respectively.
- China Eastern Airlines has terminated services from Ningbo to Jeju and Cheongju in South Korea from March 15 amid an ongoing boycott of South Korean companies and travel services. Spring Airlines and Okay Airways are also canceling flights. The number of Chinese tourists heading to South Korea is expected to fall by at least half.
NPC and CPPCC sessions
- Li Shufu, Chairman of Chinese carmaker Geely Automobile, has urged Beijing to allow more companies to be involved in high-definition mapping, which he sees as the key barrier that may prevent the country from winning the global autonomous driving race. He made the suggestion in his capacity as a member of the National Committee of the CPPCC.
- China would “never” launch a currency war to devalue the yuan to boost exports, Yi Gang, Vice Governor of the People’s Bank of China (PBOC), said on the sidelines of the CPPCC meeting. “Our overall direction is to keep the exchange rate basically stable within a reasonable range,” Yi said. He added that there was no need at present for the PBOC to follow the U.S. Federal Reserve in tightening monetary policy by raising interest rates.
- China’s government has a selection of policy tools to respond to any potentially hostile trade or economic policies by U.S. President Donald Trump, Economist Li Daokui told the South China Morning Post outside the meeting of the National People’s Congress. “What’s important is not what Trump says, but what his team says. The government has regular communications” with officials of the Trump administration, he added.
- China has pledged to simplify the value-added tax (VAT) regime this year to level the playing field and shore up the real economy. Premier Li Keqiang said the government will trim the four-tier VAT regime to three levels. Li promised to cut the tax burden by CNY350 billion this year, and slash administrative fees by CNY200 billion. While tax revenues rose 4.3% to CNY13 trillion in 2016, revenue growth has declined annually since 2010.
- Beijing will press ahead with a controversial plan for greater integration between Hong Kong and the mainland, Chinese Premier Li Keqiang announced. The Guangdong-Hong Kong-Macao Greater Bay Area concept was mentioned for the first time in the Premier’s annual report. The concept dates back to 2011 when it was proposed in a study called “The Action Plan for the Bay Area of the Pearl River Estuary”.
- Volkswagen’s luxury division Audi is recalling 681,000 cars in China to fix coolant pumps that could overheat. The measure is part of a global recall affecting around 1.1 million units of the A4, A5, Q5, A6 and A8 hybrid models, whose engine control units will require software updates to resolve the problem.
- Zhou Xiaochuan, 69, Governor of the People’s Bank of China (PBOC), looks likely to remain in the post for a while as the central government needs his experience and expertise more than ever to navigate uncharted financial waters, analysts said. He was appointed to lead the PBOC in late 2002. U.S. President Donald Trump’s threat to label China a currency manipulator has made it all the more important for Beijing to have a trusted voice that can be heard in Washington. He is already the longest-serving central bank chief in the world’s top 20 economies.
- President Xi Jinping said China must “unswervingly” crack down on financial irregularities and illegal behavior, while improving shortcomings in market supervision. Such reforms must be specific and according to international standards, he added. The country’s top leaders have criticized the flow of speculative funds into the property market, which recorded the fastest price gains last year since 2011, fueling a dangerous price bubble and inflating China’s debt load.
- The National Development and Reform Commission (NDRC) has called for accelerated research on new tax regulations for the rapidly growing sharing economy sector. In 2016, the transaction volume of China’s sharing economy reached CNY3.45 trillion, marking a 103% year-on-year growth. Employees working on sharing economy platforms numbered 5.85 million, up 850,000 year-on-year. Among them, the number of service providers increased by 10 million to 60 million.
- Tibet and Xinjiang “have virtually become China’s version of the British Virgin Islands,” according to Shen Meng, Executive Director of boutique investment bank Chanson & Co. in Beijing. Thanks to a package of tax breaks, companies registered in Tibet are subject to a corporate tax rate of 15%, well below the national standard rate of 25%. The overall tax rate can drop to as low as 9% as a result of other incentives granted by local governments. The most favorable territory in terms of preferential taxes is Khorgos, a border city in Xinjiang.
- Bonds issued in China last year totaled CNY36.1 trillion, the People’s Bank of China (PBOC) said, a 54.2% rise on 2015. China’s debt-to-GDP ratio rose to 277% at the end of 2016 from 254% the previous year, with an increasing share of new credit being used to pay debt servicing costs.
- Dalian Wanda Group has signed a strategic partnership with China UnionPay. Wanda Group and its partner merchants plan to gradually accept UnionPay QuickPass. Meanwhile, they will also jointly expand customer service channels, carry out joint marketing campaigns, and explore offering value-added services to consumers both at home and abroad.
- The Dalian Commodity Exchange (DCE) is making preparations for the participation of foreign investors in iron ore futures trading, said Chairman Li Zhengqiang, as he addressed the two-day 2017 China Iron Ore Conference. The DCE launched China’s first iron ore futures with physical delivery in October 2013.
- China will continue to be the world’s most attractive destination for global investment this year, with new materials, new technologies and the healthcare industries being the new focus, according to a report by the China Center for International Economic Exchanges (CCIEE). The growth rate of China’s foreign direct investment (FDI) was expected to reach over 15% in 2017, up from 4.1% growth in 2016 to USD118 billion. Data also showed foreign-funded businesses, which account for less than 3% of the number of companies operating in China, generated nearly half of the nation’s foreign trade and one-fifth of tax income over the past four years.
- Chinese companies looking to invest in Australian businesses should avoid bidding on “national icons” to prevent being rejected by the Australian government, Brian Wilson, Chairman of Australia’s Foreign Investment Review Board (FIRB) has said.
- Atlas Copco has opened two joint ventures with Chinese drilling equipment maker Hongwuhuan Group to produce and sell drilling rigs in China. One of the joint ventures is based in Quzhou, Zhejiang province, and will develop and produce surface drilling rigs and rock drilling tools. The other one, based in Shanghai, will focus on sales. The companies expect to achieve CNY200 million in sales this year.
- Eleven shipping companies will cut terminal handling costs in China, saving CNY3.5 billion a year for domestic trading companies, the National Development and Reform Commission (NDRC) said. Cosco has promised to cut the charge to CNY596 per TEU from CNY717, while Maersk will lower it to CNY566 per TEU from CNY681.
- The European Commission announced its final ruling to impose anti-dumping taxes on Chinese steel plate for a five-year period, with duties ranging between 65.1% and 73.7%. Wang Hejun, Director of the Ministry of Commerce’s Trade Remedy and Investigation Bureau, said China has grave doubts about the ruling and is highly concerned about the EU’s protectionist tendencies regarding Chinese steel products.
- China called on the European Union to put an end to punitive duties imposed on Chinese solar panels as soon as possible following a decision by the EU to extend the tax for 18 months with a gradual phase-out.China’s Ministry of Commerce regrets that the EU has extended the duties, disregarding the opposition of Chinese firms, although the extension period has been cut.
- Chinese telecom equipment maker ZTE Corp is nearing an agreement to plead guilty to U.S. criminal charges and pay hundreds of millions of dollars in penalties over allegations it violated the International Emergency Economic Powers Act that restricts the sale of U.S. technology to Iran. ZTE received U.S. sanctions relief till March 29. An agreement would cap a year of uncertainty for the Shenzhen-based company.
- Trading turnover at the East China Fair edged up 0.28% from last year while the number of overseas buyers rose slightly, the Shanghai Commission of Commerce said. The turnover at the five-day event, which closed in Shanghai on March 5, amounted to USD2.3 billion. The number of foreign professional visitors rose 3.2% from last year to 22,140. Japan remained the largest source of foreign buyers, accounting for 42% of the total.
- Businesses in Shanghai can now apply to register a trademark in the city at the first trademark registration window in Xuhui district. “It will significantly improve the efficiency of trademark application and save time and cost for businesses that want to register trademarks in Shanghai,” said Lin Haihan, Director of the Trademark Department at the Shanghai Administration for Industry and Commerce. The review of a trademark will take nine months. In the past, businesses in Shanghai had to visit the Beijing office of the SAIC for the trademark application process.
- China’s coal consumption fell for the third straight year in 2016. It declined by 4.7% annually in 2016, and the share of coal in the country’s energy mix slipped to 62%, down 2 percentage points year-on-year, the National Bureau of Statistics (NBS) said. Coal production also fell, down 9% to 3.41 billion tons in 2016.
- Talks between Russian gas supplier Gazprom and Chinese officials on a deal that would channel gas from Siberia to northwest China have slowed because of uncertainty amid ongoing energy industry reform and weaker demand. Gazprom Deputy Chairman Andrey Kruglov told the South China Morning Post that China’s slowing economy was a factor in the gas-supply negotiations, which are considered a follow up to a 30-year gas export deal, worth USD400 billion, that was agreed in 2014.
- The official Purchasing Managers’ Index (PMI) rose to a three-month high of 51.6 in February, compared with the previous month’s 51.3. Analysts had predicted a reading of 51.1, pointing to a modest expansion as China’s industrial firms continued to benefit from higher sales prices and a recovery in demand fueled by a construction boom. The official non-manufacturing PMI rose 0.1 points to 54.6 last month.
- Chinese business executives are more optimistic about their companies’ revenue growth amid a global recovery and opportunities emerging from the Belt and Road initiative, PricewaterhouseCoopers (PwC) said. PwC found 33% of 182 business executives, covered by the China part of its global CEO survey, said they are “very confident” about the outlook of their companies’ income in the next 12 months, up from 25% last year. Meanwhile, 31% of China’s executives said they believe the global economy will improve over the next 12 months, higher than the global level of 29%.
Mergers & acquisitions
- Chinese chemical company Lianhetech has bought UK-based chemical manufacturer Fine Industries in a GBP103 million deal, providing Lianhetech with its first European base. Shenzhen-listed Lianhetech snapped up Fine Industries, based near Middlesbrough, from private equity firm NorthEdge Capital. Lianhetech is one of China’s leading contract chemical manufacturers. It has a market value of USD2 billion and operates seven chemical factories, two machinery plants and two research and development centers in China.
- Chinese investors spent GBP805 million on property in London’s West End in January, around 80% of the amount spent by Chinese investors in that market during the whole of 2016. Four out of six deals involved Chinese buyers, according to Savills. A single massive transaction involving CC Land Holdings acquiring One Kingdom Street in Paddington accounted for GBP292 million. It was the second-biggest transaction ever by a Chinese investor in the West End market.
- The area of new homes sold in Shanghai, excluding government-subsidized affordable housing, fell 6.7% month-on-month to 363,000 square meters in February, Shanghai Centaline Property Consultants Co said. The volume, a 49.1% plunge from the same month a year ago, was also the lowest February data recorded in six years. Around 286,000 sq m of new houses were released locally last month, down 23% from January. New homes sold for an average CNY47,201 per sq m last month, little changed from January.
- China Mobile retained its ranking this year as the world’s third most valuable telecommunications brand, behind U.S. network operators AT&T and Verizon Communications. Hong Kong-listed China Mobile, the world’s largest wireless network operator, had a brand value of USD46.8 billion, according to the latest industry survey published by London-based consultancy Brand Finance. China Telecom was ranked No 11, with a brand value of USD17.6 billion, and China Unicom No 20, with a brand value of USD9.3 billion.
- Following the debut of the Shanghai-Hong Kong Stock Connect in 2014 and the Shenzhen-Hong Kong Stock Connect in 2016, financial regulators are exploring whether mutual market access can be extended to exchange traded funds (ETFs). But due to the difference between trading systems, the much-anticipated ETF Connect may not be rolled out this year, HKEX Chief Executive Charles Li said, adding that the Bond Connect was currently under discussion.
- IHG, one of the world’s largest hotel groups by room numbers, is banking on vibrant growth in China in the years ahead. “Last year saw a record number of signings in China, where 82 hotels, or 19,000 rooms, have been added to our pipeline,” said Kenneth Macpherson, CEO of IHG China. “The average revenue per available room climbed 2.2% year-on-year at our hotels in China, with even stronger growth of 3.9% for hotels in the Chinese mainland and 6.3% for those in first-tier cities,” he added. IHG operates 292 hotels spread over six brands in 100 Chinese cities at the end of last year.
- HNA Group has acquired a majority 82.5% stake in Hahn airport in western Germany, its owner, the state government of Rheinland-Pfalz, said. This is the first acquisition of an overseas airport by HNA, the parent of Hainan Airlines. Hahn is a former military base now mainly used by budget carrier Ryanair. A source familiar with the matter said the purchase price was around €15 million.
- HNA Group has acquired a 3.04% stake in Deutsche Bank. The purchase makes HNA the fourth-largest shareholder in the German lender, after BlackRock, which holds 6.07%, and two sovereign wealth funds that are controlled by Qatar, which together hold 6.1%. HNA could still increase its stake, but would keep it below 10%. HNA Capital, a financial group under HNA Group, has operations in more than 100 countries, and it deals with businesses include leasing, insurance, internet banking, securities and futures. Its total assets exceed CNY340 billion.
- Ant Financial plans to invest USD200 million in Kakao Pay, South Korean internet service provider Kakao Corp’s mobile pay platform. Kakao Pay will connect to the 34,000 stores currently using Alipay in South Korea. There are more than 14 million customers using Kakao Pay. Instant messenger tool Kakao Talk is installed on at least 97% of South Korean smartphones.
- The Chinese government said it would push ahead with supply-side structural reform and to keep a close watch on eight types of financial risks, including non-performing loans and high leveraging in the stock market.
- The China Insurance Regulatory Commission (CIRC) “will never allow the insurance industry to be turned into a rich boys’ club,” or let it become the sanctuary or war chest of corporate raiders, buyout artists and so-called “financial crocs,” said CIRC Chairman Xiang Junbo at a Beijing press conference. He said the CIRC would impose the most severe punishment on companies that breach its rules, suspend their businesses or revoke their licenses. Chinese insurers invested CNY1.89 trillion in mutual funds and equities as of November, or 12% of their total assets.
- U.S. Treasury Secretary Steven Mnuchin’s comments on whether to brand China a currency manipulator signal reduced chances of a trade war and are positive for the yuan, according to Royal Bank of Scotland Group. The two nations will seek to limit any conflict to a controllable level, said Harrison Hu, Chief Greater China Economist at RBS in Singapore.
- China will keep its corporate tax rate at 25% for the time being, ignoring calls by leading entrepreneurs to reduce the burden on businesses. The National People’s Congress (NPC) left the rate unchanged in amending the corporate income tax law on February 24. But the amount companies can deduct for charitable donations was raised to encourage philanthropy. Changes to the tax regime have previously saved companies CNY500 billion.
- The China Banking Regulatory Commission (CBRC) has issued a new rule requiring peer-to-peer (P2P) lending platforms to use third-party banks for custody of funds in an effort to curb financial fraud. A P2P lending platform should sign an agreement with only one commercial bank to safeguard the funds, and all P2P lenders should meet the custody requirement in six months, the regulator said. 209 online P2P platforms have already signed such agreements with commercial banks, accounting for 8.8% of all P2P lenders, according to Online Lending House, a portal that tracks the sector. There were 2,448 online P2P lending platforms operating in the country at the end of 2016.
- Wang Yincheng, Vice Chairman of state-owned People’s Insurance Group of China (PICC) is being investigated for “discipline violations”, which usually includes corruption.
- China’s private equity (PE) and venture capital (VC) fundraising set a new record in 2016, and will continue to rise in 2017 bolstered by a surge of yuan-backed funds, according to PricewaterhouseCoopers (PwC). A record USD72.51 billion was raised by PE and VC firms in China last year, up an annual 49%. Yuan funds were worth USD54.89 billion, up 177% year-on-year, and took up 76% of total fundraising of the sector.
- China’s Finance Ministry is investigating possible irregularities in the ways several local governments have obtained loans, as part of wider efforts to keep borrowing in check and avoid widespread defaults. It asked provincial governments in Inner Mongolia, Shandong, Henan, Chongqing and Sichuan to address the irregularities.
- China became Germany’s largest trading partner for the first time in 2016, knocking off the U.S. from the top spot it held in 2015. Germany’s trade with China rose to €170 billion in 2016, surpassing the trade volumes of €167 billion with France and €165 billion between Germany and the U.S.
- The U.S. International Trade Commission (USTC) has removed duties on truck and bus tires imported from China. The decision followed a previous ruling by the U.S. Department of Commerce in January to slap anti-dumping duties of up to 22.57% and countervailing duties of up to 65.46% on certain China-made truck and bus tires. The two countries’ tire products were different from, and complementary to, each other, and Chinese tires met the growing demand in the United States, China’s Ministry of Commerce (MOFCOM) said.
- China’s steel exports fell 23.2% year-on-year to 7.42 million tons in January as trade barriers rose. Exports dropped 3.5% to 108.4 million tons last year. In January, China imported 1.09 million tons of steel, up 17.7% year-on-year. In 2016, there were 48 trade cases filed by 20 countries and regions against China’s steel products, up 29.7% from a year earlier.
- China will “stabilize and improve its macro-economic policies” and deepen reforms to achieve its economic and social development goals this year. The nation will continue to adopt a pro-active fiscal policy and prudent monetary policy, according to a meeting of the Political Bureau of the Communist Party of China, which was presided over by President Xi Jinping.
- The Longyangxia Dam Solar Park in Qinghai province is the world’s largest solar farm with 4 million solar panels. The 27 square kilometer farm is almost the size of Macao, and can generate 850 megawatt of clean energy, enough to supply power to 200,000 households. China is the world’s largest solar power producer by capacity, with a total installed capacity of 77.4 GW at the end of 2016. Solar plants generated 66.2 GW of China’s electricity last year, accounting for 1% of the country’s total power generated.
- China’s centrally-administered state-owned enterprises (SOEs) cut 2,730 subsidiary legal entities last year. The central SOEs reduced loss and management costs by CNY4.39 billion and CNY4.91 billion respectively, in 2016. Major problems include weakness in core business, too many sideline businesses, low efficiency and excessive layers of administration and management, state media said. China has 102 central SOEs, which manage the bulk of the country’s state assets.
- China will widen market access for private investors to medical care, education, care for the elderly, culture, sports and other social sectors. Public-private partnerships will be widely encouraged, and the government also encourages setting up investment funds based on private investment.
- Home price growth slowed for the fourth consecutive month in January. Average new home prices grew 0.2% month-on-month, compared with December’s 0.3% rise. In third-tier cities, the average price of new homes rose 0.4% in January, the same as the previous month, marking a stable trend.
- Walmart Stores said it aims to add 30 to 40 new stores in China, including three to five Sam’s Club outlets, in 2017 as well as upgrade current stores and continue to work with JD.com. It will invest more than CNY300 million to upgrade and remodel around 50 current stores.
Science & technology
- Nobel laureate C.N. Yang and Turing Award winner Yao Qizhi have become Chinese citizens and officially joined the Chinese Academy of Sciences (CAS) as Academicians – the highest academic title in China. They are the first overseas scientists to relinquish their U.S. citizenship to join the CAS. Yang, 94, will join the mathematical physics department, while Yao, 70, will enter the information technology and science department. Yang and Yao now live in China after working for many years in the U.S. and are professors at Tsinghua University in Beijing.
- Shanghai’s Pudong district will build a Tsung-Dao Lee Research Center in the Zhangjiang area, along with a batch of new world-class scientific institutes in a bid to develop the area into a “national science center.”The research center is named after the Shanghai-born scientist who won the Nobel Prize for physics in 1957 and will focus on particle physics and astrophysics as well as quantum science and technology.
- The appetite of Chinese investors for U.S. dollar-denominated assets is “huge” and offshore funds available for investment are growing despite curbs by Chinese authorities to stem capital outflows, Yim Fung, Chairman of Guotai Junan International Holdings, told the South China Morning Post. The Hong Kong listed subsidiary of state-owned brokerage Guotai Junan Securities reported a flat 1% increase in net profit to HKD1.01 billion for the financial year ended December 31, 2016.
- At least six underachieving firms are likely to be expelled from the stock exchange as they have forecast that their 2016 earnings will be in the red for a third consecutive year. They are Shanghai-listed Jilin Jien Nickle Industry, Kunming Machine Tool, as well as Shenzhen-listed Pangang Group Steel Vanadium & Titanium and Chongqing Jianfeng Chemical. The other two firms, Geeya Technology and Huaze Cobalt & Nickel Material, both violated securities laws and are also facing a potential delisting. Only 2% of mainland-listed companies reporting three consecutive years of losses have been delisted since the stock market was established in 1990.
- The China Insurance Regulatory Commission (CIRC) has punished a second company in just two days for short-term speculation, suspending the insurance arm of leading property developer Evergrande Group from trading in stocks for one year. Two former executives were banned from the insurance sector for five and three years.
- Liu Shiyu, Chairman of the China Securities Regulatory Commission (CSRC), said the regulator will accelerate the pace of IPO approvals, signaling the CSRC’s intention to reduce government intervention in share sales and allow the market to play a bigger role. It would also increase oversight of market manipulation and illegal activities.
- CRRC Changchun Railway Vehicles Co will supply 100 subway cars for Metro Line 2 in Mashhad, the second-biggest city in Iran in May. The company already started to ship subway cars to Iran in 2016 after it signed a USD1.39 billion contract to supply 1,008 subway cars to Teheran, the Iranian capital, over a five-year period.
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