Finance

• Zhang Tao, Vice Governor of the People’s Bank of China (PBOC), formally assumed his duties as Deputy Managing Director of the International Monetary Fund (IMF). He succeeds Zhu Min, who stepped down on July 25. Zhang’s appointment signals that China’s influence in the arena of international financial governance is on the rise, analysts said.
• The World Bank will this week launch for the first time a bond in China which is denominated in the International Monetary Fund’s special drawing rights (SDR) and can be repaid in Chinese renminbi. The bond, which will be issued in China’s onshore interbank bond market, may initially only attract official buyers such as central banks as the low yield, its small size and the depreciating value of the yuan seems likely to limit interest from other investors.
• Poland became the first European country to issue government bonds in China. The Polish Finance Ministry issued three-year yuan-denominated bonds worth CNY3 billion. “Emitting bonds on the Chinese market was aimed above all at diversifying our investor base and acquiring financing to cover this year’s loans,” the Ministry added.
• China Life, the nation’s biggest insurer by market value, said that falling interest rates and capital market volatilities were behind a 67% plunge in profit for the first half of the year to CNY10.4 billion. Gross investment income was down 49.1% year-on-year to CNY50.84 billion. Net premiums earned in the first six months grew by 23.93% to CNY284.24 billion. The new business value (NBV) of life insurance grew to CNY28.02 billion, up 50.35% year-on-year.
• China’s central bank has injected cash into the interbank market through a longer-than-usual market operation for three consecutive days, leaving analysts divided over policy makers’ intentions. The People’s Bank of China (PBOC) conducted a total of CNY180 billion of 14-day reverse repurchase agreements. All three injections were priced to yield 2.4%, higher than for seven-day reverse repos.
• China Construction Bank (CCB) and Bank of Communications (BoCom) reported slight gains in net profits and bad-loan ratios in their half-year reports. CCB’s net earnings rose 1.1% to CNY133.41 billion from a year earlier, while BoCom said its net profit increased by 0.9% to CNY37.7 billion. CCB’s bad loan ratio in the first six months widened to 1.63% from 1.58% at the end of June last year as the bank’s bad loans jumped 9.6% to CNY181.95 billion. BoCom’s non-performing loan (NPL) ratio rose to 1.54% at the end of June from 1.51% at the end of last year as its NPLs grew 9.2% to CNY61.36 billion.
• The Asian Infrastructure Investment Bank (AIIB) is looking to work with pension funds and insurance firms, among other long-term investors, to co-fund infrastructure projects. AIIB has already approved four loans totaling USD509 million to fund infrastructure projects in Bangladesh, Pakistan, Tajikistan and Indonesia. Three of them are expected to be co-financed with partners. AIIB will begin reviewing membership applications from some 30 countries soon.
• Alipay is pushing forward with plans to expand in Europe, unveiling a partnership with Ingenico Group that paves the way for hundreds of continental retailers to accept China’s biggest mobile wallet in popular destinations. Ingenico is a financial processing platform that has thousands of merchants as its customers. Alipay is targeting the 120 million Chinese people who traveled last year and spent USD875 each on average during those trips. Alipay has no plans at this point to offer its services to consumers who are not from China.
• China has launched its long overdue shake-up of fiscal reforms in a push to rebalance central and local government funding as fiscal income dwindles. In a policy paper the government laid out principles for public financing to improve its ability to provide public goods and social services. Spending responsibilities of central and local governments will be clarified, and overlaps reduced.

Foreign investment

• Canada may consider relaxing its foreign investment rules, including steps to open up to state-owned enterprises (SOEs) in China, in a bid to attract more capital and spur economic growth, Canadian Finance Minister Bill Morneau said. Morneau spoke to reporters at a cabinet meeting ahead of the G20 leaders’ summit in Hangzhou, Zhejiang province, in early September.

Health

• Faced with an absence of effective foreign drugs or prohibitively high prices, some terminal cancer patients in China are making drugs on their own. Such patients gather online to trade active pharmaceutical ingredients (API), the basic ingredients of pharmaceuticals which, following guidelines from fellow patients, they mix in the hope of extending their lives, according to the Southern Weekend.

Macro-economy

• Lingang New City, a port area in Shanghai, is to become an advanced industries hub by 2020. The government is setting up several industry funds to support the development of key industries, including the integrated circuit equipment industry, intelligent manufacturing, the marine industry, and startups. Other projects involve new energy, new materials and information technology.
• The Shanghai government is soliciting public opinion on a master plan for 2040 which aims to develop an “excellent global city.” Urban development blueprints covering population, the environment, transport and public services are on display at the Shanghai Urban Planning and Exhibition Center until September 21. The city’s population will be limited to 25 million by 2040, the same target as set for 2020.
• China plans to complete 165 key projects during the 13th Five Year Plan (2016-20) period, and will welcome the participation of social and private capital. “To encourage and guide private capital to invest in those significant projects, the government will provide a fair market with clear direction,” Hu Zucai, Vice Chairman of the National Development and Reform Commission (NDRC) said. More sectors, including civil airport construction and oil exploration, are to be opened to private investors.
• China’s government and global markets shouldn’t worry about the nation missing annual growth targets of about 6.5% over the next five years as the economy will still show steady expansion. Growth is likely to hit about 3% to 4% each year, still a strong showing, said John Walker, Chairman of Britain-based Oxford Economics. “When you become a more developed economy, the growth rate comes down. So I don’t think they should get so hung up about 6.5%,” he said.
• PetroChina reported a better than expected 98% decline in interim profit to CNY531 million for the first six months, the lowest since the company went public in 2000. The firm booked a CNY2.42 billion operating loss on oil and gas production, compared to a profit of CNY32.9 billion in the year-earlier period. CNOOC, China’s dominant offshore oil and gas producer, posted a net loss of CNY7.74 billion, the first loss since it went public in 2001.
• China and the United States are expected to jointly announce on September 2 ratification of the landmark climate change pact agreed to in Paris last December by 195 countries. China and the U.S. account for about 38% of global greenhouse gas emissions, according to the World Resources Institute. Countries began the ratification process on April 22, Earth Day, and by August 23, 23 nations had joined, but they account for just 1% of emissions. The treaty will enter into force only after 55 countries representing at least 55% of total emissions ratify the agreement.
• Profits of China’s major industrial firms rose 6.9% year-on-year in the first seven months of 2016. Total profits of industrial companies with annual revenues of more than CNY20 million reached CNY3.52 trillion during the January-July period, the National Bureau of Statistics (NBS) said.
• President Xi Jinping has called for an acceleration in the independent research, development and manufacture of aircraft engines and gas turbines in a bid to make China an aviation industry power. A new state-owned aircraft engine maker with registered capital of CNY50 billion was established, named Aero Engine Corp of China (AECC). The company received investment from the State Council, the Beijing Municipal Government, Aviation Industry Corp of China and Commercial Aircraft Corp of China. The firm has 96,000 employees.
• China COSCO Holdings, Asia’s biggest container shipping company after a government-led merger last year, posted a loss in the first half of the year of CNY7.21 billion, compared with a restated CNY1.97 billion profit a year earlier. Revenue for the period retreated 8.5% to CNY30.9 billion in the company’s first earnings report since its huge merger.
• CITIC, China’s largest state-backed conglomerate, has posted a 46.4% fall in half-year profit to HKD20.2 billion, due to property restructuring costs, a weaker yuan, and also the non-recurrence of a huge gain from a stake sale made in its securities unit in the same period last year. First-half revenue fell 6.4% year-on-year to HKD183.97 billion.

Mergers & acquisitions

• Dalian Wanda Group expects to seal two billion-dollar film-related deals in the United States this year, Chairman Wang Jianlin said. After completing the acquisition of two non-production film companies Dalian Wanda’s next target would be a so-called “Big Six” movie studio. In January, Wang spent USD3.5 billion to buy a controlling stake in U.S. film studio Legendary Entertainment.
• The Committee on Foreign Investment in the United States (CFIUS) has approved state-owned China National Chemical Corp’s planned USD43-billion take-over of Swiss pesticide and seed firm Syngenta. A number of anti-trust regulators around the world still need to approve what would be by far the biggest-ever overseas acquisition by a Chinese firm. The transaction was expected to close by the end of the year.
• Jiangxi Copper Co, China’s biggest copper producer, said it will step up overseas mergers and acquisitions after low metal prices eroded profit by more than a third. Net profit slumped 38% to CNY643 million in the first half. Sales climbed 20% to CNY90 billion under international accounting standards. The company will seek to capture M&A opportunities in mining that are arising from low commodity prices and facilitate the progress of internationalization of the company, the state-owned smelter said.
• Beijing Xinwei Telecom Technology, owned by Chinese tycoon Wang Jing, is to acquire complete ownership of Israel’s Spacecom Satellite Communications through its unit Luxembourg Space Telecommunications. It will make Xinwei the first private company to acquire slots for satellites in high earth orbits. Founded in 1989, Spacecom operates AMOS, a series of Israeli communications satellites. Spacecom is also building the Amos 6 satellite for Facebook to provide broadband services directly to mobile phones.

Real estate

• Henderson Land Development Co saw underlying profit for the first half slide 12.1% year-on-year to HKD4.78 billion, as the contribution from Hong Kong property sales tumbled in the first half. At the beginning of this year, the uncertain outlook in global financial markets and concerns over the slowdown in the Chinese economy posed a drag on Hong Kong’s housing market, according to the developer. The pre-tax profit from property sales plunged 23.2% to HKD1.19 billion, but pre-tax net rental income increased 4.1% to HKD3.26 billion.
• Dalian Wanda Commercial Properties saw its first-half core profit climb 20% to CNY2.7 billion thanks to higher rental income and home sales. Revenue was up 22% from a year earlier to CNY37.6 billion. For the first half of 2016, revenue from rental and property management was CNY8.1 billion, a 28% increase from a year earlier. Revenue from home sales reached CNY25 billion, a 19% rise. The country’s largest shopping mall operator saw average rent at its 142 Wanda Plazas increase to CNY102.8 per square meter a month in the first half, from an average CNY97.59 during 2015.
• Wang Jianlin, who built his USD33.3 billion fortune through malls, theme parks, hotels and cinemas, said hat his Wanda Group would invest CNY63 billion to set up a tourism and sports complex in Jinan, the capital of Shandong province. The project, spread over 5.3 million square meters of floor area, will have malls, sports facilities, hotels and a theme park. Wanda will also build 20 entertainment theme park complexes in China to keep more Chinese tourists at home, Wang said.

Science & technology

• China has released the first images of a rover it plans to send to Mars in 2020 to explore the planet’s surface. The Mars rover would have six wheels, be powered by four solar panels, and weigh 200 kilograms. The probe would carry 13 payloads including a remote sensing camera and a ground penetrating radar, on what is expected to be a three-month exploratory mission blasting off in July or August 2020.

Stock markets

• More than half of China’s 95 brokerages have been downgraded by the China Securities Regulatory Commission (CSRC) in its annual classification. The main reasons for the downgrades are brokerages’ non-compliance with regulations, flouting of rules and below-par risk management capacity. The downgrades are also expected to further squeeze brokerages’ already shrinking net profits due to market fluctuations. The CSRC’s classification system comprises 11 ranks in five classes. The top-rated A Class has three ranks: AAA, AA and A.
• Fund managers are setting up more funds in both Hong Kong and mainland China to capture the increased opportunities created by cross-border share trading schemes such as the newly-approved Shenzhen-Hong Kong Stock Connect. The number of Hong Kong mutual funds rose 12.7% year-on-year to 684 in the first half of 2016, up from 607 a year earlier, according to Hong Kong’s Securities and Futures Commission (SFC). On the mainland, 23 new mutual funds were created with the aim of buying Hong Kong stocks under the Shanghai-Hong Kong Stock Connect, up from only seven in the same period last year.
• Opposition to listing reforms in Hong Kong is mounting. Christopher Cheung, incumbent Hong Kong lawmaker for the financial services sector who is seeking re-election, sent a letter to Securities and Futures Commission (SFC) Chief Executive Ashley Alder calling for suspension of the controversial listing reform proposals and asking the regulator to not move forward with the plan. Two rival candidates in the election also voiced their opposition to the plans.
• Dandong Xintai Electric Co, the first company to face delisting from China’s Nasdaq-style ChiNext board, saw its share price revive to hit the daily limit of a 10% rise on the last day it was traded on ChiNext. Instead of shunning a company that has put out more than 50 alert statements since July reminding the market of delisting risks, investors piled into Xintai, betting that regulators might take mercy on the company and allow it to continue trading. From July 12 until August 22, the company’s market capitalization shrank by more than CNY2 billion to CNY520 million, but turnover during that period reached CNY1.18 billion. Xintai’s A shares may be transferred to the over-the-counter National Equities Exchange and Quotations market for trading.
• Citic Securities, China’s largest brokerage, saw net profit tumble by 58% to CNY5.24 billion from the same period a year earlier. Total revenue fell 41.6% year-on-year to CNY18.16 billion, while basic earnings per share were down 62%. Revenue from the brokerage business fell 46.7% to CNY5.97 billion. The wealth management operation saw a 6.62% decline in revenue, while in the underwriting business revenue climbed 59.8%.
• Anbang Insurance Group, China’s biggest unlisted insurer and owner of New York’s Waldorf Astoria hotel, is preparing an initial public offering (IPO) of its life insurance unit in Hong Kong next year. The possible floating of Anbang Life Insurance on the stock exchange could see the company valued at more than CNY100 billion, but analysts warned the company’s famously mysterious holding structure and opaque business style may pose challenges for bankers looking to disclose sufficient information to attract international investors.
• Dutch high-speed trading firm IMC is being investigated by authorities in China for its activities in the country’s stock-index futures market last year. The firm has received inquiries from the China Securities Regulatory Commission (CSRC) related to futures trading at its Shanghai-based affiliate. Discussions between IMC and the regulator have been constructive and positive, IMC Spokesman Ian Bickerton said. The probe is the latest example of China’s crackdown on high-speed traders in the wake of last year’s market rout.
• Xuan Changneng, Director of the People’s Bank of China (PBOC) Financial Stability Bureau, has been appointed as Assistant Chairman at the China Securities Regulatory Commission (CSRC). Xuan, who has a doctoral degree from the University of Texas at Austin and has worked for JP Morgan, would be the third senior official with experience at the PBOC to assume a top position at the CSRC since last year. The new line-up comes as China’s leaders mull a revamp of the financial regulatory system, now made up of the central bank and three regulators for stocks, banks and insurance firms.
• The China and Hong Kong stock markets recently recorded the largest fund inflows in more than a year, helped by a global “search for yield” and further relaxations in China’s capital markets. The MSCI China Index, a key China market investment index, has jumped 12% since the Brexit vote on June 23, lifting the index’s year-to-date performance gains to 5%.

Travel

• The Chinese government has approved a plan to turn Pingtan, an island in Fujian province, into an international tourist destination. The island will also promote cooperation between the mainland and Taiwan, while playing an active role in the Belt and Road initiative. Pingtan is only 126 kilometers from Taiwan.
• Car-hailing service Uber is closing its business in Macao next month, blaming heavy penalties imposed on the company’s drivers and authorities’ reluctance to regulate the car-sharing industry. Uber Regional General Manager for Asia, Mike Brown said the company was unable to operate in Macao. September 9 will be the last day of the service.
• Just days ahead of the opening of the Group of 20 (G20) summit in Hangzhou, the city’s airport has been condemned by the Civil Aviation Administration of China (CAAC) as one of the worst managed in the country. Hangzhou Xiaoshan airport was banned from getting new flights, routes or charters. The other three airports ranked at the bottom were Shanghai’s Pudong, Shanghai’s Hongqiao and Lukou in Nanjing. They will also be penalized in the same way as Hangzhou airport.