Short news
March 27, 2017 Category Short news, Weekly
Finance
- 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.
Foreign investment
- 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.
Foreign trade
- 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.
Health
- 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.
IPR protection
- 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.
Macro-economy
- 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.
Real estate
- 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.
Stock markets
- 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.
Travel
- 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.
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