Short news
April 24, 2017 Category Short news, Weekly
Automotive
- Yang Rong, the automotive tycoon who went on a self-imposed exile in the United States after losing a 2002 feud with Bo Xilai, then Governor of Liaoning province, is making a comeback to the industry that made him China’s third-wealthiest businessman almost two decades ago. He owns 13.5% of Hong Kong’s Hybrid Kinetic Group, a producer of lithium-ion batteries and hybrid vehicles, and is Chairman of the company. At the Shanghai auto show, Hybrid Kinetic unveiled two SUVs — the five-seat K550 and the seven-seat K750 — which it describes as prototypes.
- Future Mobility Corp (FMC), an electric car start-up considered one of China’s “Tesla challengers,” said it will unveil its first concept smart car in the second half of this year before starting mass production in 2019. Daniel Kirchert, President of FMC, said that the concept car will be a mid-size SUV priced between CNY300,000 and CNY400,000 and featuring a host of smart technologies. The company is ramping up preparations for a production line with a capacity of 300,000 units in Nanjing.
Finance
- China has taken a small step to relax its controls over yuan outflows, as there is a smaller risk of capital exodus and greater market confidence in the value of the yuan. The People’s Bank of China (PBOC) in early January required commercial banks to stop processing cross-border yuan payments unless the banks could show at the end of every month that the amount of outbound yuan matched the sum that came in, but that restriction has now been scrapped. The move is expected to help boost liquidity in offshore yuan markets, especially Hong Kong.
- The disappearance of CNY3 billion from China Minsheng Bank’s private banking accounts has once again highlighted Chinese banks’ weak internal controls and the risks associated with the sale of so-called “innovative” wealth-management products. An accidental inquiry from an investor exposed the fact that the WMPs sold by a Minsheng branch didn’t even exist. The Manager of the bank branch has been arrested. Although defaults of WMPs issued by smaller banks, non-bank financial institutions and online lenders are not uncommon in China, such incidents at big banks are rare.
- China increased its holding of U.S. Treasury securities in February by USD8.6 billion after a reduction by USD7.3 billion in the previous month. Its total holding now amounts to USD1.0597 trillion. China’s foreign exchange reserves climbed to USD3.009 trillion at the end of March. Concerns about capital outflows from China have receded lately.
- China’s tax revenue grew faster in the first quarter. The tax authority collected CNY3.33 trillion, excluding export rebates, up 11.8% from a year ago. The central government collected CNY1.54 trillion, and local governments received CNY1.79 trillion, up 11.1% and 12.4% respectively. The service sector contributed 55.7% of the total.
- Net forex sales by Chinese banks rose slightly in March. Banks bought USD145 billion worth of foreign currencies and sold USD156.6 billion, resulting in net sales of USD11.6 billion last month, according to the State Administration of Foreign Exchange (SAFE). “Generally speaking, the pressure of cross-border capital outflow eased significantly in the first quarter. Supply and demand of foreign currencies have become more balanced,” said SAFE Spokeswoman Wang Chunying. In the first quarter, banks’ net forex sales were USD40.9 billion, down 67% from a year earlier.
- Ant Financial, the payment affiliate of Alibaba Group Holding, has acquired Singapore-based payment service HelloPay Group, the payment subsidiary of e-commerce firm Lazada group, which is majority-owned by Alibaba after a USD1 billion deal in 2016, and will be rebranded as Alipay in relevant markets, including Singapore, Malaysia, Indonesia and the Philippines. The rebranded service will remain independent of Alipay’s existing app, which has 450 million users in China.
Foreign trade
- China and Ireland have signed a formal protocol on beef exports to China. The protocol is related to inspection, quarantine and veterinary health requirements for Irish frozen beef to be exported to China. China imposed a ban on Irish beef after Europe’s mad cow disease outbreak in 2000. Beef consumption in China increased almost six-fold between 1990 and 2015 and is forecast to rise further over the coming years. However, Chinese beef production has not kept pace with rising demand. Irish agri-food exports to China have risen from €240 million in 2012 to €780 million in 2016.
- Shanghai’s foreign trade in the first quarter jumped 20.1% from a year earlier to CNY751.13 billion amid improving external and domestic demand, reversing a 4.1% drop in the same period of last year. Exports gained 13.2% and imports surged 25.3%.
- China is pushing the U.S. to relax controls on exports of high-tech goods. Based on data from 2004 to 2009, if the U.S. were to liberalize export barriers against China to the same level as those applied to France, U.S. exports to China would increase by an estimated USD45.7 billion to USD76 billion, narrowing the deficit by 20.3% to 33.7%, according to the Carnegie Endowment for International Peace, a leading U.S.-based think tank. U.S. multinational companies also contribute to a large portion of the deficit. Part of their production overseas will eventually go back to the U.S. and get registered as imports.
- U.S. President Donald Trump has ordered a comprehensive investigation of steel imports that could result in broad restrictions on imports of steel from China. The investigation will determine the extent to which Chinese steel imports have undercut the ability of domestic producers to meet increasing demand from U.S. military equipment manufacturers, U.S. Commerce Secretary Wilbur Ross said. The domestic steel industry is running at 71% of capacity while foreign imports account for 26% of the domestic steel market, Ross added.
- China Southern Airlines has banned shark fin shipments and promised to “actively participate” in animal conservation. The decision is significant as the company is based in Guangzhou, the world’s largest trading hub for the delicacy, and it narrows the options for Chinese importers. It means that 51% of international airlines, based on seat capacity, have now banned the cargo. Among the big three Chinese airlines, only China Eastern has yet to declare a position. Worldwide, 17 of the 19 biggest shipping lines measured by container capacity have banned shark fin, impacting 71% of the global market.
- China should open up its services sector to ease trade tensions with the U.S. and bolster global trade, according to Changyong Rhee, the Asia-Pacific Director at the IMF. The medical, health, legal and financial services sectors are among areas that could be liberalized, he said in Washington.
- Railway authorities of China, Belarus, Germany, Kazakhstan, Mongolia, Poland and Russia have signed an agreement to deepen cooperation on China-Europe freight rail services. The countries will jointly push for better railway infrastructure for a safe, smooth, fast, convenient and competitive rail route, according to the agreement. The countries will expand the rail services to more areas with faster customs clearance.
Macro-economy
- China’s steel production amounted to 72 million tons in March, nearly the total output of the United States last year. China’s steel prices had plunged for 33 trading days in a row as of April 17, reaching a five-month low at CNY3,590 per ton on average. Lange’s steel price index posted the largest and longest decline since June after it shrank by 12.7% from its peak on February 28. China’s steel prices surged more than 70% from a year earlier to peak around CNY4,110 per ton at the end of February.
- Chinese start-up companies are increasingly looking to expand abroad in the early stages of operations – even as their home market offers plenty of growth opportunities. Start-up company managers said that technology and innovation should not be bound by borders. Beyond the prospects of better financial returns, start-ups also see surviving in the global marketplace as a test of their businesses’ viability and resilience.
- China’s military is offering to fund 2,000 projects to private Chinese firms and institutes for research on equipment and weapons, a move that experts said will further boost military-civilian integration and upgrade military technologies. The Central Military Commission’s Equipment Development Department recently released a guideline on its website, saying that China plans to invest CNY6 billion this year for research in shared technology and other research. Private Chinese firms have been allowed to carry out research and manufacture military equipment since 2005, and more than 1,000 private firms have gained approval to enter the military industry.
- Premier Li Keqiang called at a meeting for boosting the nation’s economic transformation and pace of growth by promoting technological innovation, emerging industries and effective investment and consumption. Hundreds of governmental officials and well-known entrepreneurs were present at the meeting, which focused on enhancing new development concepts and new economic drivers. Li called for cultivating emerging sectors and upgrading traditional industries by focusing on technological innovation to enhance productivity.
- China has made new progress toward carrying out supply-side structural reform in the first quarter of the year, the National Bureau of Statistics (NBS) said, including cutting overcapacity, reducing inventories, deleveraging, lowering costs and strengthening weak links. The capacity usage rate of major industrial firms rose 2 percentage points from the fourth quarter of last year to 75.8% in the January-March period, while coal output dropped 0.3% year-on-year, the NBS said. The amount of unsold commercial housing space fell by 6.4% year-on-year, 3.2 percentage points higher than at the end of last year.
- Shanghai’s gross domestic product (GDP) grew 6.8% in the first quarter from a year earlier to CNY692.28 billion. The growth was 0.1 percentage points faster than in the same period of last year but slower than the national level by the same margin. Industrial production climbed to CNY782.15 billion during the three months, a year-on-year rise of 7.1%, the highest first-quarter gain since 2012.
- China’s grain output is expected to decline by 1% this year to about 610 million metric tons, and its agricultural trade deficit will decrease to about USD35 billion, according to the Green Book of Rural Areas (2016-17), released by the Chinese Academy of Social Sciences’ Rural Development Institute. Last year, grain output fell by 0.8% to 616.2 million tons, the first decline since 2004.
- Chinese manufacturers are not well prepared for the coming wave of digitalization, McKinsey & Co suggested in a report when it launched a Digital Capability Center at Tsinghua University, the fifth it has set up after those in the United States, Germany, Italy and Singapore, to facilitate the application of smart production and digital operation to reshape manufacturing. As the world’s factory, China produced 70% of mobile phones, 80% of air conditioners and 91% of personal computers, but its manufacturing productivity was still only a quarter of developed countries, McKinsey said. Less than 5% of Chinese manufacturers were first movers or pioneers with innovative business models and advanced digitalization, such as Haier, Lenovo and Huawei, it said.
Mergers & acquisitions
- HNA Airport Holding Group is close to buying out the 30% stake of engineering conglomerate Odebrecht in Brazil’s second-busiest international airport, Rio de Janeiro International Airport, commonly known as Galeão. A corruption scandal has severely limited Odebrecht’s access to credit and new contracts in Brazil and almost a dozen other countries. Before the deal can be concluded, Odebreacht still needs to pay overdue licensing fees.
- Fidelity & Guaranty Life (FGL) terminated its USD1.6 billion agreement to be purchased by China’s Anbang Insurance Group Co. Anbang, one of China’s most active cross-border acquirers, was unable to get approval from the U.S. states of Iowa and New York, where FGL does business, within the time frame set out in an extended takeover agreement. Nevertheless, the deal had received clearance from the Committee on Foreign Investment in the United States (CFIUS).
- The number and value of overseas mergers and acquisitions made by Chinese enterprises plunged in the first quarter of 2017 amid tougher regulatory requirements on authenticity and compliance, PricewaterhouseCoopers (PwC) said in a report. Chinese enterprises concluded 142 M&A deals worth USD21.2 billion overseas from January to March, a year-on-year drop of 39% and 77%, respectively. Privately owned enterprises became the most active investors last year, outperforming their state-owned counterparts for the first time.
Science & technology
- The Springer Nature publishing company has retracted 107 research papers by Chinese authors published in the journal Tumor Biology after learning about irregularities in their peer review process. The authors had supplied the journal’s editors with made-up contact information of third-party reviewers. The latest move constitutes the single largest withdrawal of academic papers, according to Retraction Watch, which monitors academic fraud.
- The Netherlands seeks closer clean technology collaboration with China, such as converting fertilizers into electricity and recycling wasted heat, said Sigrid Bollwerk, Manager at the Energy Research Center of the Netherlands. The Netherlands hopes the two countries can develop new technologies in oil and gas together to “help cut carbon emissions and lower energy costs,” Bollwerk added.
Stock markets
- China is creating a consortium, including state-owned oil giants and banks, and its sovereign wealth fund, that will act as a cornerstone investor in the initial public offering (IPO) of Saudi Aramco. Due to list next year, Aramco’s potential USD100 billion equity sale that is expected to be the world’s largest to date. Saudi Aramco’s board is expected to meet in Shanghai in May.
- Feng Xiaoshu, a former Member of the Review Committee under the China Securities Regulatory Commission (CSRC), has been banned for life and fined CNY499 million for trading stocks under his mother-in-law’s and sister-in-law’s names. He made an illicit profit of CNY248 million.
Travel
- Zhou Hang, Founder of Yidao Yongche, the premium vehicle-sharing company controlled by LeEco, has admitted the company has cash flow problems but blamed the situation on misappropriation of CNY1.3 billion in funds by the controlling shareholder – an allegation LeEco has rejected. Yidao drivers have accused the company of not getting paid.
- China is considering turning the entire Tibetan plateau and surrounding mountains into a huge national park to protect “the last piece of pure land”. It would be called the Third Pole National Park and become the world’s biggest national park. The plateau covers an area of more than 2.5 million sq km. The park would be more than 250 times larger than the Yellowstone National Park in the U.S.
VIP visits
- Heads of state from 28 countries will attend a major summit on May 14 and 15 in Beijing to discuss China’s “Belt and Road Initiative”, although leaders from major Western countries will not attend. The summit will be China’s major diplomatic event this year. Leaders who will attend include Russian President Vladimir Putin, Philippine President Rodrigo Duterte, Turkish President Recep Tayyip Erdogan, Vietnamese President Tran Dai Quang and Myanmar’s leader Aung San Suu Kyi. Heads of state from Hungary, Italy, the Czech Republic, Switzerland and Spain would also attend, as well as African leaders from Kenya and Ethiopia.
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