Short news
May 2, 2017 Category Short news, Weekly
Finance
- Chinese banks will face pressure to keep their growth in 2017 amid tighter rules on their off-balance sheet activities, PricewaterhouseCoopers (PwC) said. The China Banking Regulatory Commission (CBRC) has been targeting shadow banking products and lending between financial institutions in the interbank market. Small and medium-sized banks, which rely heavily on off-balance sheet wealth management products (WMPs) and interbank business, will be hardest hit from the crackdown, PwC said.
- The World Bank Group and the China-led Asian Infrastructure Investment Bank (AIIB) signed an agreement during the 2017 IMF/World Bank annual spring meeting in Washington to strengthen cooperation and knowledge sharing between the two multilateral financial institutions. They have already co-financed five projects.
- The net profits of the 27 listed banks in 2016 totaled CNY1.32 trillion, increasing 3.2% year-on-year, according to PricewaterhouseCoopers (PwC). Their NPL ratio increased to an average of 1.67% at the year end. The NPL balance was up 16.8% year-on-year to reach CNY1.15 trillion.
- The number of corruption suspects fleeing China in the last four years has fallen dramatically as the government stepped up controls, including on the issuance of passports for officials. In 2014, 101 officials fled abroad, in 2015 the number fell to 31, while last year only 19 escaped, the Central Commission for Discipline Inspection (CCDI) said.
- People’s Bank of China Deputy Governor Yi Gang has given assurances on currency convertibility and easier access to China’s financial markets, while Chinese Ambassador to the U.S. Cui Tiankai warned the U.S. not to carry through on threats to erect trade barriers. Yi said that China would prioritize improving the convertibility of the yuan after it succeeded in cutting capital outflows and reducing over-leveraging in its domestic corporate sector.
- State-owned enterprises (SOEs) saw their profit growth slow in March as net earnings in the electricity industry declined, the Ministry of Finance said. The SOEs made combined profits of CNY587.31 billion in the first quarter, up 37.3% from the same period a year earlier. Profits for centrally-owned SOEs soared 247.1% year-on-year in the first three months, while those owned by local governments rose 74.3% in the period.
- A commentary in the People’s Daily criticized U.S. President Donald Trump’s new tax cut plan, accusing him of inciting a “tax war”. The cuts, if approved by the U.S. Congress, would “wreak chaos in the international taxation order”, it said. The Trump administration proposed cutting the corporate tax rate to 15% from 35% and streamlining individual tax brackets. The plan offers a one-time tax break on corporate profits brought back to the U.S. from overseas, which incentivizes American businesses to bring their offshore operations back home. The tax break would add to the pressure on China’s capital outflow.
- Minority shareholders of CITIC have urged Hong Kong’s Securities and Futures Commission (SFC) to appeal against a ruling by the Market Misconduct Tribunal that cleared former Chairman Larry Yung and four other ex-directors of misconduct and of providing misleading information to the investing public over massive losses from wrong-way foreign-currency bets in 2008.
- Anbang Insurance Group has denied a rumor that Chairman Wu Xiaohui has been detained by authorities in Beijing. Analysts note that bank managers and executives sometimes suddenly disappear, while later it turns out they have been put under investigation, and sometimes they have been assisting an investigation into another corruption suspect. Wu recently divorced Zhuo Ran, a granddaughter of Deng Xiaoping. Financial magazine Caixin said Anbang had violated regulations and lacked transparency, and its shareholder structure could be traced to 86 individuals. Anbang is sueing Caixin for defamation.
Foreign investment
- Foreign direct investment (FDI) into Shanghai accounts for 15% of the national total, but it has declined year-on-year for three consecutive months this year, the first time in 17 years. Foreign-invested companies contributed a third of the city’s GDP as well as two-thirds of foreign trade and a third of tax revenue last year. A survey of 15,200 foreign-invested companies in the city showed that their profits jumped 12.3% year-on-year in 2016 while revenue rose 5.5%.
Foreign trade
- China’s crude steel output grew 4.6% year-on-year to 201.1 million tons in the first quarter of 2017, while steel exports fell 25% year-on-year to 20.73 million tons, the China Iron and Steel Association (CISA) said. Steel exports to the United States plunged 51.76% annually in 2016 to 1.17 million tons, accounting for only 1.08% of China’s total steel exports.
- China’s trade with economies along the Belt and Road Initiative posted double-digit growth year-on-year in the first quarter of the year, the Ministry of Commerce (MOFCOM) said. Trade in goods grew 26.2% in the first three months from the same period of last year. China’s exports to these countries and regions rose by 15.8%, and imports grew by 42.9%. China’s non-financial outbound direct investment (ODI) in 43 economies in the Belt and Road regions reached USD2.95 billion, accounting for 14.4% of the country’s total.
- China’s foreign service trade deficit continued to grow in March to CNY152.3 billion, up from USD17.6 billion in February. In contrast to the deficit in service trade, China’s foreign goods trade ran a surplus of USD30.6 billion in March, compared with a deficit of USD4.8 billion in goods trade in February. China’s total foreign service and goods trade had a surplus of CNY58.3 billion in March.
- Ministry of Commerce Spokesman Sun Jiwen urged U.S. authorities to abide by World Trade Organization (WTO) rules in its investigation of aluminum foil imports. The U.S. Department of Commerce began an investigation after the Aluminum Association Trade Enforcement Working Group accused Chinese aluminum foil producers of using improper subsidies and selling at unfair prices.
IPR protection
- China’s intellectual property authority is making an effort to shorten the review time for patent applications. “Last year, the average review time for a patent application in China was reduced to about 22 months, faster than the United States and the European Patent Office, and slightly slower than Japan and South Korea,” said Shen Changyu, Director of the State Intellectual Property Office (SIPO).
- The 2016 Annual Report of Copyright Protection on the Internet in China was released at the National Conference on Copyright Protection in the Digital Environment in Beijing. With improvements in the IP environment and the convenience of online payment, “users are more willing to pay for digital content, and did so last year”, said Liu Duo, Director of the China Academy of Information and Communication Technology. In 2016, users spent CNY212.3 billion on digital content online, a year-on-year increase of 28%.
Macro-economy
- China removed 29 steel plants from a “normal list” and urged 40 others to cut pollution and upgrade equipment to help cut overcapacity and enhance the industry’s competitiveness, said the Ministry of Industry and Information Technology (MIIT). Most of the 29 companies were considered inefficient, engaged in illegal production or were heavily debt-laden. The Ministry listed 304 steel companies as “normal” between 2013 and 2015.
- China should “unswervingly press on with the strategic adjustment of its economic structure” while ensuring “systematic financial risks do not occur”, the Political Bureau of the Chinese Communist Party said in a statement. The country also should accelerate its establishment of a long-term mechanism to promote the stable development of the real estate sector. China still faces many challenges in maintaining stable growth, and “economic restructuring remains a long-term, arduous task”, it added.
- Finance Minister Xiao Jie said an increasing number of positive signs were seen in the Chinese economy in the first quarter gross domestic product (GDP) report. Beijing was confident of reaching the government’s 6.5% GDP growth target this year, Xiao said. Separately, People’s Bank of China Adviser Sheng Songcheng said the improving economy had been matched by a stable yuan, with signs that capital was starting to return to China.
- More than 3.59 million new market entities were registered in the first quarter of this year, an increase of 19.5% compared with the same period last year, according to the State Administration for Industry and Commerce (SAIC), including 1.25 million new enterprises, up by 18%.
- The Xiongan New Area in Hebei province, which will soon start construction, is calling for worldwide competitive bids for the planning and design of the area’s first phase, which will cover 30 square kilometers. The work of land requisition is about to begin, followed by residential demolition and the resettlement of villagers.
- Industrial output increased by 6.8% in the first quarter, 1 percentage point faster than in the same period of last year. In March, industrial output increased by 7.6% year-on-year, clearly showing a strong momentum for the whole industry.
- China’s migrant work force is getting older and more reluctant to work far from home. The average age of the migrant workforce is now 39, with the number of those who leave their hometowns for work in the cities falling 1.1% last year, according to the National Bureau of Statistics’ annual survey of migrant workers. The size of China’s migrant workforce grew 1.5% to 281.71 million at the end of last year. Workers’ average monthly salary was CNY3,275.
- China’s GDP growth is expected to reach 6.6% this year, dipping 0.1 percentage point year-on-year, and it will stay within a stable and reasonable growth range, according to a forecast by the Chinese Academy of Social Sciences (CASS). GDP growth hit 6.9% in the first quarter of 2017, and it is forecast to hit 6.7%, 6.6% and 6.5% in the following three quarters, respectively.
- Profits earned by China’s industrial firms rose 23.8% in March to CNY688.7 billion from a year earlier, buoyed by a continued construction boom, though the pace of growth eased from previous months. In the first quarter, industrial profits climbed 28.3% to CNY1.7 trillion, slowing from growth of 31.5% in the first two months.
Mergers & acquisitions
- China Petroleum & Chemical (Sinopec) has agreed to pay USD1.68 billion to BP for the latter’s 50% stake in petrochemical joint venture Shanghai Secco Petrochemical. Sinopec also approved a plan to separately list its fuel marketing business on an overseas stock exchange. Secco, a base chemicals maker whose USD2.7 billion plant started commercial operation in 2005, booked a net profit of CNY3.8 billion last year.
Real estate
- Shanghai-based Greenland Holdings, China’s fourth-largest developer by sales, reported a 19% profit growth for the first quarter of this year to CNY2.7 billion on revenue of CNY58.8 billion, which was 20% higher than the year-earlier figure. Greenland’s property businesses generated quarterly sales of CNY31.6 billion, accounting for 53.7% of its total CNY58.8 billion revenue. For the full year of 2016, its profit increased 5% from a year earlier to CNY7.2 billion. The developer took drastic steps in diversifying into finance and consumer sectors last year.
- Evergrande, China’s largest homebuilder, spent CNY6.3 billion to buy 5.3% of its shares over the past four weeks, during which time the stock rallied by 40%. The move was designed to ensure a high valuation for the backdoor listing of its property assets in Shenzhen. However, the market now believes the buyback is reaching the minimum float limit and the stock has been dropping. JP Morgan estimates Evergrande has a public float requirement of 22.04% which means the developer can only buy back another 4.2 million shares.
- Shanghai is set to surpass Hong Kong as the largest office market in China when 11 million square meters of Grade A space will be available by 2020, real estate service provider JLL said. Around 1.1 million sq m of prime office space are expected to be available in Shanghai’s central business district by then. An additional 3.3 million sq m of office developments will be completed in the decentralized Pudong, Hongkou and Minhang sub-markets.
Stock markets
- Charles Li, Chief Executive of Hong Kong Exchanges & Clearing (HKEx) had his 2016 bonus cut by a quarter because of lower turnover in the city’s stock market. He received a performance bonus of HKD11.25 million for 2016. The former JPMorgan banker, however, still took home a total of HKD44 million last year, down only 2.6% from 2015. The Hong Kong stock exchange reported a worse-than-expected 27% drop in 2016 annual profit to HKD5.77 billion. Hong Kong saw USD39.4 billion raised on its bourse last year, 57% less than in 2015, even as the city remained the world’s largest market for initial public offerings (IPOs) for the second year.
- The Shanghai Composite Index (SCI) fell 2.1% in April, its worst monthly performance for this year, as strengthened regulatory supervision dampened investor appetite for trading in equities. As the China Securities Regulatory Commission (CSRC) increased its oversight of the market to guard against stock manipulation, the China Banking Regulatory Commission (CBRC) also issued at least seven documents aimed at reducing commercial lenders’ leverage. “This is just the start for regulatory reforms and near-term uncertainties will increase as the rules are being rewritten,” said Hong Hao, Managing Director at Bocom International.
Travel
- ShanghaI Tower has opened its sightseeing observatory on the 118th floor, with an admission fee of CNY180. The 546-meter-high observatory, named the “top of Shanghai,” covers over 1,000 square meters. The tower, which is 632 meters high and has 137 floors, is the world’s second tallest building.
- Didi Chuxing has closed a USD5.5 billion funding round to fund “its global strategy and artificial intelligence-based technologies”. The new round is likely to give the car hailing site a valuation of over USD50 billion, making it the world’s most valuable start-up after Uber.
- Collaboration to improve civil aviation between China and the European Union is advancing along with the growth of air travel, which reached some 8 million passenger trips last year, representing an annual increase of 15%. China has signed bilateral transportation agreements with 27 out of the 28 EU countries, with 15 of the nations already having launched direct flights to China. Every week, there are more than 600 flights between China and the EU,” according the Civil Aviation Administration of China (CAAC). 812 flights were made between China and the U.S. every week in the winter of 2016, up 20.8% from the summer of 2016.
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