Short news
May 15, 2017 Category Short news, Weekly
Belt and Road Forum
- China is urgently seeking support from international lenders to close a yawning financing gap for projects under its “Belt and Road Initiative”, Yi Gang, Vice Governor of the People’s Bank of China (PBOC) said. Support from the global market was “desperately needed”, Yi added. The Asian Development Bank (ADB) says there is a USD26 trillion funding gap in the infrastructure projects that will be required in Asia by 2030. “Most projects are financed by Chinese financial institutions, while participation of international institutions is relatively limited,” Pan Guangwei, Vice Chairman of the China Banking Association, said.
- To increase the appeal of the Belt and Road Initiative, Beijing should explain its intentions, publish a list of projects and introduce some profitable pilot schemes to lure initial investors to get onboard, Zhao Xijun, Finance Professor at Renmin University in Beijing, said.
- China plans to import USD2 trillion of products from countries participating in the Belt and Road Initiative over the next five years, Commerce Minister Zhong Shan said.
- The presence of Chinese banks in the 64 countries along the route is still limited: nine Chinese banks had set up 62 branches in 26 countries by the end of 2016.
- Matt Pottinger, U.S. National Security Council Senior Director for East Asia, said the U.S. Embassy in Beijing and U.S. companies had teamed up to form the American Belt and Road Working Group. “U.S. firms have a long and successful track record in global infrastructure development, and are ready to participate in Belt and Road projects,” Pottinger said, adding that the project’s success would rest on several factors, including transparency in procurement and broad participation from the private sector.
Finance
- China’s foreign exchange reserves rose for the third month in a row in April, staying above the psychologically important USD3 trillion mark and giving the leadership more room to pursue structural reform. The reserves grew by USD20 billion in April to USD3.03 trillion. Bank of Communications (BoCom) Analyst Liu Jian said a fall in the U.S. dollar and a more stable economy eased expectations of further falls in the yuan and slowed capital outflows.
- The China Insurance Regulatory Commission (CIRC) has decided to toughen supervision of the industry to guard against financial risks. Chinese insurers used leveraged money to buy shares in listed companies, triggering sharp volatility in the market at the end of last year. Insurance funds should not invest in risky products, and there will be tougher supervision over equity changes of insurers, the CIRC said.
- Danish bank Saxo said Chinese carmaker Geely, the owner of Volvo, would become its largest shareholder by buying around 30% of its capital.“Saxo Bank is a trusted trading platform with a strong reputation. We expect to deliver group synergies from the development of financial services both within Geely Group and the wider Chinese market,” said Daniel Li, Geely’s Chief Financial Officer (CFO). Saxo was founded as a brokerage called Midas in 1992 before getting a banking permit in 2001.
- Net profits of Chinese banks stood at CNY493.3 billion in the first three months, up 4.61% year-on-year, said the China Banking Regulatory Commission (CBRC). Their total assets grew 14.3% year-on-year to CNY238.5 trillion, indicating that the profitability of commercial lenders was waning. Chinese lenders’ bad-loan ratio was almost flat at 1.74% at the end of March, said the CBRC. The banks’ loan loss provisions reached CNY2.82 trillion, up CNY156 billion from the end of 2016.
- Many Chinese financial institutions should have been closed because their existence is only adding risks to the country’s overall financial system, Xu Zhong, Research Director at the People’s Bank of China (PBOC) said. Some problematic financial institutions, including regional ones, need to go bust, but vested interests from local governments prevented it, he added. “Not a single Chinese financial institution has gone bankrupt. Are China’s financial institutions really so good that not even a single one has gone bust?”, Xu asked in a speech at Peking University.
- The Asian Infrastructure Investment Bank (AIIB) has approved seven new members of the bank: Bahrain, Bolivia, Chile, Cyprus, Greece, Romania and Samoa, bringing the bank’s total membership to 77 countries.
Foreign investment
- Efforts are being made to resolve a stalled copper mining deal between China and Afghanistan, a decade after the USD3 billion contract was signed, according to Janan Mosazai, Afghanistan’s Ambassador to China. Under the deal, MCC agreed to pay Afghanistan USD3 billion to lease the Mes Aynak mine, 40 km southeast of Kabul, which has Afghanistan’s largest copper deposit, for 30 years.
- Foreign companies could get more involved into the Made in China 2025 strategy by setting up research and development (R&D) centers, talent training organizations and smart plants in the country, Li Dong, Director of the Industrial Equipment Department at the Ministry of Industry and Information Technology (MIIT) said. The Ministry has selected a group of foreign enterprises as model players to help build smart plants in China. German companies SAP and Siemens, and Japanese shipbuilder Kawasaki Heavy Industries are among them.
Foreign trade
- China will extend anti-dumping duties on chloroprene rubber imported from Japan, the United States and the European Union for another five years. The Ministry of Commerce (MOFCOM) said anti-dumping duty rates for Japanese imports range from 10.2% to 43.9%, while those for U.S. producers are 151% and EU companies are subject to rates ranging from 11% to 151%. Chloroprene rubber is mostly used to make electrical cables and waterproof products.
- The U.S. Senate has voted to confirm Robert Lighthizer to be the next U.S. Trade Representative. He was a partner at the law firm of Skadden, Arps, Slate, Meagher & Flom and served as deputy USTR under President Ronald Reagan. He is widely seen as a strong supporter of the U.S. steel industry which has often accused China of unfair trade practices.
- U.S. Commerce Secretary Wilbur Ross sees the U.S. semiconductor industry as still dominant globally but said he is worried that it will be threatened by China’s planned investment to build up its own chip making industry. The Commerce Department is considering a national security review of semiconductors because of their “huge defense implications”. China is planning massive state-directed investments in semiconductor manufacturing capacity under its “Made in China 2025” program, which aims to replace mostly imported semiconductors with domestic products.
- China’s Ministry of Commerce questioned U.S. trade investigations into imports of steel products from six countries including China, describing the measures as “excessive.” The U.S. Department of Commerce has decided to initiate anti-dumping investigations against cold-drawn steel mechanical tubing from China, Germany, India, Italy, South Korea and Switzerland. Products from China and India will also be subject to anti-subsidy investigations.
- The 1,000th freight train linking China and Europe this year left Yiwu station for Madrid on May 13. From January 1 to May 13, the number of Sino-European freight trains increased by 612, or 158%, from a year earlier, according to China Railway Corp.
Macro-economy
- Chinese Vice Premier Zhang Gaoli visited the Xiongan New Area and said the government should “plan well before taking action and make steady efforts in planning construction”. The government announced the plan to set up the area on April 1. Zhang “stressed tight control of land, property development and neighboring regions as well as protecting historical and cultural heritage and the ecological environment”. Covering three counties in Hebei province, the new area is to take over some functions from Beijing and integrate the economies of Hebei, Beijing and Tianjin.
- China’s courier sector posted strong growth in 2016. The sector generated CNY397.4 billion in revenue last year, up 43.5% annually. A total of 31.28 billion deliveries were made last year, up 51.4% year-on-year, the China Postal Bureau said. Guangzhou was the city with the most express deliveries, followed by Shanghai, Shenzhen, Beijing and Hangzhou. The sector’s revenue target for 2020 is set at CNY800 billion.
- China’s factory gate prices eased more than expected in April, lowered by falling commodities prices, the National Bureau of Statistics (NBS) said. The producer price index (PPI) rose 6.4% in April compared with the same month a year earlier, lower than the market consensus of 6.7%. The index hit a peak of 7.8% growth in February, fueling concerns about reflation. The consumer price index (CPI) rose 1.2% in April, slightly higher than analysts’ predictions of a 1.1% gain. The index rose 0.9% in March.
- A drastic consolidation of major power generating companies is a “must-do” that is in line with massive efforts to cut overcapacity and lower greenhouse gas emissions, according to UBS. The Chinese authorities are attempting to create three energy giants through merging eight large-size companies. China Huadian Corp and China Guodian Corp could merge with China National Nuclear Corp; China Datang Corp is likely to be combined with China General Nuclear Power Corp; and China Huaneng Group may merge with State Power Investment Corp. Beijing has set a goal of limiting its coal-fired power generation capacity to 1,100 gigawatt (GW) by 2020, or 55% of the country’s total power generating capacity.
- Hong Kong’s economy grew at its fastest pace in six years in the first quarter. Gross domestic product (GDP) grew 4.3%. The expansion in the economy was boosted by the buoyant stock market, increased trade, a hot property sector, robust employment, and an encouraging global economic outlook, the government and experts said. The overall performance was well above the 3.7% average forecast by analysts. The growth is expected to continue into the second quarter.
Mergers & acquisitions
- Inner Mongolia Yili Industrial Group, China’s biggest dairy company, is competing with Dean Foods Co of Texas to buy Stonyfield, the largest American producer of organic yoghurt, in its first overseas acquisition. The deal is estimated to be worth USD850 million. Yili said in a stock exchange filing that the bidding process is in its preliminary stages. Stonyfield, based in New Hampshire, said on its website that it “makes everything certified organic”.
Retail
- May 10 was celebrated as the first Chinese Brands Day, which aims to publicize brands owned independently by Chinese companies and attach greater importance to brand building in the country. Yili Dairy is the most selected brand in China with over 1.1 billion purchases in a year, according to the 2016 Brand Footprint report by consumer research firm Kantar Worldpanel. In 2017, the total value of the list of BrandZ Top 100 Chinese Brands hit record levels, growing 6% to reach USD557.1 billion in brand value.
- Portable power bank rental is becoming a hot sector for investment by start-ups as China’s 1 billion smartphone users are eager to keep batteries from losing power. A dozen players have jumped onto the power bank rental market in the past several weeks, driven by the influx of venture capital. Rental outlets have started to flood major cities in China with all kinds of designated power bank distribution machines, which can be as big as a vending machine or as small as a mini fridge. Through apps, users can find the nearest available machines, which are usually located at cinemas, shopping malls and restaurants, and rent a power bank out by scanning a QR code. Tencent-backed Xiaodian is currently the market leader.
- China’s convenience stores posted a 13% rise in sales from a year ago to CNY130 billion in 2016. The average daily transaction of a single domestic convenience store gained 4% to CNY3,714, according to a joint report by the China Chain Store & Franchise Association and the Boston Consulting Group. The total number of convenience stores in China rose 9% to 98,000 at the end of 2016.
Stock markets
- The latest proposals for a listing reform on the Hong Kong Stock Exchange (HKSE) were overwhelmingly rejected by 94% of the 8,500 respondents to a consultation paper, as many were worried that giving the Securities and Futures Commission (SFC) a bigger role in the early stages of the listing process could endanger the initial public offering (IPO) market. Central to the reforms is the establishment of a listing regulatory committee and a listing policy committee with equal representation from the SFC and HKEX. The regulatory committee would handle applications deemed complicated by the exchange’s listing division, while the second panel would decide on policies.
- In a rare move, Hong Kong’s Securities and Futures Commission (SFC) ordered the suspension of trading in the shares of China Huishan Dairy Holding. The company, which saw all but two of its board members quit weeks after its stock price mysteriously plunged 85% in just 90 minutes on March 24, said the Hong Kong Stock Exchange (HKSE) had halted trading based on instructions from the SFC. There have been only six suspension of trading orders issued by the SFC since 2011. The company’s board has only one acting Director – Chairman Yang Kai – making it ineligible to act on behalf of the company under Hong Kong law.
- Hong Kong Exchanges and Clearing (HKEX), which runs the city’s stock and futures markets and owns the London Metal Exchange (LME), has reported better-than-expected net profit growth of 20% for the first quarter of the year to HKD1.72 billion. The rise in profit was party due to a one-off gain of a HKD55 million interest payment from the liquidation of Lehman Brothers. The exchange plans to introduce more new products and connect schemes to attract more turnover this year.
- China Tower Corp, the state-backed telecommunications infrastructure-sharing joint venture, looks on track for its initial public offering (IPO) between the last quarter of this year and the first half of 2018. China Unicom Chairman and Chief Executive Wang Xiaochu said the Tower Corp listing will not be affected by Unicom’s participation in the central government’s mixed-ownership reform program. The joint venture was established by China Mobile, China Unicom and China Telecom in July 2014 to be responsible for all the construction, maintenance and operations of their telecommunications network towers and auxiliary infrastructure.
Travel
- The Palace Museum in Beijing, also known as the Forbidden City, plans to stop selling paper tickets from its box office in October. An internet-based system will be set up to better coordinate the number of visitors for different hours of the day. Starting in July, the museum will gradually decrease the percentage of paper tickets available at the gate. The Forbidden City received more than 16 million visitors in 2016.
VIP visits
- Chinese President Xi Jinping pledged to protect the Paris Agreement on curbing climate change during a phone call with French President Emmanuel Macron. China and France “should protect the achievements of global governance, including the Paris Agreement”, Xi told Macron. The two leaders agreed to meet “as soon as possible”.
- Chinese and Uzbekistan enterprises signed agreements and deals of more than USD10 billion, during Uzbekistan President Shavkat Mirziyoyev’s first state visit to China. Chinese President Xi Jinping said China is willing to expand cooperation with Uzbekistan in production capacity, investment, industrial parks, and infrastructure construction.
- Chinese Premier Li Keqiang said that the country is capable of maintaining financial market stability and warding off regional and systemic financial risks during his meeting with Managing Director of the International Monetary Fund Christine Lagarde. In a separate meeting with World Bank President Jim Yong Kim, Li said China’s economy is in the process of transformation and upgrading, which requires traditional industrial capacity to be overhauled and new growth momentum to be fostered.
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