Short news
July 10, 2017 Category Short news, Weekly
Automotive
- China’s FAW Car, the partner of Japan’s Mazda Motor, will recall over 680,000 Mazda cars due to issues with air bags that were supplied by embattled Japanese auto parts supplier Takata Corp. The recall includes Mazda 6 vehicles manufactured in China between September 2008 and March 31, 2016. All faulty parts will be replaced free of charge. It estimated that more than 20 million cars in China from 37 manufacturers were equipped with the faulty airbags, which can explode on impact and spray shrapnel.
Finance
- China’s restrictions on capital repatriation and the large number of stock trading suspensions are foreign investors’ primary concerns, which could impede further global integration of China’s USD7 trillion stock market, according to index compiler MSCI. The two issues may cause illiquidity problems to foreigners who invest in A shares, said Chia Chin Ping, MSCI’s Managing Director.
- Yu’E Bao, one of China’s most popular internet-based funds, had amassed CNY1.43 trillion of assets under management by the end of June, which has already exceeded the size of individual deposits at some of China’s largest banks. The assets under management of Yu’E Bao surged some 80% in the past six months from around CNY800 billion by the end of December 2016. The quarter-on-quarter growth is about 30%.
- In a serious setback for the grand ambitions of Chinese billionaire Jia Yueting, Founder of internet media company LeEco, the CNY16 billion 26% stake Jia owns and controls in LeEco’s Shenzhen-listed arm – Leshi Internet Information & Technology Corp – was frozen by a Shanghai court. The Shanghai branch of China Merchants Bank turned to the courts seeking asset preservation after a LeEco affiliate failed to pay due interest on loans. Other creditors may follow suit with severe consequences for the company.
- SF Lottery, a joint venture by Hong Kong-listed AGTech and Chinese logistics firm SF Express, launched a new instant scratch lottery product in four Chinese provinces in a bid to shake up the country’s lucrative lottery market. The new instant scratch cards will be distributed in Guangdong, Jiangsu, Hunan and Jiangxi provinces initially via the thousands of couriers in SF Express’ network, and in SF Best, the company’s offline retail stores. Instant scratch lottery cards generated CNY28.5 billion in sales last year, according to the Ministry of Finance.
- Holders of mainland-issued China UnionPay bank cards are no longer allowed to withdraw cash from hundreds of ATM machines in Macao. They can only use those fitted with new facial recognition technology. So far, 834 of Macao’s 1,300 ATMs have been fitted with what the Macao Monetary Authority has dubbed “Know Your Customer” technology. Reported casino revenue dropped sharply in the last week of June, a month after the move to facial recognition technology began to be introduced.
- The Chinese government plans to hold a long-delayed key financial work conference in the middle of this month, putting the focus on financial security. The big issues up for debate could include an overhaul of the financial regulatory regime, financial security, and opening up of the financial markets. The first National Financial Work Conference was held in November 1997 during the Asian financial crisis. The conference is held once every five years to determine the direction of financial regulation and reform.
- China is expected to roll out new personal tax relief policies for top executives, in an effort to help its biggest and most successful firms, and start-ups, hold onto their best talent. Business consultancies now expect top corporate officials to be offered tax relief on more non-cash types of remuneration.The top rate of personal tax in China is 45%, compared with 17% in Hong Kong and 20% in Singapore.
- Wang Yincheng, former President of the People’s Insurance Co (Group) of China, will be prosecuted after an investigation found he engaged in corrupt practices, including bribery. The Central Commission for Discipline Inspection (CCDI) said he had been expelled from the Communist Party. Wang interfered with inspections and audits, collaborated with corrupt officials, used public funds to pay for personal holidays and took bribes, the CCDI said.
- The People’s Bank of China (PBOC) said the economy and financial markets are generally stable, though the environment is still “complex”, adding that risk prevention should be given greater emphasis. Reiterating it will stick to a “prudent and neutral” policy, the PBOC said it will “keep liquidity relatively stable and credit growing at a reasonable pace”.
- The Chinese yuan exchange rate has been stable, but it won’t always be and Beijing’s efforts to maintain its stability could hinder China’s global currency ambitions, Kelvin Lau, Senior China Economist at Standard Chartered, said in an interview with the South China Morning Post.
- Foreign firms could “very soon” be allowed to rate onshore bonds, according to PBOC Deputy Governor Pan Gongsheng. Under the new regime, foreign players such as Moody’s, Standard & Poor’s and Fitch Ratings would be able to do business directly rather than as junior partners in joint ventures. But Political Economist Hu Xingdou from the Beijing Institute of Technology said foreign credit rating agencies should be prepared to deal with accusations of China bashing, discrimination or unfairness from senior officials, state media and nationalists.
- China has no intention of devaluing its currency, the yuan, to boost its competitiveness, Pan Gongsheng, Director of the State Administration of Foreign Exchange (SAFE), wrote in the magazine Qiu Shi. The yuan slumped about 6.5% against the U.S. dollar last year in its biggest annual drop since 1994. But since then, it has regained its vigor, rising 2.4% against the dollar in the first half of this year. China’s foreign exchange reserves rose to USD3.06 trillion in June, the first increase for five months in a row since June 2014.
Macro-economy
- Iron ore markets are heading for a very bumpy ride in the next couple of years, marked by significant price swings amid the restructuring of the steel industry in China, according to Andrew Stocks, Managing Director of Iron Road. Iron ore has swung from a bear to bull market within three months, rebounding from a year low of USD53.36 a ton last month on a surge driven by mills in China boosting purchases to replenish inventories, with higher-grade ore in demand. This volatility is the result of the Chinese market transitioning to a cleaner, leaner production phase.
- The Caixin Media and Markit manufacturing purchasing managers’ index (PMI) rose to 50.4 from 49.6 in May, which had been the first time the index had slipped below 50 since June 2016. Output increased to 50.6 from 50.2 in May while new orders also rose. The official government PMI released on June 30 rose to 51.7 in June.
- China is due to bring two nuclear reactors in Zhejiang and Shandong provinces online in the fourth quarter as part its efforts to utilize some of the world’s most advanced nuclear technology. The Sanmen station in Zhejiang and the Gaiyang station in Shandong have a capacity 1,000 megawatt (MW) each and would help China reduce its reliance on coal and gas, Wang Binghua, Chairman of the State Power Investment Corp said at the 25th International Conference on Nuclear Engineering in Shanghai.
- Growth in China’s services industries slowed in June, overshadowing expansion in the manufacturing sector. The Caixin China General Services Purchasing Managers’ Index (PMI) fell to 51.6 in June from May’s four-month high of 52.8. The reading was the second lowest in 13 months. Services companies noted the weakest increase in new orders since May last year, with several firms saying subdued market conditions weighed on client spending.
- China’s wealth gap has widened for the first time in five years. The Gini coefficient increased slightly to 0.465 last year from 0.462 in 2015, according to the National Bureau of Statistics (NBS). A reading of zero would mean everyone’s income was equal, while a reading of one would indicate that all the income was going to one person. The United Nations considers a Gini coefficient higher than 0.4 a sign of severe income inequality. The most recent figure for the U.S. was 0.479. In terms of cities, Hong Kong recorded an all-time high of 0.539 last year, behind only New York at 0.551.
Mergers & acquisitions
- COSCO Shipping Holdings Co has offered to buy Orient Overseas International (OOIL) for HKD49.23 billion in a deal that will see COSCO Shipping become the world’s third largest container line. OOIL’s controlling shareholders agreed to sell their 68.7% stake to COSCO Shipping. Shanghai Port International Group will acquire a 9.9% stake. COSCO shipping will have a fleet of more than 400 vessels and capacity exceeding 2.9 million TEU.
Real estate
- Shanghai-based Greenland Holdings, China’s fourth-largest developer by sales, has agreed to sell its property management unit to its Guangdong rival Agile Property Holdings, raking in a one-time gain of CNY993 million. Greenland Property Service, which currently manages properties covering a total 4.17 million square meters, reported net profits of CNY2.86 million in 2016. Its net assets are valued at CNY6.5 million. Last month, Fitch Ratings downgraded the long-term foreign- and local-currency credit rating of Greenland Holding to BB, from BB+, driven by the developer’s persistent high leverage. In 2016, Greenland reported its profits rose 5% from a year earlier to CNY7.2 billion, as sales climbed 19% to CNY247.2 billion.
- An ageing population, people’s increasing demand for better life, and rising awareness about environment protection have become the key driving forces for China’s property management industry. The China Index Academy predicted that the property management market in China could amount to CNY1.2 trillion a year.
- New home sales more than halved in the first six months of this year in Shanghai as the toughest-ever measures to cool an overheated housing market kicked in. Sales of new residential properties, excluding government-subsidized affordable housing, totaled 3.57 million square meters, or about 29,300 units, between January and June, a plunge of 52.8% in area and 51.8% in units from the same time last year, Shanghai Homelink Real Estate Agency Co said. In June, about 686,100 sq m of new homes were sold across the city, a fall of 3.4% from May and 45.1% from the same period a year earlier. About 620,300 sq m of new houses were released onto the market in June, down 15.2% from May.
- China Evergrande Group’s first-half contracted sales rose 72% in the first half from a year earlier to CNY244 billion, representing 54% of the company’s annual sales target of CNY450 billion. Evergrande achieved sales of CNY61.1 billion in June, up 95% from a year earlier. Growth in terms of floor area was up 44% to 6.05 million square meters. The heavily indebted developer said it had paid back all its perpetual bonds, amounting to CNY112.94 billion. Evergrande will speed up releasing projects in the second half, planning to launch sales of 233 new residential projects, compared to 79 projects in the first six months. The company expects full year contracted sales to reach CNY500 billion.
- According to the China Real Estate Information Corp (CRIC), Country Garden was the best performer among mainland Chinese developers in the first half of 2017. Its contracted sales more than doubled to CNY284 billion by the end of June, followed by China Vanke and Evergrande. Total sales of the top 10 developers amounted to CNY1.5 trillion, rising 58% from a year earlier.
- Both land transaction fees and the average price of land in 300 cities in China rose in the first half of 2017, with lower-tier cities experiencing the fastest growth. According to the China Index Academy, the combined income from leasing land in China was CNY1.5 trillion in the first half year, a 34% year-on-year increase. About 374 million square meters of land were transacted across China. The average price was CNY2,249 per sq m, a year-on-year increase of 40%.
- Two parcels of land in Shanghai are being leased for “rental residential projects”, the first of its kind in the city. Two parcels, 65,000 square meters in Pudong district’s Zhangjiang science park area and 28,500 sq m in Jiading district, would be leased for 70 years. The properties to be built on the land cannot be sold. Shanghai is taking measures to promote the rental market. So far, 10 of the top 30 developers in China have tapped into the rental market across China.
- Sales of pre-occupied homes fell for the third consecutive month in Shanghai in June as sentiment among buyers stayed subdued. Across the city, about 12,200 units of existing houses changed hands last month, a month-on-month fall of 16.6% and a year-on-year plunge of 49.9%, Shanghai Homelink Real Estate Agency said. Last month’s data was the third-lowest June figure since 2011. For the first half, a total of 79,300 second-hand houses were traded in the city, a drop of 55% from same period a year ago.
- Investor interest in the Shanghai office market stayed strong in the second quarter despite high prices and lower transaction volumes, according to JLL. En-bloc real estate investment deals covering all property types in the second quarter totaled CNY19.4 billion, a decrease of 2.8% from the first quarter, but a year-on-year surge of 47.2%.
- Over the next five years until 2020, Shanghai plans to add about 1.7 million new housing units to the market, an increase of 60% from the previous five-year period. To facilitate the growth, a total of 5,500 hectares of residential parcels will be released to the local land market between 2016 and 2020, an increase of 20% from the 12th Five Year Plan (2011-2015) period.
Retail
- The Golden Jaguar buffet restaurant chain has closed its Yan’an Road W. outlet in Shanghai, along with other outlets, leaving diners who bought prepaid cards in the dark. Employees have not been paid for more than three months. All four Beijing outlets are also shut. The chain once had 26 restaurants in China.
Science & technology
- More high schools in China are offering Russian courses as student interest in the language grows in secondary schools. “One of the key reasons is that implementation of the Belt and Road Initiative has facilitated close exchanges and cooperation between China and Russia, as well as with other countries like Kazakhstan and Ukraine, where the language is also used,” said Huang Mei, Director of the School of Russian Language and Culture at the Beijing Foreign Studies University.
- The Chinese communications satellite ChinaSat 9A, which ended up in the wrong orbit after the unsuccessful launch of the Long March 3B on June 19, has now been placed in the correct orbit by activating thrusters on the satellite. But the launch of an experimental satellite – the Shijian-18 – atop a Long March 5 Y2 rocket failed. The two failures have raised concerns about possible delays to China’s ambitious space missions, which include lunar exploration.
- Four students from the Beijing University of Aeronautics and Astronautics entered the Lunar Palace-1 with the aim of living self-sufficiently for 200 days and find out how it feels to live in a space station on another planet, recycling everything from plant cuttings to urine. The experiment will also test how the participants react to living for a period of time without sunlight.
- China’s first city-wide commercial communications system using “unhackable” quantum technology is expected to be up and running next month. Tests on the system in Jinan in Shandong province had been completed. The network will provide extremely secure communication for nearly 200 users in the government, military, finance and electricity sectors.
Stock markets
- In the latest exchange rules to crack down on trading halts, stock trading suspensions cannot exceed three months in principle. As of July 3, 248 out of the 3,235 China-listed companies were suspended from trading.
- Chinese and Hong Kong investors dumped tech shares on July 4, after the People’s Daily labelled Tencent’s popular online game Honor of King’s a “poison” and called for tighter industry regulation. In Hong Kong, the Hang Seng Index declined 395.16 points, or 1.5%, to end at 25,389.01, marking the steepest percentage decline since mid-December. Tencent finished down 4.1%, its biggest fall in nearly 17 months, wiping out more than HKD100 billion of market capitalization.
- China will nearly double its quota for overseas investors to buy securities on the mainland through Hong Kong to forge closer financial links between the two, the People’s Bank of China said (PBOC). The government has approved an increase in the quota under the Renminbi Qualified Foreign Institutional Investor (RQFII) program for Hong Kong to CNY500 billion from CNY270 billion. The RQFII program now covers 18 areas, with Hong Kong allocated the largest of the total CNY1.74 trillion quota. The U.S. allocation is CNY250 billion, followed by South Korea with CNY120 billion.
- China’s finance regulators have uncovered CNY80 billion worth of “rat trading” since 2014. Rat trading in China essentially refers to a form of misconduct in which traders at a financial institution build a position with their own money, and then use investors’ funds to elevate the share price. It is more commonly referred to in western markets as front-running.
Travel
- The first bullet train linking Beijing and the Xiong’an New Area has been put into service. The journey takes 1 hour and 50 minutes. The train’s terminal is Baoding Railway Station in Hebei province. The ticket fare for an economy seat on the bullet train from Baiyangdian to Beijing is CNY45. The establishment of the new area was announced in April.
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