Short news
July 24, 2017 Category Short news, Weekly
Finance
- Apple launched a large-scale promotion, offering special discounts for consumers who use its mobile payment solution ApplePay in China, where third-party mobile payments are dominated by Alibaba Group and Tencent Holdings. Between July 18 and 24, consumers using Apple Pay to make payments at 28 offline retail stores, supermarkets and restaurants such as 7-Eleven, Watsons, Starbucks and Burger King, and 16 internet merchants including bike-sharing app Mobike, online travel app Ctrip as well as JD.com, received discounts.
- Swatch Group has launched the second generation of its chip-embedded devices that can be used for mobile payments in China, after teaming with UnionPay to offer “Swatch Pay”. The new watches can be linked with credit cards issued by 11 partner banks, in addition to debit cards. Swatch unveiled its first-generation of watches with payment functions in October 2015. The new generation will be modestly priced at around CNY580 a piece. Chinese have embraced mobile payment methods, completing transactions worth CNY38 trillion via mobile devices in 2016 – nearly triple the amount of a year earlier.
- The European Central Bank (ECB) is considering carrying out a review of Deutsche Bank’s two largest shareholders, Qatar’s royal family and the Chinese conglomerate HNA, which each own just under 10% of the shares. The aim of the assessment is to establish whether an investor is trustworthy and financially sound, where the money used for the investment came from and whether the investor engages in any criminal dealings such as money-laundering or financing of terrorism. A negative outcome of the review could result in the ECB prohibiting the shareholder from exercising its voting rights.
- China’s tax revenue from the service sectors rose rapidly in the first half of the year, reflecting the country’s improving economic structure. The nation collected CNY7.08 trillion in taxes in the first half of the year, up 8.9% year-on-year. The service sector accounted for 57.6% of total tax revenue, up 1.1 percentage points from the level of last year. Retail tax grew by 25% year-on-year in the first half, reflecting the fact that consumption is playing a bigger role in driving economic growth. The total value of tax cuts for small and innovative companies amounted to CNY216.9 billion in the first half of the year, up by 29.6% year-on-year.
- China faces less pressure from capital outflows, according to the State Administration of Foreign Exchange (SAFE) and economists said the situation may continue to improve in the second half of this year. China’s banks sold a net USD93.8 billion of foreign exchange to clients in the first six months of this year, down 46% year-on-year. The foreign exchange savings by individuals dropped by USD1.7 billion in the first half. Foreign exchange reserves had been rising for five consecutive months by June.
- Chinese President Xi Jinping has told officials they must tighten control over borrowing by local officials and hold them permanently accountable for the debt they incur. China’s overall government debt was about CNY27.3 trillion at the end of last year, almost 40% of its gross domestic product (GDP), still lower than many developed economies, but unregulated corporate loans guaranteed by local governments could push the level above 60%.
- The Beijing-based National Institution for Finance and Development (NIFD) claims that the “leverage ratio” of the non-financial sector rose to 237.5% at the end of March from 234.2% at the end of last year. The leverage ratio compares total debt to assets or gross domestic product (GDP). The leverage ratio of Chinese companies and local governments rose 2.7 percentage points in the first quarter, surpassing the full-year increase of 2.1 percentage points last year. The rise was due to thriving shadow banking, the Institute said.
Foreign investment
- President Xi Jinping says the government should create a “stable, fair, transparent and predictable” environment for foreign businesses operating in China, stepping up Beijing’s rhetoric to woo foreign business as the country is gradually losing its attractiveness to overseas investors. In rare praise for the role of overseas businesses, Xi said foreign money has “helped reasonable resource relocation, promoted market-oriented reforms and played an important role for China’s economic development”. As such, China must do more to retain and attract foreign investment, he said.
- China will release the 2017 Catalog for the Guidance of Foreign Industries to offer more favorable policies and further improve the market environment for global companies by the end of this month.
- Shanghai has reported the biggest half-year slump in overseas capital inflows since 2010, in a sign that growing protectionism, rising costs and a tougher business environment are pushing global companies to look elsewhere. Contracted foreign investment slumped 47% to USD18.2 billion in the first six months of the year. Actual foreign direct investment (FDI) in Shanghai fell 7% in the first half to USD8.1 billion, a larger decline than the nationwide figure, which inched down 0.1% to CNY441.5 billion.
Foreign trade
- Top executives of Chinese and American companies have urged their governments to promptly resolve trade disputes through “effective negotiation” amid concerns that the two nations are heading towards a trade war. Twenty business leaders made the appeal during the first U.S.-China Business Leaders Summit held at the U.S. Commerce Department in Washington. The event was co-chaired by Alibaba Chairman Jack Ma and the Chief Executive of Blackstone, Stephen Schwarzman.
- China should perfect its systems for safety risk alerts, quick response, and supervision of imports and exports of commodities, a meeting of the Central Leading Group for Deepening Overall Reform chaired by President Xi Jinping announced. The meeting highlighted the safety of traded commodities at a time China is becoming a major buyer of global foods.
- China’s imports of major agricultural products continued to increase fast in the first five months of the year, driven by price gaps between domestically produced products and imported products, according to the Ministry of Agriculture. Wheat imports reached 2.2 million metric tons, an increase of 67.3% year-on-year, while import of soybeans increased by nearly 20% to 37 million tons, and imports of beef rose by 14% during the period, compared with the same period last year. Imports of some major agricultural products kept increasing quickly between 2011 and 2016, with grain imports increasing at an average annual rate of 32.2%, meat at an average annual rate of 24.9%, and dairy products at 16.6% during the five-year period.
- China is to ban importing 24 kinds of solid waste from overseas because of damage to the environment and people’s health. China previously allowed the imports because the rubbish was recycled, creating extra supplies of metals and materials in short supply for use in the domestic market, but officials say the problems created far outweigh the benefits. China imported more than 46 million tons of waste in 2015.The real amount of imported waste from overseas is probably much higher as some is brought into the country illegally.
- Shanghai’s foreign trade in the first six months jumped 18.7% from a year earlier to CNY1.55 trillion, reversing a 0.4% drop in the same period last year. The growth accounted for 11.7% of China’s total foreign trade in the first half year. Imports surged 23.7% to CNY926.71 billion while exports rose 12% to CNY626.59 billion. Imports and exports through the city’s free trade zone (FTZ) took up over 40% of Shanghai’s total foreign trade. Exports of machinery and electronics accounted for 70.6% of Shanghai’s total exports in the first half, up 1.2 percentage points from the same period last year. Integrated circuits, automobiles and pharmaceuticals are the three largest categories of imported products.
- China’s steel industry association, which represents 80% of the country’s steel production, has called on the government to get tougher with the administration of U.S. President Donald Trump and to threaten retaliation if Washington moves to curb Chinese steel imports. If Washington moves to levy additional tariffs on Chinese steel products or takes restrictive measures against imports from China, China can “hit back on restricting U.S. imports of automobiles and agricultural products”, Li Xinchuang, Vice President of the China Iron and Steel Association (CISA) said. The U.S. imported 30.1 million tons of steel last year, but only 1.13 million tons, or 3.8%, were actually from China.
Macro-economy
- Alibaba Group Holding and Tencent Holdings are expected to be introduced next month as the first major private-sector stakeholders of a state-owned enterprise. The Shanghai-listed parent of China Unicom announced that its plan has been given the go-ahead by the National Development and Reform Commission (NDRC). The first phase of the reform plan will likely be formally unveiled in four weeks. China United Network is one of eight state-owned enterprises participating in the pilot implementation of the government’s mixed-ownership reform program, which aims to introduce private-sector capital and expertise to improve their efficiency and become more market-driven.
- The number of Chinese companies on the Fortune 500 list has reached 115 with the addition of 10 first-timers this year, including Anbang Insurance Group, Alibaba Group and Tencent Holdings. The number has been rising for the last 14 years. Guangdong-based Country Garden is the only Chinese property company on the list. Walmart topped the list with USD485 billion in revenue in 2016, followed by three Chinese companies: State Grid, Sinopec Group and China National Petroleum Corp (CNPC). Apple is the most profitable company among the 500, followed by four major Chinese commercial banks.
- White-collar salaries continued rising in Hangzhou in the second quarter, bucking a declining national trend. The average monthly salary for white collar workers in Hangzhou increased to CNY7,933, up 4.3% on the last quarter, making the city the fourth highest paid in China for office staff, up from eighth a quarter ago. Hangzhou’s most competitive sectors include telecommunications, software, and IT services. The findings were based on online job postings from 37 key Chinese cities, compiled by recruitment website Zhaopin. Nationwide, average monthly salaries for office workers dropped 3.8% from a quarter ago to CNY7,376 in the second quarter.
- China’s installed solar power capacity surged over the first half year, as 23.6 gigawatt (GW) of solar power were installed, 34.2% higher from a year ago, far more than the 20-25 GW analysts had expected for the whole year. Of the installed solar capacity over the first half year, 7 GW was by rooftop panels at consumers’ homes, up from below 2 GW a year ago, according to the China Electricity Council.
- China should pay more attention to maintaining a balance between cutting leverage levels and stabilizing economic growth in the second half of this year after it achieved faster-than-expected GDP growth of 6.9% in the first half, said Yu Yongding, Economist at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences (CASS). “China’s deleveraging move is in the right direction, but it is a long-term process and we should not carry it out too hastily so as to affect the normal financing activities of enterprises, especially small and medium-sized companies,” Yu added.
Mergers & acquisitions
- More Hong Kong family firms will become targets of acquisitive mainland buyers this year, particularly those planning overseas expansions, according to a new study by UBS.“Competition is intensifying, tempting Hong Kong family companies to sell their assets to bigger industry players,” said Managing Director at UBS’ investment bank, Samson Lo, who’s responsible for mergers and acquisitions in Asia. The latest acquisition involved the family of former Hong Kong Chief Executive Tung Chee-hwa, whose shipping company Orient Overseas International was bought by Chinese rival Cosco Shipping Holdings for HKD49.23 billion.
- China’s outbound mergers and acquisitions (M&As) rebounded in the second quarter of this year with deal value surging 148% quarter-on-quarter. China recorded the second most cross-border acquisitions by value with 94 deals totaling USD35.9 billion, according to Baker McKenzie’s Cross-Border M&A Index. The industrial sector continues to outrank other sectors in terms of China’s outbound M&A deal volume while the consumer and technology sectors also saw significant amounts of outbound investment. China’s inbound M&A activities continued to climb, rising 29% in volume to 62 deals and a 69% jump in value to USD13.2 billion from the first quarter of 2017.
Real estate
- Chinese Estates Holdings has accumulated about 5% of China Evergrande Group since April on the open market for a total of HKD8.1 billion. The Hong Kong developer is now the second-biggest shareholder in Evergrande. Earlier this month, the Hong Kong developer said it would record a HKD2.3 billion gain from the sale of Shengjing Bank shares – which it bought from Evergrande last May. Earlier this month, Evergrande announced its first-half contracted sales soared 72% from a year earlier to CNY244 billion, representing 54% of its annual sales target of CNY450 billion.
- Country Garden Holdings sold USD600 million of five-year bonds in Hong Kong, the latest in a recent string of issuances that signal a relaxation of policy curbs to raise funds by Chinese property developers. Country Garden said the bonds would pay a coupon of 4.74% and would have an option for the company to redeem prior to maturity. Goldman Sachs and Deutsche Bank were the joint global coordinators.
- China’s housing authorities said cities with net population inflows need to accelerate the development of rental housing projects. Twelve cities will pilot the rental projects. Banks have been instructed to help real estate companies with developing rental housing, which takes longer to earn a profit compared to house sales.
- The growth of home prices in China’s key cities slowed for nine consecutive months to the end of June, with prices in Beijing actually falling for the first time in more than two years in June. Shanghai prices declined 0.2% month-on-month, while Shenzhen home prices stalled in June, and Guangzhou’s grew 0.5%. “China’s 15 hottest property markets, mostly first and second-tier cities, remained stable in June,” the National Bureau of Statistics (NBS) said. On a year-on-year comparison, in all of the key 15 cities, prices declined in June between 0.8% and 5.5%. Some lower-tier cities however are still experiencing price increase.
- Sino Land has won a residential land plot in Ma On Shan, in Hong Kong’s New Territories, for HKD1.38 billion, setting a new record for the area. Pacific Asia, a subsidiary of Sino Land, outbid 29 other bidders in the government tendering process, including several mainland Chinese developers. The Ma On Shan site has a maximum gross floor area of about 119,000 square feet, with average land prices reaching HKD11,588 per square foot, an 80% jump from the last record set by developer Citic Pacific in 2015 in the same area.
- About CNY4.93 trillion of new homes, excluding government-subsidized affordable housing, were sold in the first half of the year, a year-on-year hike of 17.9%, the National Bureau of Statistics (MBS) said in a statement. The area of new homes sold in the six-month period climbed 13.5% from a year earlier to 647.9 million square meters.
Stock markets
- Zhongyuan Bank, the biggest city lender in central China, made a sluggish debut on the Hong Kong stock exchange, after investors gave the city’s third-biggest initial public offering (IPO) of 2017 the cold shoulder. The bank’s shares ended 1.6% above the IPO price of HKD2.45. The bank, based in the Henan provincial capital of Zhengzhou, had already priced its offer near the bottom of the expected price range. The IPO was only able to generate enough interest from retail investors to bid for 39% of the shares on offer, making it one of the worst new listings this year in the city.
- The pace of initial public offerings (IPOs) is expected to accelerate in the second half of the year. There were 246 IPOs in the Shanghai and Shenzhen bourses in the first half of 2017, increasing 303% year-on-year, according to PricewaterhouseCoopers (PwC).
- Twenty months after he was taken away for investigation after the 2015 Chinese stock market rout eviscerated trillions of yuan in value, Yao Gang, the former No 2 at the China Securities Regulatory Commission (CSRC) has been expelled from the Communist Party. He is accused of disturbing the capital market order, violating the political system at the CSRC, and taking bribes. Yao was in charge of initial public offering (IPO) approvals before moving to oversee fixed income and futures markets in late 2015.
Travel
- 27 major rail stations in 24 big cities, including Xian, Shanghai, Guangzhou, Wuhan, Nanjing, Hangzhou and Chengdu, have launched an on-demand food delivery service for high-speed trains. The choices include local dishes and Western style fast food, including KFC. Passengers can order their meals on China Railway Corp’s ticket-booking website or via its app two hours before the train is scheduled to arrive at the selected station.
- HNA Infrastructure Co, a subsidiary of HNA Group, has signed an agreement to acquire a 60% stake in Rio de Janeiro Aeroportos, the controlling shareholder of Aeroporto International Antonio Carlos Jobim-Galeao (GIG Airport) from Odebrecht. The equity stake is worth USD18 million. The transaction is subject to regulatory approval in China and Brazil and is expected to be completed in the fourth quarter.
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