CX Daily: China Cuts Reserve Requirement Ratios — Again

Monetary easing /

China to lower banks’ reserve requirement, releasing $126 billion

The PBOC announced Friday that it will lower the reserve requirement ratios (RRRs) by 50 basis points for all banks Sept. 16 in a bid to support the economy. The cut does not apply to finance companies, financial leasing companies and automobile finance companies. A basis point is one-hundredth of a percentage point.

In addition, the PBOC will lower the RRRs by an additional 100 basis points for city commercial banks that operate only within the provincial-level regions where they are based, according to the statement. It plans to implement these cuts in two phases, with one 50 basis-point cut Oct. 15 and the other Nov. 15.

The RRR cuts will release around 900 billion yuan ($126.4 billion) of liquidity into the banking system, the central bank said. They will also reduce banks’ funding costs by an estimated 15 billion yuan a year, which can help lower actual interest rates on loans to businesses.

FINANCE & ECONOMICS

Forex /

China allows three more brokerages access to interbank forex market

China’s forex regulator for the first time in more than four years allowed three additional brokerages to trade on the domestic interbank foreign-exchange market as the next step in the country's overhaul of the forex market to increase the diversity of its players and improve the its liquidity.

The State Administration of Foreign Exchange Thursday approved pilot qualifications of Citic Securities Co., Huatai Securities Co. and China Merchants Securities Co. to conduct interbank forex business both in proprietary trading and on behalf of clients. Previously, Guotai Junan Securities Co. and Harvest Fund Management were the only two nonbank participants.

Wealth Management /

World’s biggest money-market fund shrinks by $120 billion

The world’s biggest money-market fund, which once offered annualized returns of nearly 7%, is on track to lose its crown after shrinking by more than $120 billion in just over a year.

Known as Yu’e Bao, the Chinese fund operated by an affiliate of Alibaba Group Holding Ltd. had 1.03 trillion yuan in assets under management at the end of June, or an equivalent of $144 billion based on current exchange rates, down from a peak of $270 billion on March 31, 2018. It’s on course to fall behind the JPMorgan U.S. Government Money Market Fund, which has been hovering around $150 billion since 2017, and Fidelity Government Cash Reserves fund, according to figures compiled by Bloomberg.

Small businesses /

SOEs told: Pay your bills on time

China is stepping up measures to help millions of struggling small companies with new rules to curb abuse, such as coercion by government agencies, SOEs and large companies to accept unreasonable terms of business. This will include forcing them to pay their bills on time.

Entities that abuse their power over small companies by delaying payment for goods and services will be named and shamed on the List of Dishonest Judgment Debtors, a court-administered blacklist, and could face fines of 100,000 yuan ($14,047) to 500,000 yuan. That’s according to a draft of rules on “Administrative Measures for Timely Payment of Small and Medium-Sized Enterprises (SMEs)” released Wednesday by the Ministry of Industry and Information Technology (MIIT) which is open for public feedback until Oct. 7.

Quick hits /

Ex-U.S. commerce secretary warns of trade war’s consequences

Canada's new ambassador to face diplomatic test in China

HKEx suspends trading in derivatives citing software issues

Shanghai bourse flashes first red light on STAR Market IPO

Opinion: The true toll of the trade war

Opinion: Trade war may impact China’s appeal to foreign investment

BUSINESS & TECH

Customers queue to return their membership cards at a Costco supermarket in Shanghai, Sept. 4, 2019. Photo: VCG

Retail /

Shanghai Costco cools down after frenzied opening

Last week, at the frenzied opening of the first Chinese mainland branch of U.S. wholesale giant Costco in Shanghai, customers were lining up to enter the store and to pay for deals they had managed to nab. This week, when we visited the store in Minhang district, customers were still lining up to enter, but for many, it was to return their membership cards, which most had purchased for 199 yuan.

The retailer's prices had generally increased since the first day. The shop’s food area was crowded, while the area filled with high-end products which particularly caught the attention of shoppers and the media on the first day —bottles of premium Moutai liquor and designer bags — was nearly deserted, as the discounted stock had mostly sold out.

M&A /

Alibaba buys rival cross-border shopping platform NetEase Kaola for $2 billion

Alibaba Group Holding Ltd., China’s largest e-commerce company by market share, will pay $2 billion to acquire cross-border e-commerce platform Kaola from NetEase Inc., the company said Thursday.

The announcement, which comes after we reported a potential deal last month, marks the latest consolidation in China’s ultra-competitive online shopping market. NetEase Kaola, the biggest import e-commerce platform in China, is an archrival of Alibaba’s Tmall Global.

Shipping /

Li Ka-shing's port trust booted from key index amid trade tensions

Hutchison Port Holdings Trust will be removed from Singapore’s Straits Times Index after a dramatic fall in its market value amid rising global trade tensions, the index provider said in a statement.

The move marks the end of an era for the Li Ka-shing backed container port trust in Hong Kong, whose IPO in 2011 was among the biggest that year. The market capitalization has dropped 84% since to around $1.4 billion, the lowest among the 30 constituents of the Straits Times Index, according to data compiled by Bloomberg. The decline was accompanied by falling operating income since 2016 due to weakened trade demand.

The great sale /

HNA to revive sale of container unit Seaco to raise cash

HNA Group Co. is considering reviving a sale of its container-leasing business Seaco as the troubled Chinese conglomerate seeks more cash to pay down debt, people with knowledge of the matter said.

The company has decided to restart work with advisers to identify potential buyers for Seaco, the sources said. HNA earlier this year decided to shelve a sale of the business because of disagreements over valuation. While the conglomerate aims to fetch more than $1 billion from a sale, its liquidity challenges mean it may consider lower offers, the people said.

Quick hits /

Chinese scientists develop atomic-level graphene-folding technique

HKEx invests in Chinese data-security firm led by Turing Award winner

China Unicom to set up 10 billion yuan fund of funds for 5G

AI upstart SenseTime’s valuation passes $7.5 billion, CEO says

Alibaba’s charity extravaganza gets blockchain backing

Thanks for reading. If you haven't already, click here to subscribe.