CX Daily: China's Local Government Bond Quotas are Running Out

Economy /

Almost all local governments have used up annual bond quotas

China’s local governments have almost used up their bond quotas for this year, official data shows, after Beijing urged them to speed up bond sales to boost infrastructure investment amid an ongoing economic slowdown.

Local governments issued 3.04 trillion yuan ($430 billion) of new bonds in the first nine months of this year, collectively using up 98.6% of the total new bond quota for the year approved by the National People’s Congress, the country’s top legislative body, according to new official figures.

That’s up from 92.3% of the quota in the first nine months of 2018, according to our calculations. As of the end of last month, of the 37 local entities subject to the quota — including 31 of which are provincial-level regions and five cities — 35 had completely maxed out their limits.

FINANCE & ECONOMICS

China’s crackdown has led shadow banking assets to shrink to a three-year low. Photo: VCG

Financial risk /

China’s shadow banking assets shrink to 3-year low

China’s shadow banking assets shrank to 64% of nominal GDP at June 30, a near-three-year low and down from 68% at the end of 2018 amid a government crackdown on shadow banking, according to global ratings firm Moody’s Investor Service.

Broad shadow banking assets, including entrusted loans, trust loans, banker acceptances, assets funded by wealth management products and loans from private finance firms, shrank by 1.7 trillion yuan ($238 billion) in the first half of 2019 to 59.6 trillion yuan, the lowest level since the end of 2016, Moody’s said in its latest quarterly report on China’s shadow banking.

Commodities /

U.S., Australia pursue rare earths to cut reliance on China

After Prime Minister Scott Morrison and President Donald Trump agreed during talks at the White House last month to enhance the development of rare earth minerals in a bid to sideline China, U.S. Commerce Secretary Wilbur Ross will hold further meetings in Canberra and Sydney this week ahead of high-level discussions between U.S. and Australian officials in November in Washington.

These discussions will aim to develop a “U.S.-Australia Critical Minerals Action Plan” that will improve the security and supply of rare earths and other critical minerals for the U.S. and Australia. With China controlling at least 80% of global trade in rare earths, Australian and American defense and security officials have been in talks for months about developing alternative deposits both in Australia and the U.S.

Economy /

World Bank, IMF issue new warnings on global slowdown

The IMF and World Bank issued fresh warnings about further cuts to their global growth forecasts amid economic uncertainties including Brexit, the U.S.-China trade war and a downturn in Europe, calling on governments to coordinate fiscal stimulus measures to prevent a severe slowdown.

The new head of the IMF, Kristalina Georgieva, painted a downbeat picture of the world economy in her first major address in Washington Tuesday, saying the fund will cut its growth forecasts for 2019 and 2020 in its next World Economic Outlook due Oct. 15. In July, the fund lowered its growth projection to 3.2% this year and 3.5% next year — its fourth downgrade since last October.

Properties /

Shanghai gives first-time buyers mortgage relief

Shanghai decided to allow banks to keep mortgage rates for the city’s first-time buyers below the country’s new benchmark borrowing cost, the loan prime rate (LPR), in breach of central bank guidelines, to avoid raising the repayment burden on home buyers resulting from an overhaul of the interest-rate system.

New loans in Shanghai should be priced at least 20 basis points below the national LPR of the equivalent maturity, a source close to the PBOC told us. That means first-time buyers will pay as little as 4.65% on their mortgages compared with the prevailing 4.85% LPR for loans of more than five years. In August, before the new regulations came into effect, the average mortgage loan rate for first-time buyers in Shanghai was 4.84%.

Quick hits /

Exclusive: Document confirms death of UCF Holdings founder

Editorial: Social security reform must be completed as soon as possible

BUSINESS & TECH

CCTV, Tencent suspended airing NBA games after a tweet by the Houston Rockets general manager ignited a firestorm of criticism. Photo: VCG

NBA firestorm /

Chinese companies start cutting multibillion-dollar business ties with the NBA

A host of Chinese companies and celebrities – including apparel retailers, a bank and even purveyors of coffee and milk – distanced themselves from the NBA by suspending business partnerships or quitting NBA-related activities even as more apologies, including one from 2018 MVP James Harden, were forthcoming.

China’s state television network CCTV said Tuesday it would suspend airing and streaming preseason NBA games. Internet giant Tencent Holdings Ltd. followed with a similar move despite holding a $1.5 billion contract for digital broadcasting rights to the games. Neither CCTV nor Tencent gave a timeframe for the resumption of broadcasting.

U.S. blacklist /

MIT, Goldman Sachs reevaluate Chinese AI ties following U.S. blacklist

The Massachusetts Institute of Technology said it will review its relationship with SenseTime Group Ltd., an AI startup that was among eight Chinese companies blacklisted by the U.S. this week over alleged human rights violations. The relationship, described by the university last year as an effort to “confront some of the world’s greatest challenges,” adds to a series of business arrangements that have drawn scrutiny toward MIT this year.

At the same time, U.S. multinational Goldman Sachs Group is reevaluating its role in the IPO plan of another Chinese AI company, Megvii Technology, after it was also placed on the export blacklist, Reuters reported Wednesday.

Gaming /

Blizzard bans esports player after Hong Kong outburst

American video-game developer Blizzard Entertainment has suspended Hong Kong-based professional gamer Chung Ng Wai after the 21-year-old used a Sunday post-game interview to show solidarity with the city’s protesters.

In an online live chat following his win at the Hearthstone Grandmasters, a Taipei-based tournament for players of its eponymous online card game, Chung, who appeared wearing eye goggles and a gas mask, said in Mandarin a slogan frequently deployed by demonstrators. Blizzard said in a statement that Chung would receive no prize money and was suspended from Hearthstone esports events. Chung told AFP that he did not regret the outburst.

Apps /

Communist Party newspaper blasts Apple for hosting app favored by Hong Kong protesters

The People's Daily, official newspaper of the Communist Party, blasted Apple for providing a program in its App Store that can be used to track police activity in Hong Kong as sometimes-violent protests continue to roil the city.

Apple “opened the gates to those causing violence and chaos in Hong Kong,” said a scathing Chinese-language editorial published Tuesday. Though it did not mention the offending app by name, it's believed to be a reaction to the popular mapping service HKmap.live, which allows users to upload real-time updates on developments across the city. Apple previously banned HKmap.live from the App Store, but later reversed the decision.

Quick hits /

HNA unit to sell controlling stake in HY Energy

Robin Li steps down as executive director of Baidu’s cloud business

Hillhouse-backed Genor seeks up to $1 billion valuation

Citizen science app helping clean up China’s polluted water bodies, study says

BYD, Vanke to launch $154 million tech and logistics investment fund

Two steel makers in new state-assisted fundraising

AVIC International set to take Hong Kong electronics subsidiary private after $380 million buyout deal

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