CX Daily: Ex-Finance Minister’s Call for Bond Market Reform Sparks Central Bank Pushback
Ex-finance minister’s call for bond market reform sparks central bank pushback
A row over how to overhaul China’s bond market spilled over into the public domain after former Finance Minister Lou Jiwei launched a broad-brush attack on the country’s regulators and warned that if reforms aren’t speeded up, the market could well be the source of another buildup of financial risk.
China, home to the world’s second-largest bond market, has been rocked by scandal and a wave of defaults this year among privately owned companies and state-owned enterprises (SOEs), most recently involving Yongcheng Coal and Electricity Holding Group Co. Ltd.
In a high-profile speech Sunday, Lou criticized the poor oversight of the interbank bond market and blamed the wave of defaults by SOEs partly on the lack of a unified supervision mechanism and the presence of too many regulators with different responsibilities. He called for bonds issued by nonfinancial institutions and companies, known as credit bonds (信用债), to be banned from the interbank market and for trading to be exclusively reserved for banks to buy and sell bonds to each other. But the People’s Bank of China (PBOC), one of the regulators, was quick to hit back with an article (link in Chinese) .
FINANCE & ECONOMY
Chinese authorities have been working to consolidate the banking industry and encourage smaller, weaker banks to merge.
Province to raise $2.3 billion for new bank born from merger of local lenders
A northern Chinese province said it will capitalize a new bank born from the merger of small city lenders by selling special-purpose bonds (SPBs) as the authorities look to get Shanxi’s scandal-ridden banking industry back on its feet.
The Shanxi provincial government will issue 15.3 billion yuan ($2.3 billion) of SPBs Wednesday to replenish the capital of the as-yet-unnamed new commercial lender, according to statements (link in Chinese) released Friday. The bonds will mature in 10 years and received the highest possible AAA rating from Golden Credit Rating International Co. Ltd.
In return, a local state-owned investment company will hold a stake in the new city bank. The company will derive dividend income and other profits from the equity, which will be eventually sold off to repay bondholders, according to the statements.
Iron ore /
Commodities exchange warns of bubble as iron ore futures hit record highs
Iron ore futures soared to all-time highs this week in China, more than doubling from April levels, prompting the local exchange operator to warn of a speculative bubble as Beijing also sent signals that could foreshadow government intervention.
As producer of more than half of the world’s steel, China is also the largest iron ore importer, and its largely state-owned production complex employs thousands around the country. Accordingly, producers and officials in Beijing closely follow the prices of iron ore — one of the main components of steel production — and have pushed for China to play a larger global role in determining its price.
The price has soared in recent months, with the benchmark contract on the Dalian Commodity Exchange rising nearly 10% on Monday alone to 1,144.5 yuan ($175) per ton — a record since the contracts began trading in 2013. The price represented a 50% jump from levels in late October and was more than double the price in early April.
China makes rare move to expand corn supply as prices rally
A rally in Chinese corn prices is spurring the government to take the unusual step of bolstering supply at a time when sales from farmers are poised to expand.
The government disclosed a plan last week to resume state corn sales, the first time in years it is doing so during a seasonal peak period for farmers’ sales. On Monday, China’s top corn region of Heilongjiang followed with an offer to sell almost 1 million tons to designated buyers. These are on top of the 1.3 million tons already sold to refineries and feed mills in Jilin and Heilongjiang in the previous two weeks.
China’s corn prices have rallied this year with futures in Dalian hitting a record at the start of December amid a need to feed a massive number of hogs as the nation’s herd recovers from African swine fever. Overseas purchases by the world’s second-biggest consumer have also surged.
JD.com’s fintech unit reshuffles executives ahead of IPO
E-commerce giant JD.com Inc.’s fintech unit embarked on a surprise executive reshuffle ahead of its planned $3.1 billion Shanghai listing, which has come under the shadow of Ant Group’s derailed IPO last month.
Chen Shengqiang, CEO of Jingdong Digits Technology Holding Co. Ltd., or JD Digits, has been asked to step down and take the post of vice chairman of JD Digits, making room for JD.com’s Chief Compliance Officer Li Yayun to take over as JD Digits’ top executive, according to a statement released Monday.
The change has raised eyebrows because the fintech giant already started the process for an IPO whose success faces new uncertainty after proposed changes to China’s online microlending rules knocked off Ant Group Co. Ltd.’s planned blockbuster listing last month.
Quick hits /
Postal Saving Bank gets direct banking approval
Global academics mourn East Asia expert Ezra F. Vogel
Tencent-backed virtual bank opens for business in Hong Kong
BUSINESS & TECH
Huawei is doubling down on products other than smartphones in the face of U.S. sanctions on chip supplies, including the HiCar smart screen supported by its self-developed Honghu chips.
Seeking to escape grasp of U.S. sanctions, Huawei launches in-car screens for smart vehicles
Huawei Technologies Co. Ltd. launched its first in-car smart screen device Monday, as the company pivots into new products after its smartphone business was throttled by U.S. sanctions.
The smart screen debut comes nearly one month after the Shenzhen-based tech giant folded its smart car business into its consumer segment led by veteran CEO Richard Yu and sold its budget smartphone unit Honor.
These two decisions were made in the face of increased pressure from the U.S. government’s clampdown on Huawei’s core telecom equipment and smartphone business.
U.S. adds over 100 Chinese, Russian companies to blacklist
The U.S. Commerce Department added more than 100 Chinese and Russian companies to a new list of companies it said have links to their nations’ militaries, a move that will sharply curtail certain types of exports.
The list of 58 Chinese and 45 Russia companies means anyone seeking to sell items that could eventually be used for military purposes to those businesses will need a license, the Commerce Department said Monday in a statement.
Among the biggest names were seven subsidiaries of Aviation Industry Corp. of China Ltd. and Russia’s Foreign Intelligence Service, or SVR, which has been implicated in a recent cyberattack on U.S. federal agencies and companies.
Electric cars /
Embattled Faraday Future sets up car sales unit in Zhuhai
A new-energy vehicle venture with links to U.S. electric-car startup Faraday Future and its fugitive founder Jia Yueting was registered in Zhuhai, sparking speculation that the cash-strapped carmaker is making a new attempt at targeting the China market.
FF Automobile Zhuhai Co. Ltd., wholly owned by FF Hong Kong Holding Ltd., was set up in the southern city of Zhuhai in Guangdong province with registered capital of $250 million, corporate registration records showed. FF Hong Kong also owns 95% of FF China, Faraday’s Beijing-based unit registered in 2017.
Jia Chentao, a supervisor of LeEco Eco-Auto Zhejiang and the legal representative of FF Hong Kong, was registered as the legal representative of FF Automobile Zhuhai, public records showed. The new company’s business covers new-energy vehicle sales, auto parts development, and research, auto rental and artificial intelligence system-related services.
Tesla rival Xpeng cruises into export lane with first overseas sales
U.S.-listed Chinese electric vehicle startup Xpeng took a big step toward becoming a global powerhouse by making its first exports to Norway.
The first 100 Xpeng G3 electric sport utility vehicles are being delivered to customers from 28 Norwegian cities and towns, some of which are located above the Arctic Circle, the company said Monday in a statement. Sold for a starting price of 358,000 krone ($41,000), the Norwegian version of the G3 electric vehicle features an AI-powered voice assistant, smart navigation and app-enabled remote control, according to the statement.
Quick hits /
EHang to pilot self-flying vehicle sightseeing trips in South China city
Japan’s Takeda sells five prescription drugs to China’s Hasten for $322 million
Legislators consider lowering the age of criminal responsibility for violent offenses
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