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ECONOMY

By Yue Yue and Liu Jiefei / Jul 22, 2019 02:39 PM / Economy

Photo: IC Photo

Photo: IC Photo

Foreign asset managers will be allowed to be the controlling shareholder in wealth management joint ventures they set up with Chinese financial institutions, according to a series of measures on further opening up the country’s financial sector released Saturday.

Foreign financial institutions will also be allowed to apply for the Type-A lead bond underwriter license in the interbank market, according to the measures. This will allow them to underwrite all debt financing tools in the interbank market, a notice published on the People’s Bank of China’s website Saturday explains. Foreign institutions have previously only been allowed to be the lead underwriter for corporate panda bonds — yuan-dominated bonds that are issued by foreign non-financial institutions in China.

It’s hard for existing companies to meet the needs of China’s fast-growing asset-management market, a spokesperson at the China Banking and Insurance Regulatory Commission said Saturday. Allowing foreign institutions to control wealth management companies will help the sector’s development, the spokesperson said.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)

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ECONOMY

By Wen Simin and Timmy Shen / Jul 19, 2019 03:34 PM / Economy

Photo: VCG

Photo: VCG

Vietnam’s container throughput surpassed Hong Kong’s in the first half of this year, possibly in part due to trade diversion amid the trade war between China and the U.S.

In the first half of 2019, Hong Kong saw a container throughput of 9.06 million twenty-foot equivalent units (TEUs), down 8.1% year-on-year, according to government data from the Hong Kong Maritime and Port Board.

In the same period, Vietnam recorded 9.1 million TEUs in container throughput, up 3% year-on-year, official data from the Vietnam Maritime Administration show.

“As tit-for-tat tariff hikes between the US and China increase, so does the cost of importing from each other,” Nomura economists said in a report. “However, there is a silver lining: the two countries diverting imports away from each other potentially benefits industries in different economies.”

“Vietnam is by far the largest beneficiary,” they said, adding that orders due to trade diversion were worth nearly 8% of the country’s gross domestic product in the year through the first quarter of this year.

Read the full story later on Caixin Global.

Contact reporter Timmy Shen (hongmingshen@caixin.com)

Related: China’s Exports and Imports Drop in June in Wake of New U.S. Tariffs

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By Cheng Siwei and Guo Yingzhe / Jul 18, 2019 03:34 PM / Economy

Photo: VCG

Photo: VCG

As tax and fee cuts hit China’s fiscal revenue growth, some of the country’s governments are reporting higher-than-usual revenues from nontax sources — including the sale of state-owned assets and sucking up more profits from state-owned enterprises (SOEs).

Southwest China’s Guangxi Zhuang autonomous region, for example, beefed up its revenues by selling off idle assets such as factories and land, Sun Liangquan, a regional finance official, told Caixin earlier this month.

Additionally, the central government collected 168.5 billion yuan ($24.5 billion) more from SOEs profits in the first half of 2019 than during the equivalent period last year, accounting for 62% of the country’s nontax revenue growth, Liu Jinyun, an official at the Ministry of Finance, said at a Tuesday press conference.

Despite an uptick in June, year-on-year growth in China’s fiscal revenue has slowed in recent months as tax cuts have taken effect and downward pressure on economic growth has risen. Some provincial-level governments even suffered a decline in fiscal revenue.

In March, Beijing promised to slash taxes and fees by nearly 2 trillion yuan this year, compared with cuts of 1.3 trillion yuan last year.

Read the full story later today on Caixin Global.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: In Depth: China’s Whopping Tax and Fee Cut Package Surprised Even Insiders

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By Han Wei / Jul 18, 2019 05:17 AM / Economy

Photo: VCG

Photo: VCG

The American housing market is facing a sharp drop in demand from foreign investors led by Chinese homebuyers, CNBC reported, citing data from the National Association of Realtors.

The dollar volume of houses purchased by foreign buyers from April 2018 through March 2019 dropped 36% from the previous year, according to the report.

Both the number of transactions and purchase prices have dropped. Overseas homebuyers bought 183,100 properties in the U.S. with a total value of about $77.9 billion during the period, down from 266,800 valued at $121 billion a year earlier, according to the report.

The slowing sales partly reflect weakening demand from Chinese, the leading foreign buyers for seven consecutive years in U.S. housing market. Purchases by Chinese declined 56% between April 2018 and March 2019 from a year earlier, the biggest percentage drop for all foreign buyers, data from National Association of Realtors showed.

Analysts attributed the pullback by foreign buyers in the U.S. housing market to weakening global growth, tighter capital controls in China, a strengthening U.S. dollar, low inventory, and growing tensions between China and the U.S., according to the report.


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By Zhao Runhua / Jul 16, 2019 05:21 PM / Economy

Photo: VCG

Photo: VCG

China’s supervisor of state-owned enterprises (SOEs), which is directly managed by the central government, expects more central SOEs to list on the high-tech board, spokesperson Peng Huagang said during a Tuesday briefing.

The State-owned Assets Supervision and Administration Commission of the State Council has encouraged a few companies to file for IPOs on the Shanghai Stock Exchange’s STAR Market, which is also known as the high-tech board, Peng said. The companies satisfy requirements of “national strategies,” show “breakthroughs in core technology,” and are “highly acknowledged by the markets,” Peng said. Peng offered no further details such as the companies' names or business focuses.

According to Peng, 14 central SOEs’ high-tech board IPO applications have been received, among the total 148 companies that have submitted applications. Railway infrastructure operator China Railway Signal and Communication, as the first central SOE to have received a formal IPO green light, will debut next Monday with another 24 companies.

Related: SOEs Turn to Jack Ma for Digital Innovation

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By Liu Jiefei / Jul 15, 2019 10:41 AM / Economy

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China’s economy grew 6.2% year-on-year in the second quarter this year, down from 6.4% growth in the first quarter, official data showed Monday.

The growth rate met the median forecast of a 6.2% gain for the period by economists polled by Bloomberg.

In the first half of this year, China’s economy grew 6.3% year-on-year, according to data from the National Bureau of Statistics (NBS).

Fixed-asset investment, a key driver of domestic demand that includes infrastructure investment, increased 5.8% year-on-year in the first half of this year, NBS data showed. The reading was up slightly from 5.6% growth in the first five months.

Government-driven infrastructure investment rose 4.1% in the first half of this year, up from 4% growth in the first five months.

Value-added industrial output, which measures production at factories, mines and utilities, rose 6.3% year-on-year in June, up from 5% growth in the previous month.

Retail sales, which include spending by governments, businesses and households, grew 9.8% in June, up significantly from 8.6% growth in the month before. The reading marked the highest since March 2018.

Read the full story on Caixin Global.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)

Related: Weak Economic Data Bolster Expectations for Further Policy Easing

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By Guo Yingzhe / Jul 12, 2019 04:15 PM / Economy

Photo: VCG

Photo: VCG

China’s exports of goods fell 1.3% year-on-year in June, official data showed Friday, down from a 1.1% increase in the month before but higher than the median forecast of a 1.4% slide from economists polled by Bloomberg.

Imports declined 7.3% year-on-year last month, data from the General Administration of Customs showed, compared with an 8.5% drop in the previous month. Economists had forecasted a median decrease of 4.6%.

China’s trade surplus widened further to $51 billion in June, up from $41.7 billion in the month before.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

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By Yu Hairong and Denise Jia / Jul 11, 2019 09:47 AM / Economy

Photo: VCG

Photo: VCG

China will expand a pilot program this year to transfer government holdings in state-owned enterprises to social security funds nationwide in response to concerns about the sustainability of the pension system.

The State Council decided at an executive meeting Wednesday to fully push for the transfer of 10% of the equity in state-owned companies to the national social security fund and relevant local entities.

The move is a further implementation of a 2017 trial plan that was limited to a small number of central government-owned businesses in selected provinces.

According to the timetable set in 2017, the transfer should be completed in batches and as soon as possible after 2018. But the progress so far has been too slow, said former Finance Minister Lou Jiwei, former Deputy Commissioner of China’s State Taxation Administration Xu Shanda and Zhang Junkuo, vice president of the Development Research Center of the State Council.

Lou said in March that only five of about 600 companies have completed the equity transfers.

One reason for the slow progress in that existing state-owned shareholders were not willing to cooperate, Caixin learned.

China’s social security fund is under increasing strain as a result of a rapidly aging population and a shrinking workforce. Some provinces running deficits in their pension funds have been forced to borrow from other provinces to meet pension payments.

An April report by the Chinese Academy of Social Sciences, a central government think tank, projected that the national social security fund would be depleted by 2035.

Related: State Firms Dragging Their Feet on Measure to Head Off Pension Shortfall

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By Liu Jiefei / Jul 10, 2019 09:57 AM / Economy

Photo: IC Photo

Photo: IC Photo

China’s producer price index (PPI) posted zero year-on-year growth in June, down from a 0.6% increase in the previous month, official data showed Wednesday. The reading marks the lowest point since August 2016.

The PPI tracks the prices of goods circulated among manufacturers and mining companies.

The consumer price index (CPI) rose 2.7% year-on-year in June, the same as the month before, which had marked the highest level since February 2018, according to data from the National Bureau of Statistics.

The CPI measures the prices of a select basket of consumer goods and services.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)


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By Ren Qiuyu / Jul 08, 2019 07:13 PM / Economy

Photo: VCG

Photo: VCG

A Caixin investigation reveals how mass cover-ups and official inaction have driven China's African swine fever epidemic to crisis levels.

Local officials in many parts of the country have refused to acknowledge suspected outbreaks of the disease in order to avoid paying culling subsidies, reporters have learned.

Facing massive economic losses, many pig farmers sold their stock at low prices when they showed the first signs of swine fever. The pigs were sent to transfer hubs and slaughterhouses — sometimes in different provinces — further spreading the disease, which is not known to affect humans but kills almost every pig it infects, and can only be transmitted through direct contact.

They ended up on dinner tables across China.

The crisis that has devastated the country’s pork industry is “man-made,” said Qiu Huaji, a research director at the Harbin Veterinary Research Institute. 

Read the full investigation here.

Contact reporter Ren Qiuyu (qiuyuren@caixin.com)

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By Du Caicai and Zhao Runhua / Jul 05, 2019 07:09 PM / Economy

Photo: VCG

Photo: VCG

China’s agriculture ministry has “zero tolerance” for those who conceal outbreaks of African swine fever, Vice Minister Yu Kangzhen said Thursday in response to online reports that some cases of the disease have not been recorded.

Since the disease was first reported in China in August, the country has recorded 143 separate outbreaks and culled over 1 million hogs, Yu said. African swine fever is not known to affect humans but is deadly for pigs.

  Read More  
In Depth: How Secrecy and Loopholes Fueled China’s Swine Fever Crisis

While a number of restrictions on transporting pigs between provinces have been lifted, and cases are dwindling, the situation is “still very severe,” Yu said. Yu made the comments at the same briefing where he signalled that China would continue to import pork from the U.S. amid tightened domestic supply.

China’s pork production may decline about 30% in 2019 because of African swine fever, analysts at Rabobank predicted in April. A drop of that size would be roughly the same as Europe’s entire annual pork supply, the bank said.

Yu encouraged reports of any abnormal deaths of hogs, even if after investigation they turned out to be unrelated to African swine fever.

Contact reporter Zhao Runhua (runhuazhao@caixin.com)

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By Zhao Runhua  / Jul 05, 2019 01:32 PM / Economy

Photo: VCG

Photo: VCG

Prices of some major iron ore futures in China dropped as much as 3.5% Friday morning, as traders brace for a possible government crackdown on high prices. 

The “relevant government departments” are closely watching increases in iron ore prices, and will strictly crack down on monopolistic and intentionally “unreasonable” pricing, Qu Xiuli, vice chairman of China’s top industrial association for iron and steel, said on Friday.

Qu’s comments come after iron ore futures traded in the northeastern city of Dalian reached a four-year high on Wednesday, which analysts believe was largely driven by global shortages and rebounding demand from Chinese steelmakers. 

Contact reporter Zhao Runhua (runhuazhao@caixin.com)


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By Liu Jiefei / Jul 03, 2019 11:56 AM / Economy

Photo: VCG

Photo: VCG

Activity in China’s services sector expanded at the slowest pace in four months in June as weak new export growth offset stronger domestic new business, a Caixin survey showed on Wednesday.

The Caixin China General Services Business Activity Index, which provides a snapshot of operating conditions in the country’s services sector, fell to 52 in June from 52.7 the previous month, the lowest reading since February. A reading above 50 indicates expansion, while a number below that signals a contraction in activity. Policymakers are counting on the labor-intensive services sector, which accounted for more than 60% of China’s economic growth in the first quarter, to create millions of jobs as the country’s economic structure shifts further away from a model dependent on manufacturing and heavy-industry.

“The conflict between China and the U.S. impacted business confidence rather heavily,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, an affiliate of Caixin Global. “Although its impact on exports hasn’t been fully reflected in the short run, the longer-term situation doesn’t look optimistic.”

Read the full story here.


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By Zhang Yu, Isabelle Li and Zheng Lichun / Jul 03, 2019 04:24 AM / Economy

Photo: VCG

Photo: VCG

A few companies have moved production out of China to avoid tariffs and damage from the trade war with the U.S., but their size is small and the impact is manageable, said Chu Shijia, head of the Commerce Ministry’s Comprehensive Department, at a Tuesday press briefing.

Foreign investment and trade have maintained “steady growth” this year, despite the trade tensions, Chu said. China’s exports and foreign investment into the country both accelerated in May, indicating the resilience of the economy, Chu said.

Chu’s comments echoed those of Premier Li Keqiang, who told reporters at the Summer Davos meeting in Dalian that China is still a competitive location for investment.

“The relocation of the global industrial chain is a natural trend during globalization, and global industries will improve during the process,” the premier said.

A total of 91 large and medium sized industrial enterprises in southern China’s manufacturing hub Shenzhen left the city in 2018, making up around 1.1% of the total base, according to the latest government statistics. The government cited companies’ business strategy, operating costs and other cities’ policies as the major factors affecting businesses’ departure from Shenzhen.

Related: Apple Asking Suppliers to Weigh Moving 15%-30% of Capacity From China: Nikkei

Contact reporter Isabelle Li (liyi@caixin.com)


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By Lin Jinbing / Jul 02, 2019 12:03 PM / Economy

Photo: IC Photo

Photo: IC Photo

China will abolish caps on foreign ownership of securities, futures and life insurance firms by 2020, one year earlier than originally planned, Premier Li Keqiang said Tuesday at the Summer Davos conference of the World Economic Forum in Dalian, northeast China.

Read the full story on Caixin Global later today.

Related: China to Ease Ownership Rules on Oil Exploration, City Gas Networks

Contact reporter Lin Jinbing (jinbinglin@caixin.com)


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By David Kirton and Li Liuxi / Jun 28, 2019 06:38 PM / Economy

Photo: VCG

Photo: VCG

A unit of one of China’s “big five” power producers has been ruled bankrupt after amassing major debts, with a missed 16.44 million yuan ($2.39 million) loan repayment proving the straw that broke the camel’s back.

A local court in northern China’s Gansu province deemed Gansu Datang International Liancheng Power Generation Co. to be “seriously insolvent” after it failed to pay creditors, according to a stock exchange filing (link in Chinese) from its parent company on Thursday.

The unit of Datang International Power Generation Co. accrued debts of around 1.77 billion yuan, the filing showed. With the company’s assets worth around 594 million yuan, its debt to liability ratio stands at a whopping 298.5%. Bankruptcy and liquidation proceedings will soon commence, while the company’s chairman Ying Xuejun has been removed from his post.

Gansu Datang’s exact circumstances remain unclear, but an industry insider told Caixin that China’s overcapacity in power production has driven down generation hours for all plants, reducing their income. “Immense pressure in northwestern provinces means that coal plants are feeling the decrease in generation hours more acutely,” he said.

Efforts to restrict the supply of coal are also reducing supplies and therefore driving up costs for coal power producers, the insider said.

Stricter regulations and emission standards have also caused coal power companies financial problems. In December 2018 another Datang subsidiary, Datang Baoding Huayuan Thermal Power, was declared bankrupt after it was forced to shut down its two 125 megawatt coal plants, losing its sources of operating income in the process.

Related: Three-Quarters of China’s Coal Plants Fitted With Emission-Cutting Techhttps://www.caixinglobal.com/2019-02-13/three-quarters-of-chinas-coal-plants-fitted-with-emission-cutting-tech-101379222.html

Contact reporter David Kirton (davidkirton@caixin.com)


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By Cheng Siwei and Han Wei / Jun 27, 2019 03:07 AM / Economy

Photo: VCG

Photo: VCG

Audits of 52 local governments’ debt have found errors in data reporting and holes in debt relief plans, China’s national auditor said Wednesday.

In a report to national legislators, the National Audit Office (NAO) said a 2018 inspection of local budget implementation found 31 local authorities either inflating or deflating debt totals, while 11 localities lacked proper plans to deal with outstanding debts totaling 17 billion yuan ($2.47 billion).

The inspection covered 18 provincial governments, 17 cities and 17 counties, the NAO said.

The central government has ordered local officials to work out plans to dispose of their borrowings from before July 2017 in five to 10 years — through debt swaps or restructuring measures — as part of the national campaign to defuse debt risks.

The auditor suggested further enhancing supervision of local government spending and setting up a national debt risk monitoring mechanism.

Related: Editorial: Tighten the Cord on Local Debt


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By Qu Hui and Han Wei / Jun 25, 2019 03:49 AM / Economy

Photo: VCG

Photo: VCG

The government of Shenzhen, China’s southern technology hub, auctioned off five residential land parcels Monday for a total of more than 22.4 billion yuan ($3.2 billion), setting a single-day sales record.

The auction attracted 71 developers, which put up a record 98.7 billion yuan in deposits to participate. The response was another signal that the Shenzhen housing market is heating up after a two-year slowdown as regulators slammed on the brakes. Official data showed that new home sales rose 79.6% year-on-year in May, with average prices up 1.24%.

Residential land has been scarce in the city of 12.53 million, where the booming tech sector continues attracting migrants. Between 2015 and 2018, the city government added only 18 plots to the market for residential development, according to data from Midland Realty. The Monday sale was the first auction of land for residential development so far this year.

The parcels, with a combined area of 170,273 square meters (1.8 million square feet), sold at prices 45% higher than the minimum bids. Guangdong government-backed Yuexiu Property Co., Logan Property Holdings, China Overseas Land, PowerChina Real Estate Group and a unit of Ping An Insurance Group’s venture capital arm were the winning bidders.

Related: Jump in One Lower-Tier City's Land Prices Hints at Sharp Real Estate Recovery


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By Cheng Siwei and Denise Jia / Jun 21, 2019 04:32 AM / Economy

Photo: Bloomberg

Photo: Bloomberg

China’s relaxed rules on special-purpose bonds for infrastructure projects don’t apply to riskier public-private partnership (PPP) projects, a person close to the Ministry of Finance told Caixin.

That clarification may dash optimistic speculation sparked by a recent document issued by China’s central government allowing local governments to use proceeds from special-purpose bonds for certain infrastructure investments.

According to the document issued Monday by the cabinet, local governments can now use special-purpose bonds to raise project capital for major and strategic investments in highways, railways and electricity and gas projects.

The document requires that such infrastructure projects be physical projects funded directly by local governments. Those are not the same as PPP projects, which are often implemented through a special-purpose vehicle (SPV), the person said.

To prevent the new policy from being abused, the Ministry of Finance will launch a platform for the disclosure of local government debt information in the next couple of months, the person close to the ministry said. All projects eligible for special-purpose bonds will be published on the platform, the person said.

The central government has been tightening PPP regulations since 2017 as Beijing has grown increasingly concerned that some local governments are using PPP programs as disguised channels for raising debt.


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By Zhao Runhua / Jun 19, 2019 11:12 AM / Economy

Photo: VCG

Photo: VCG

China's central bank is selling more yuan-denominated bills in Hong Kong, which should absorb yuan funds in the offshore market and so make it harder to short the struggling currency. The yuan, also called the renminbi, has fallen sharply against the dollar since April and is now hovering close to the key psychological barrier of 7 yuan per dollar.

The People’s Bank of China (PBOC) said Wednesday it will sell 30 billion yuan ($4.35 billion) worth of bills in Hong Kong on June 26, through 20 billion yuan of one-month bills and 10 billion yuan of six-month bills. The sale would be the biggest since PBOC issued the first bills of this kind in Hong Kong in November. The central bank has performed similar issuances three times before, to a total amount of 60 billion yuan.

Related: Central Bank Steps Up Measures to Defend Yuan

Contact reporter Zhao Runhua (runhuazhao@caixin.com)


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