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ECONOMY

By Fran Wang / Jan 18, 2019 11:29 AM / Economy

Photo: VCG

Photo: VCG

The Chinese government announced Friday that it has revised the country’s economic growth rate in 2017 to 6.8%, down from the previously published 6.9%.

The change was due to a reduction of 636.7 billion yuan ($94.0 billion) from the calculation of gross domestic product (GDP) for 2017, as more comprehensive data were obtained from various departments that only became available after the preliminary economic growth figures were released a year ago, according to a statement by the National Bureau of Statistics.

The decrease in 2017 GDP was mainly accounted for by smaller value-added figures from sectors including agriculture, forestry, husbandry, aquaculture, and manufacturing, a table attached to the statement showed.

The NBS routinely revises the GDP figures of the year before last in January, after publishing the preliminary data in January of the previous year.

Related: China 2017 GDP Growth Target at 25-Year Low

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ECONOMY

By Bloomberg / Jan 18, 2019 10:21 AM / Economy

Foreign investors are increasing their presence in China’s commercial real estate market, taking advantage of the deleveraging drive that’s squeezing the nation’s companies.

Overseas firms may be set to sustain a resurgence that last year sent their purchases to a record $9 billion nationwide and accounted for just over half of all sales in Shanghai. Blackstone Group LP and Singaporean developer CapitaLand are among those leading the charge.

The upswing comes just as some of China’s biggest private conglomerates -- like embattled HNA Group -- are unwinding overseas property buying binges. In some cases, they’re also selling domestic real estate.

“For years, every time a foreign investor prepared a bid, they’d ask me -- ‘how many domestic bidders do you have now?’ When I said ‘several,’ they were very upset,” said Colliers International Group Inc.’s’ head of China capital markets Betty Wang. “It totally reversed course last year.”

Offshore buyers are aided by a weak yuan that makes purchases cheaper and the tight financial conditions that mean many Chinese companies are more likely to be sellers than purchasers. The serious financial firepower on tap for foreigners includes the $15.6 billion raised for Asian property private equity funds last year, according to market research firm Preqin.

“China’s deleveraging drive pushed borrowing costs higher and damped domestic investor demand,” said Sam Xie, CBRE Group’s head of research in China. Foreign buyers have “an edge in financing,” he said.

Overseas firms bought 31% of commercial property nationwide last year, based on CBRE data for deals of $10 million and above. They may account for as much as 40% of sales in Shanghai and Beijing combined in 2019, according to Colliers. The constraints holding back local firms include rule changes in late 2017 that made it harder for property private equity funds to raise money.

CapitaLand and Singapore sovereign wealth fund GIC Pte splashed out $1.8 billion on Shanghai’s tallest twin towers in the biggest purchase of 2018. Yields have been ticking up in the city’s central business district. Blackstone in December bought an office and retail complex in the city for $1.25 billion.

While the bulk of purchases by foreign investors are in Beijing and Shanghai, cities such as Hangzhou, Nanjing and Wuhan are attracting interest on the prospect of rising yields, according to CBRE’s Xie. Hot market segments include rental apartments and logistics, he said.

Commercial property investment by foreign firms surged 62 percent to 78 billion yuan ($9.1 billion) in 2018, the largest amount in data stretching back to 2005, CBRE said.

“While foreign investors have spent a lot, they haven’t used up their ammunition,” said Francis Li, Cushman & Wakefield’s head of capital markets in Greater China. “Foreign capital will be a sweeping force in China commercial property investments this year.”

Related: China Doubles Foreign Investment Limit in Opening-Up Bid

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By Charlotte Yang / Jan 17, 2019 11:56 AM / Economy

Foreign-exchange sales by China’s central bank hit a four-month low in December, government figures show, indicating easing pressure on the yuan to weaken.

The People’s Bank of China (PBOC) sold 4.0 billion yuan ($590 million) worth of foreign currency to banks last month, the lowest figure since August and down from November’s 57.1 billion yuan, according to Caixin’s calculations based on official data released Wednesday.

The sale left the central bank’s outstanding foreign-exchange purchase position at 21.256 trillion yuan, down from 21.260 trillion yuan in November.

A decline in the total indicates pressure on the yuan to weaken as companies and individuals preferred to hold foreign currency rather than the yuan, or to move assets overseas, which increases capital outflows. Therefore, a smaller fall suggests the demand for foreign currency was less strong.

December was the fifth month in a row the PBOC has sold its foreign-currency holdings.

Related: China Sets up New Forex Reserve Investment Arm

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By Wu Gang / Jan 17, 2019 01:52 AM / Economy

Photo: Xinhua

Photo: Xinhua

Chinese President Xi Jinping on Wednesday inspected the Xiong’an New Area, a zone established in April 2017 to encourage the development of northern China.

It was the second visit since February 2017, when the president went to Xin’an, Hebei to prepare the creation of Xiong’an, according to the official Xinhua News Agency.

The latest visit followed shortly after the Chinese government’s approval of a comprehensive blueprint for the new zone, with construction plans going out as far as 2035.

The central government has said it will build Xiong’an as a new place to catalyze the development of major North China cities Beijing, Tianjin and Hebei, and it will also ease some of Beijing’s metropolitan burdens.

The birth of the Xiong’an, slightly more than 100 kilometers south of Beijing in Hebei province, is said to be comparable with the creation of earlier economic zones in Shenzhen and Shanghai Pudong, which contributed to China’s opening-up to the outside world and transformation into the world’s second-largest economy.

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By Bloomberg / Jan 16, 2019 04:13 PM / Economy

Photo: VCG

Photo: VCG

Chinese officials are getting creative in their battle to support the economy as a slowdown weighs on consumers and threatens to dent employment.

Guangdong, which borders Hong Kong and is the largest regional economy, is taking advantage of its famed cuisine to train Cantonese chefs and create 300,000 related jobs by 2022. That’s part of a 20.8 billion yuan ($3.1 billion) provincial package to promote employment, which includes cutting social security contribution rates, subsidizing small businesses and offering seed funding for start-ups.

In the north, the capital Beijing is urging shops and malls to stay open later at night, and the industrial Hebei province is proposing giving workers 2.5-day weekends so they have more time to spend.

The central government -- as well as providing tax cuts -- is getting creative too, promoting water sports, skiing, outdoor activities and marathons with the goal of boosting annual sports consumption to 1.5 trillion yuan by 2020 in a two-year blueprint released this week.

Chinese policy makers have banked on rising consumption and solid employment in previous downturns to cushion the blow as old smokestack industries slowed. This time around, retail sales growth and signs of stress in the labor market are showing up, threatening a broader slowdown. Global companies from Apple Inc. to Volkswagen AG are among those feeling the effect.

Another possible indicator of the slowdown is that more migrant workers are going back to their home towns for the new year break well ahead of the actual holiday. The human resources ministry confirmed more workers went home in December 2018 compared to the same time in 2017, and ascribed this to better opportunities at home, personal reasons and also effects from their employers’ operations.

Related: China's Small and Midsize Businesses Continue to Struggle Despite Support
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By Charlotte Yang / Jan 15, 2019 04:22 PM / Economy

Former TV show host Liao Yingqiang. Photo: VCG

Former TV show host Liao Yingqiang. Photo: VCG

Who breaks laws on China’s stock markets, and what were their crimes?

Thanks to a new report, we know.

Chinese authorities often publish roundups of legal cases they consider “typical,” to alert regulators to what should be on their radars. And now we’re seeing such a report on the country’s stock markets.

The following are three of the most common types of violations on China’s stock market in 2018, according to a list of 20 by the China Securities Regulatory Commission (CSRC) – as well as Caixin’s coverage of high-profile cases for each.

1. Illegal information disclosure

Example: Scandal-ridden vaccine maker Changsheng Bio-Technology

CSRC said the infamous vaccine maker, which was found to have produced substandard vaccines and falsified production data, violated information disclosure rules.

The watchdog ordered the company to pay fines and to delist from the stock market. The watchdog also said it has “zero tolerance” towards market parties that “seriously damage public interests” and will quickly investigate and deal with such cases going forward.

2. Market manipulation

Example: Former TV commentator Liao Yingqiang

Liao Yingqiang, formerly host of a popular TV show on finance, engaged in market manipulation by buying stocks before recommending them to his followers on social media, the watchdog said.

In April 2018, the CSRC confiscated Liao’s gains and handed him a fine of 86 million yuan ($13 million).

3. Insider trading

Example: Wang Peng’s insider trading worth 878 million yuan

From 2009 to 2011, Wang Peng, the then-bond trader at China Asset Management, used his post to learn undisclosed information and then engaged in securities trading of 375 stocks with his relatives. His cumulative trading transactions amounted to 878 million yuan, with a personal gain of 17 million yuan.

The CSRC said that such “rat trading” 老鼠仓 (what is known as “front-running” in the U.S.) seriously undermines the trust of the industry and infringes on investor interests.


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By Lin Jinbing / Jan 15, 2019 01:08 PM / Economy

China’s new yuan loans reached 16.17 trillion yuan ($2.39 trillion) last year, up 2.64 trillion yuan from 2017, Zhu Hexin, a deputy governor of the central bank, said Tuesday at a press conference, citing preliminary data. 

The increase was three times as large as that in 2017, he said.

As of the end of last year, China’s outstanding loans grew 13.5% year-on-year, up from a 12.7% rise a year earlier, according to Zhu.

Related: China’s Not Too Rich for World Bank Loans, Report Says

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By Han Wei / Jan 15, 2019 04:32 AM / Economy

Photo: VCG

Photo: VCG

Foreign direct investment in China reached an all-time high in 2018, reflecting overseas investors’ growing confidence in China, according to the Ministry of Commerce.

China received 885.61 billion yuan ($131 billion) of foreign investment in its non-financial sectors last year, up 0.9% from the previous year, the Commerce Ministry said Monday. A total of 60,533 foreign-funded enterprises were established last year, up 69.8% year-on-year.

In December alone, foreign direct investment in China grew nearly 25% year-on-year to total 92.3 billion yuan, the ministry said.

Foreign investments in China’s manufacturing sector, and business in central and western regions are growing at a faster pace, led by investors from Singapore, Japan, South Korea, Britain and Germany, the ministry said. Large-scale projects ― those with $50 million of investment or more ― rose 23% year-on-year.

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By Wei Yiyang and Han Wei / Jan 14, 2019 12:28 PM / Economy

Photo: VCG

Photo: VCG

Rivals or pals?

That’s the big question for the Hong Kong stock exchange these days, as it moves ever closer to its mainland Chinese counterparts in Shanghai and Shenzhen. Twenty-one years after Hong Kong’s return to China, the stock market of the former British colony has developed an intricate, symbiotic relationship with its mainland counterparts — they are increasingly interconnected while competing with each other.

Although officials including HKEx chief Charles Li have repeatedly said that cooperation should always outweigh competition, clashes between the Hong Kong and mainland bourses have become more visible as competition grows more heated for some of the world’s hottest Chinese companies.

Regulators on both sides have stepped up communication and coordination on market supervision. Just last month, the Hong Kong Securities and Futures Commission said it would enhance the exchange of information with the CSRC under the stock-connect programs to identify mainland investors behind transactions as a way of combating cross-boundary market misconduct.

To read more in-depth about this complex developing relationship in Caixin’s latest cover story, click here


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By Fran Wang / Jan 14, 2019 10:29 AM / Economy

China’s trade surplus shrank in 2018 to the lowest level in five years, according to data released Monday from the General Administration of Customs.

Imports soared 15.8% to $2.14 trillion, while exports rose 9.9% to $2.48 trillion. This tamped down the trade surplus by 16.2% to $351.76 billion, the administration said.

Related: Mnuchin Says China's Liu Likely in U.S. Soon for Trade Talks

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By Han Wei / Jan 12, 2019 01:58 AM / Economy

Photo: VCG

Photo: VCG

Local Chinese governments will face mounting pressure to repay foreign debts as a large volume of bonds issued abroad by their financing vehicles will come due this year, the international rating firm Standard & Poor's said in a report.

More than $10 billion of offshore bonds issued by local governments’ financing vehicles to fund local investment are due this year, about one-third of their outstanding overseas debts, S&P reported. Despite the rising repayment pressure, the report found that no particular default risk has emerged regarding the bonds.

Local government units rushed to issue offshore bonds in 2016 after the central government eased requirements on such borrowing. Most of the bonds were set to mature in three years, according to the report.

Mounting repayments will test the borrowers’ liquidity and financial capacity. As some issuers may sell new bonds to raise funds for repayments, bond issuance costs in overseas markets are likely to rise, according to the report.

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By Liu Jiefei / Jan 10, 2019 10:05 AM / Economy

China's consumer price index (CPI) rose 1.9% year-on-year in December, according to data released Thursday by the National Bureau of Statistics. The reading hasn't been this low since June.

The producer price index (PPI) rose 0.9% year-on-year in December, marking the slowest pace since September 2016.

For the whole of 2018, CPI and PPI grew 2.1% and 3.5%, respectively.

Related: Charts of the Day: Consumer, Factory Inflation Both Slow

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By Han Wei / Jan 10, 2019 02:15 AM / Economy

Photo: VCG

Photo: VCG

China’s State Council, the cabinet, announced new measures Wednesday to further cut taxes for small enterprises in a bid to support economic growth.

The measures, including tax-rate cuts, higher tax thresholds and broader preferential policies, will save businesses about 200 billion yuan ($29 billion) each year, according to a statement (link in Chinese) released Wednesday after a cabinet meeting chaired by Premier Li Keqiang.

The new measures took effect as of Jan. 1 and will last three years, according to the statement.

Chinese authorities since last year have rolled out an array of policies to bolster a cooling economy facing stiffening headwinds. Last week, the central bank announced lower requirements on the amount of money lenders must hold as reserves.

The cabinet also pledged to accelerate local government bond issuance to support infrastructure projects and encourage financial institutions to support the real economy. China has planned to issue 1.39 trillion yuan of special-purpose bonds this year to fund local infrastructure projects.

Related: Caixin View: Reserve-Ratio Cut Has More Targets Than Lending

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By Han Wei / Jan 08, 2019 01:58 AM / Economy

Photo: VCG

Photo: VCG

The United States and China are likely to reach a good settlement over immediate trade issues, said U.S. Secretary of Commerce Wilbur Ross, as the two countries open talks on settling a damaging trade war.

“I think there’s a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues,” Ross said Monday in an interview with the American cable TV network CNBC.

But he said agreement on structural trade issues would be harder to reach.

China and U.S. officials started negotiations Monday in the first face-to-face meetings since Presidents Donald Trump and Xi Jinping agreed in early December on a 90-day truce. Key issues to be discussed include U.S. demands over trade imbalances, market access, and protection of intellectual property.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading a U.S. working team for two days of meetings in Beijing. Ross said the talks are at an “appropriate level” and the U.S. delegation is large because of the number of issues to be addressed.

China’s foreign ministry said Monday that both sides are expressing a will to work together to push forward a consensus.

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By Han Wei / Jan 05, 2019 03:04 AM / Economy

Photo: VCG

Photo: VCG

Growth of China’s economy will further slow to around 6.3% this year, dragged down by cooling exports and related manufacturing investment, according to a research report by the Bank of Communication (BoCom). Researchers estimated China’s growth in 2018 at 6.6%, down from 6.9% in 2017.

Infrastructure investment is expected to rebound in 2019 backed by government support, but it will hardly offset slowdowns in the property market and manufacturing sector, the report said.

BoCom researchers found that the Chinese economy will face greater downward pressure in the first half but will pick up in the second half as governments’ pro-growth policies take effect.

Possible easing of trade tensions with the U.S., supportive policies and positive effects of previous policies to cut overcapacity and financial leverage are expected to benefit the economy in 2019, the bank said.

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By Leng Cheng / Jan 04, 2019 06:13 PM / Economy

China’s central bank announced Friday that it will cut the amount of money that banks have to hold in reserve, releasing a net 800 billion yuan ($116.5 billion) into the financial system to ensure an ample supply of cash ahead of the Spring Festival holidays.

The People’s Bank of China (PBOC) plans to cut the reserve requirement ratio (RRR) twice this month, once on Jan. 15 and once on Jan. 25, for a total reduction of 100 basis points.

"The cut should be seen as a targeted adjustment, rather than flooding the financial system," the PBOC said in a separate explanatory filing that emphasized it was not altering the "moderate stance" of China’s monetary policy.

The central bank’s announcement came just hours after Premier Li Keqiang promised to cut the RRR and lower taxes and fees to help the country’s small and private firms.


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By Teng Jing Xuan / Jan 04, 2019 05:49 PM / Economy

Photo: VCG

Photo: VCG

At least nine Chinese airlines have said they’ll scrap fuel surcharges for domestic flights starting Jan. 5, People’s Daily reported Friday.

The airlines, which include major industry players like Hainan Airlines and XiamenAir, are making the move in response to international oil prices that been falling since November, People’s Daily said, citing a civil aviation analyst.

Chinese airlines last began scrapping fuel surcharges for domestic flights in 2015, when oil prices hit multiyear lows. But the surcharges were reinstated in mid-2018 during a surge in fuel prices.

Related: Aircraft-Maker Hires Industry Veteran to Boost Sales of China-Made Jet

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By Bloomberg / Jan 03, 2019 09:00 AM / Economy

People look at the view from the observation deck at the Shanghai World Financial Center as the Jin Mao Tower

People look at the view from the observation deck at the Shanghai World Financial Center as the Jin Mao Tower

With all eyes focused on crucial China-U.S. trade talks, it’s easy to forget that the performance of the world’s second-biggest economy will also be determined by other key drivers this year.

That point was hammered home Wednesday when the Caixin Manufacturing PMI for December slid to 49.7, the lowest since May 2017. While external demand was weighed by trade frictions, there was an even more marked weakening in domestic demand, Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, said in the Caixin report.

The following are five key areas beyond the trade war to watch in 2019:

Property

How China tweaks property policies is crucial to when its economy bottoms, says Lu Ting, chief China economist at Nomura International Ltd. in Hong Kong. Because policies such as restrictions on home purchases, sales and prices are entrenched, the risk is measures to support the sector are eased too slowly, he says.

“Beijing will eventually ease many of the tightening measures in large cities during or after spring 2019,” says Lu. “It is only after this that growth can rebound.”

Consumption

With retails sales growth weakening in recent months, former Goldman Sachs Group Inc. chief economist Jim O’Neill says how consumer spending performs this year is crucial. For much of this decade, consumption has become more important relative to other sectors of the economy, a key thing for China’s and global rebalancing, said O’Neill.

“For all China’s challenges, they all pale in significance compared to the importance of their consumer,” he says. “Any future stimulus should be aimed at supporting the Chinese consumer.”

Reform

The single thing to watch is the level of conviction put into reforms at a time of complicated geopolitics and when the economy needs support from stimulus, said Karine Hirn, a partner at East Capital in Hong Kong.

“So far the government has been resolute, and this is the reason why some headline numbers have been quite weak and the markets have underperformed,” she said. “How long will it last? We all know that big problems require big solutions, and the later solutions are put in place the bigger the problems get.”

‘Competitive Neutrality’

That’s the new buzz phrase in China. The extent to which policy makers take concrete steps to flesh out the idea of ensuring a level playing field between state-owned and private firms is pivotal this year, says Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. If there’s progress in areas including regulation and access to funding, it will boost business confidence and also ease tensions with trading partners, he said.

Growth Trajectory

The most important thing to watch is the trajectory of growth itself, says Peking University professor Michael Pettis. Unless expansion falls below the psychologically important six percent line, China can’t rein in debt, says Pettis, the former head of emerging markets at Bear Stearns Cos. If by the end of 2019, growth breaks below 6 percent even for a quarter, policy makers will likely have the upper hand in gaining control of debt, he says.

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By Han Wei / Jan 01, 2019 12:35 AM / Economy

Photo: Xinhua

Photo: Xinhua

China will never slow its pace of reform and will only open its doors even wider, President Xi Jinping said Monday evening in his New Year address.

In comments broadcast live by all state media, Xi said China launched more than 100 major reform measures in 2018 and unveiled a comprehensive and systematic overhaul of both party and state institutions.

“The world has seen China's accelerating reform and opening up, and its determination to carry it forward,” Xi said.

The year 2018 marked the 40th anniversary of China’s landmark economic reforms, while the country has faced mounting pressures from economic cooling and a trade war with the United States. Xi and other officials have repeatedly pledged further reform efforts to counter the continued uncertainties.

In his New Year speech, Xi also warned of challenges ahead.

“Looking at the world, we are faced with huge changes, changes not seen in 100 years,” he said.

Xi reaffirmed further tax and fee cuts to alleviate business pressures, measures to encourage innovation and efforts to fight against poverty in rural areas.

“No matter how the international situation changes, China's confidence and determination to safeguard national sovereignty and security will not change. China's sincerity and goodwill for maintaining world peace and promoting common development will not change,” the president said.

Related: 40th Anniversary of Reform and Opening

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By Teng Jing Xuan / Dec 28, 2018 10:40 AM / Economy

China’s Commerce Ministry says the country plans to hold trade talks with U.S. representatives in January.

"Despite the American side currently having Christmas holidays," U.S. and China trade teams have "maintained close communication," ministry spokesperson Gao Feng said.

"The two sides have indeed made concrete arrangements to meet face-to-face" next month, Gao said, without confirming media reports that U.S. representatives will visit China on Jan. 7.

Full coverage of the U.S.-China trade war

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