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ECONOMY

By Bloomberg / Jan 27, 2020 01:57 PM / Economy

Oil tumbled on fears China’s deadly coronavirus will crimp demand, prompting Saudi Arabia to say it was closely monitoring the situation.

Futures in London and New York plunged more than 3% as the death toll and the number of infections rose, while officials extended the Lunar New Year holiday to help stem the spread of the outbreak. Goldman Sachs Group predicted that global oil demand may take a hit, but Saudi Arabia said it believes the crisis so far will have a “very limited impact” on consumption.

Saudi Energy Minister Prince Abdulaziz bin Salman said the world’s largest oil exporter was closely monitoring the situation both for its impact on the Chinese economy and the oil market fundamentals. Yet, he said that the same “extreme pessimism” that’s afflicting the market also occurred in 2003 during SARS, “though it did not cause a significant reduction in oil demand”.

“The current impact on global markets, including oil and other commodities, is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” the prince said in a statement.

Global oil demand may slip by 260,000 barrels a day this year and could shave almost $3 from the price of a barrel of crude, Goldman Sachs said last week, using the 2003 SARS epidemic as a guide.

China extended the Lunar New Year holiday until Feb. 2 from Jan. 30. There are more than 2,700 confirmed cases of infection in China so far and Canada confirmed its first case while the U.S. announced a fifth, as the virus spreads to at least 15 countries and territories.

“The ultimate worst case scenario is getting priced into oil,” said Stephen Innes, chief market strategist at AxiCorp. “The move is exaggerated because there is lot of oil in the market at the moment. Fear is driving markets.”


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ECONOMY

By Zhou Tailai and Denise Jia / Jan 23, 2020 05:58 AM / Economy

Photo: Bloomberg

Photo: Bloomberg

China’s Agriculture Ministry issued biosafety certificates for three new genetically modified (GM) crops, the first batch of such crops to win safety clearance in 10 years.

The three are an insect-resistant and herbicide-tolerant corn developed by Beijing Dabeinong Biotechnology Co. Ltd., another corn developed by Hangzhou Ruifeng Biotechnology Ltd., and a herbicide-tolerant soybean developed by Shanghai Jiao Tong University.

The safety certificates are valid for five years. The approval means the GM crops have been found safe to use, but they still need to get administrative clearance to start production and commercialization.

China granted biosafety certificates to its first GM corn varieties and two GM rice varieties in 2009, but it has never moved to commercialize the crops.

The commercialization of the first GM corn was hindered by the lack of a GM variety verification method, said Chen Rumei, a researcher with the Biotechnology Research Institute of the Chinese Academy of Agricultural Sciences and a member of the team that developed the first GM corn. The two GM rice varieties have also been caught up in the verification process for similar reasons.

A person close to the Agriculture Ministry told Caixin that the ministry is studying a verification method for GM crops, but it’s unknown how long it will take.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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By Ding Yi / Jan 15, 2020 04:53 PM / Economy

When it comes to the internet, foreign investors just can’t seem to get enough of China.

The total value of listed Chinese internet firms hit a record 11.6 trillion yuan ($1.7 trillion) in last year’s fourth quarter, up 18.3% from the previous quarter, according to a report by the China Academy of Information and Communications Technology (CAICT).

Online titans Alibaba and Tencent combined accounted for more than 60% of the value of those firms, with market caps of nearly 4 trillion yuan and 3.21 trillion yuan, respectively. Meituan Dianping came in at a distant third with 530 billion yuan, the report said.

During the quarter, Chinese names accounted for nine of the world’s 30 largest listed internet companies, the CAICT said, without being more specific. Of the top 30, 18 came from the U.S., while Japan, South Korea and Brazil each had one.

Operating revenue of China’s internet firms grew 22.4% to 1.08 trillion yuan in the first 11 months of 2019, according to a report issued on the last day of 2019 by China’s telecoms regulator. The CAICT is affiliated to the regulator, which publishes revenue data for the country’s internet sector every month.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Chinese Internet Companies’ Revenue Topped 1 Trillion Yuan in 2019


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By Lu Yutong / Jan 14, 2020 01:40 PM / Economy

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China has vowed to ban the addition of steel capacity this year in a bid to tackle oversupply, according to state news service Xinhua.

The China Iron and Steel Association (CISA), an industrial group that describes itself as a “bridge between government and enterprise,” said Monday that the country’s steel industry will not allow the addition of new steel capacity this year.

That would help consolidate the achievements of supply-side structural reforms, the group said. Reforms that reduced around 150 million tons of excess capacity between 2016 to 2018.

The ban came after a forecast by CISA found slowing demand growth would see it fail to keep up with supply this year.

https://www.caixinglobal.com/2020-01-13/specter-of-oversupply-returns-with-robust-steel-output-forecast-for-2020-101503621.html

China’s total crude steel output for 2020 would grow at a similar rate to last year’s 6%, but growth in demand should slow sharply to 2% amid a broader economic downturn, CISA said at its annual meeting on Saturday.

A slowdown in real estate construction growth would be sharp enough to offset steady growth in demand from domestic infrastructure investment and the home appliance industry, the group predicts.

It has also pledged to remove outdated technology to increase efficiency.

The World Steel Association has forecast that Chinese steel demand will grow by a little as 1% this year. Domestic steel output was around 980 million tons in 2019, while demand grew at similar rate to 875 million tons for the year, the group said.

Contact reporter Lu Yutong (yutonglu@caixin.com)

Related: Specter of Oversupply Returns With Robust Steel Output Forecast for 2020


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By Wu Yujian and Tang Ziyi / Jan 13, 2020 03:48 PM / Economy

Returns on China’s national reserve to cover retiree benefits picked up in 2019 as government officials geared up to seek capital to plug potential pension shortfalls as the country’s population ages.

Last year’s rate of return of 15.5% was partly thanks to a recovery in the overall capital markets, Chen Wenhui, a vice chairman of the National Council for Social Security Fund (NCSSF), said at a forum in Beijing on Saturday. That figure was much higher than the average annual return of 8.15% since the reserve was set up in 2000, and far stronger than a 2.3% loss in 2018 and a gain of 9.7% in 2017.

In China, local governments withhold a portion of workers’ earnings and employer contributions to pay out pension benefits for existing retirees.

The central government set up the NCSSF to maintain a strategic reserve to supplement pensions and other social security spending as China’s population rapidly grays. NCSSF operators are allowed to make investments in domestic and overseas stocks and bonds and asset-backed securities, as well as earn interest on bank deposits.

Read the full story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

Related: China Transfers $157 Billion in SOE Equity to Social Security Fund


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By Zeng Linke and Lu Yutong / Jan 13, 2020 03:39 PM / Economy

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China’s steel output in 2020 is expected to remain robust following strong growth last year, but lower demand from the nation’s slowing economy is sparking concerns of oversupply that could put pressure on prices.

Total output for steel in China last year was around 980 million tons, up 6% from 2018, while domestic demand rose relatively in lockstep at the same growth rate.

But in 2019 the growth rate for steel production is expected to remain at similar levels, even as growth in demand is expected to slow sharply to 2% to about 890 million tons, a general assembly of the China Iron and Steel Association said on Saturday.

The World Steel Association predicts China’s domestic demand will grow by an even lower 1% in 2020 as the nation’s economy continues to cool.

Read the full story on Caixin Global later.

Related: Chinese Steel Production Expected to Surge 6.5% This Year

Contact reporter Yutong Lu (yutonglu@caixin.com)


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By Guo Yingzhe and Peng Qinqin / Jan 06, 2020 06:16 PM / Economy

The People’s Bank of China (PBOC) vowed to keep monetary policy; prudent, flexible and moderate in a statement posted Sunday on its website outlining its policy agenda for 2020.

The PBOC added that it will take action to defuse financial risks, and improve its macroprudentia regulations. The statement also said it will strengthen countercyclical adjustment to maintain reasonably abundant liquidity, and to promote credit growth in line with economic development.

The statement echoed the PBOC’s earlier decision to cut required reserve ratios for commercial lenders by 50 basis points, which is estimated to unleash about 800 billion yuan ($115 billion) of liquidity into the financial system. The policy took effect on Monday.

Economists from Nomura International (Hong Kong) Ltd. said the cut signals Beijing’s heightened concerns of economic growth headwinds, credit contraction pressure in some places, and an upcoming liquidity shortage ahead of and during the Lunar New Year holiday.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: More Cuts to Banks’ Reserve Requirement Under Consideration, Premier Says


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By Lu Yutong / Jan 06, 2020 03:27 PM / Economy

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A northeast Chinese city has banned new homes from going back on the market for more than three-and-a-half years.

Tangshan, in Hebei province, implemented a citywide 42-month selling restriction starting Saturday. It applies to newly built housing units purchased after Jan. 4 and is the latest local government effort to rein in property speculation, after Beijing gave localities more power to make their own real estate policies.

The Tangshan municipal government has scrambled to keep a lid on prices after the city’s housing market became one of China’s fastest growing in the second half of 2019. Prices went up 1.9% in November, the highest rise among 70 cities monitored by the National Bureau of Statistics.

The city’s move could help curb speculation, make purchase behavior more rational and regulate the property market, said Yan Yuejin, a researcher with Shanghai-based property research institute E-house China R&D Institute.

According to state-run Economic Daily, China's property sector raked in 5.98 trillion yuan ($858 billion) in 2018, accounting for 6.65% of the country’s total GDP.

Read the full story on Caixin Global later today.

Contact reporter Yutong Lu (yutonglu@caixin.com)


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By Ding Yi / Jan 06, 2020 12:29 PM / Economy

The Chinese government has granted a 5G trial license to state-owned cable TV operator China Broadcasting Network (CBN) in a bid to accelerate the nationwide deployment of the next-generation wireless technology.

The broadcaster will be allowed to run trials in the 4.9 GHz frequency range in 16 cities including Beijing, the Ministry of Industry and Information Technology (MIIT) said Friday in a WeChat post.

The license will boost the nationwide construction of CBN’s 5G networks and make it a strong alternative to the “big three” state-owned wireless carriers — China Mobile, China Unicom, and China Telecom, the ministry added.

Mobile communications industry body GSMA expects China to become one of the world’s biggest 5G markets by 2025, when it could be home to 460 million 5G connections, or 28% of the country’s predicted total.

Contact reporter Ding Yi (yiding@caixin.com)

Related: China Mobile Talks 5G Tie-Up With National Cable TV Operator


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By Lu Yutong / Jan 03, 2020 03:13 PM / Economy

China’s electricity consumption, a useful alternative indicator of the country’s economic development, grew at a slower pace in the first 11 months of last year.

That’s stirred concerns about the real state of China’s economy.

But it’s not all bad news. Growth in power output from cleaner energy sources such as hydropower and wind outpaced more polluting ones like coal and natural gas, perhaps reflecting efforts to curb environmental pollution.

China consumed a record 6,514 terawatt hours (TWh) of electricity for the year through November, up 4.5% on the same period in 2018. But the growth rate slowed markedly from 8.5% in the first 11 months of 2018.

The growth rate for power consumption by industry dropped by more than half.

According to official figures, China’s GDP growth slowed to 6.2% in the first three quarters of 2019, down from 6.7% in the same period the previous year.

Read the full story later today on Caixin Global.

Contact reporter Lu Yutong (yutonglu@caixin.com)


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By Wang Jing and Guo Yingzhe / Jan 03, 2020 01:01 PM / Economy

Local government land sales are expected to have hit a record high in 2019 as officials struggled to fill budget gaps left by tax and fee cuts that have bitten into their fiscal revenue.

Land sales revenue in 50 major Chinese cities last year grew to a record 4.2 trillion yuan ($601.6 billion) as of Dec. 26, marking a jump of 17.6% from the same period in 2018, according to data provided by a research center of Hong Kong-based Centaline Property Agency Ltd.

“It is the first time that the land sales revenue of the 50 cities surpassed 4 trillion yuan,” said Zhang Dawei, chief analyst at the Centaline research center.

The increased land sales come after Beijing imposed tax and fee cuts expected to be worth more than 2 trillion yuan in 2019 in an effort to shore up flagging economic growth. In the wake of the cuts, however, some local governments found it difficult to make ends meet because they had to boost investment spending as a stimulus at the same time. In 2019, local governments as a whole were likely to collect less revenue than they had planned at the beginning of the year, Finance Minister Liu Kun said in a report last week.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: Tax Cuts Boosted Growth, but Put Pressure on Government Revenue, Finance Minister Says


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By Lu Yutong / Dec 31, 2019 01:24 PM / Economy

Figures for China’s newly launched coal freight railway raise serious questions about its effectiveness.

The Haoji Railway was designed to help solve one of China’s fundamental energy problems in 2008. Unequal energy resource distribution in the country has left some electricity poor regions craving resources, while other regions with resources have been hounded by excess capacity.

When the idea of constructing a 1,813-kilometer (1,127-mile) freight line, running from Kholbolji in the Inner Mongolia autonomous region to Ji’an, Jiangxi province came up at a government planning meeting in 2008, the plan seemed to offer a way of streamlining coal transportation costs by moving the commodity through the middle of the country. The railway was created to haul the fossil fuel from a region in northern China that at the time was home to 69.9% of domestic coal production to an inland area that didn’t produce much of its own coal.

More than 10 years and 193 billion yuan ($27.55 billion) in the making, the Haoji Railway started running on Sept. 28 to much fanfare, with the state-run China Daily reporting that the project would ensure Central China’s energy security and give an economic boost to localities along the line.

However, freight volume data from the line’s first month of operations raises the question of whether there will be enough demand to support a railway designed to haul more than 200 million tons of coal a year, or roughly 547,000 tons a day. In its first month up and running, the Haoji Railway transported 35,000 tons a day on average, according to Daqin Railway Co. Ltd., one of its shareholders.

Read the full story later today on Caixin.com

Contact reporter Lu Yutong (yutonglu@caixin.com)


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By Cheng Siwei and Tang Ziyi / Dec 27, 2019 03:16 PM / Economy

Seven Chinese local governments have announced plans to issue bonds to raise funds for infrastructure projects earlier than normal next year, following Beijing’s call to stimulate the slowing economy.

As of Thursday, local governments in seven provinces and cities across the country, including the provinces of Henan, Sichuan, Zhejiang, Hunan and Shanxi, and the cities of Shenzhen and Qingdao, had all said they will use some of next year’s special-purpose bond quotas in January, earlier than most of the usual schedules, according to Caixin calculations based on documents from government websites and China Central Depositary & Clearing Co. Ltd., one of the country's major clearing houses.

Since the beginning of this year, local governments have been allowed to make early bond issuance. Special-purpose bonds are mostly designated to raise funds for investment in infrastructure such as roads, sewers and public services. Local governments usually use these to fund mid- to long-term infrastructure projects.

The issuance of such bonds is subject to rules set out by Beijing. The seven local governments’ early issuance plans come after China’s Ministry of Finance recently granted local governments to issue special-purpose bonds totaling 1 trillion yuan ($143 billion) early next year, in a bid to speed up the sale of bonds to boost effective investment and increase domestic demand.

Read the full story on Caixin Global later today.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

Related: Local Governments Get 2020 Bond Quotas Early to Drive Investment


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By Yuan Ruiyang and Mo Yelin / Dec 26, 2019 04:13 PM / Economy

China has identified another 24 cities as pilot zones for large-scale cross-border e-commerce, in an effort to boost exports by selling through online platforms. These cities include Shijiazhuang in Hebei province, Fuzhou in Fujian province, and Yantai in Shandong province, according to a statement released Tuesday by the State Council, the country’s cabinet. China had previously designated a total of 35 cities as venues for cross-border e-commerce. The new additions will extend the pilot program to most of China’s largest cities. Pilot cities typically see their companies enjoy benefits such as tax rebates and government support to set up e-commerce platforms and international logistic services, according to the State Council. Last year, China’s cross-border e-commerce transactions grew 50% to 134.7 billion yuan ($19.3 billion), according to data from the country’s customs administration. Goods sold for export grew by 67% to 56 billion yuan. Read the full story at Caixin Global later today. Contact reporter Mo Yelin (yelinmo@caixin.com)

Related: Beijing Relaxes E-Commerce Imports to Stimulate Consumer Spending


By Guo Yingzhe and Cheng Siwei / Dec 26, 2019 01:21 PM / Economy

Tax and fee cuts have helped China’s economy this year, likely contributing 0.8 percentage points to GDP growth, China’s finance minister Liu Kun said on Wednesday.

As China’s growth has slowed, amid sluggish domestic and global demand and the U.S.-China trade war, policymakers have cut taxes and fees, boosted infrastructure investment, and eased monetary policy to stimulate the economy.

In January-to-October, the government cut taxes and fees by the value of 1.97 trillion yuan ($281.5 billion), and the cuts for the whole year are likely to surpass 2 trillion yuan, accounting for over 2% of the annual GDP, Liu said in a report delivered to lawmakers.

However, he also warned that the cuts have put pressure on government revenue. Data from the Ministry of Finance show that fiscal revenue rose 3.8% year-on-year in the first 11 months of this year, down 2.7 percentage points from the growth rate of the same period last year; and tax revenue only grew 0.5% year-on-year, down from the 9.5% growth of the same period last year.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: In Depth: Whither the Chinese Economy in 2020?


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By Guo Yingzhe / Dec 25, 2019 01:20 PM / Economy

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China’s pork imports more than doubled year-on-year in November as the world’s top pork consumer tried to make up for pig shortages and deal with soaring prices due to the deadly African swine fever.

Pork imports grew 151.2% last month to 229,707 tons compared to the same period in 2018, data from the General Administration of Customs showed on Monday. It is up from the already substantial 113.9% year-on-year growth in October and the eighth month of growth in a row. The value of pork imports also skyrocketed to $627.5 million, more than quadruple year-on-year.

In the first 11 months of the year, pork imports rose 57.9% to 1.7 million tons year-on-year, up significantly from a 0.7% decline for the same period last year, according to customs data.

Data from the agriculture ministry earlier this month show that the country’s live pig stock partially rebounded last month amid a government push to restore pig farming, rising 2% compared with October and marking the first month-on-month growth in 13 months.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: In Depth: China’s Small Pig Farmers Stuck in Financing Mire After Swine Fever


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By Guo Yingzhe / Dec 24, 2019 01:12 PM / Economy

Photo: VCG

Photo: VCG

China’s Premier Li Keqiang said Monday the government will study the possibility of further cutting banks’ reserve requirement ratios (RRRs), among other measures, to lower borrowing costs for small businesses. The announcement is being seen as a signal of easing monetary policy in the coming year.

The government will continue to take measures, such as overall and targeted RRR cuts, relending and rediscount, in a bid to lower real interest rates and financing costs for businesses, he said during a visit to the southwestern province of Sichuan, according to the State Council website. Relending and rediscount are both monetary tools the central bank uses to inject funds into banks.

As many are predicting China’s GDP growth could dip to 6% or even lower in 2020, debate over monetary and fiscal policies has flared. Yu Yongding, an influential economist and former People’s Bank of China adviser, has called for greater monetary stimulus and government spending to shore up the flagging economy. But some other economists doubt the effectiveness of such stimulus and have warned about associated risks.

This year, China’s central bank lowered all banks’ RRRs by a total of 150 basis points, releasing a net 1.6 trillion yuan ($228.2 billion) into the financial system. However, its GDP growth hit a nearly 30-year low in the third quarter amid sluggish domestic and global demand, as well as suffering from the Sino-U.S. trade war.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: In Depth: Whither the Chinese Economy in 2020?


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By Yang Ge / Dec 19, 2019 01:29 PM / Economy

Photo: VCG

Photo: VCG

The Chinese economy may be slowing, but don’t tell that to the hordes of Chinese consumers who love to buy luxury goods.

The latest edition of Bain & Co.’s annual report on the global luxury market is showing that China’s market for personal luxury goods like watches, handbags, and shoes is expected to grow by a hefty 26% this year to 30 billion euros. That far outpaces the global growth rate, which is expected to come in at about 4%.

The strong growth owes largely to recent efforts by luxury brands to reduce price discrepancies between their goods sold in China and those sold elsewhere. In the past, the same luxury goods often sold for far more in China than identical products in other countries, leading many Chinese to do their shopping abroad.

The latest report shows that the overseas shopping trend still continues, even as the price-equalizing efforts boost the China market. Chinese consumers are forecast to account for about a third of all personal luxury goods spending worldwide this year, even though actual sales of such goods in China will account for just about 10% of the world’s total.

China is now the world’s fourth-largest market for personal luxury goods in regions tracked by the report, behind Europe, the Americas, and the rest of Asia. On a broader basis, the global market for all luxury goods, which also includes such big-ticket items like cars, is forecast to grow 4% this year to about 1.3 trillion euros, the report showed.

Read the full story later today on Caixin Global.

Contact reporter Yang Ge (geyang@caixin.com; Twitter: @youngchinabiz)

Related: Cadillac Rides Growth Bandwagon for Luxury Cars in China

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By Lin Wenhui, Wang Jing and Guo Yingzhe / Dec 18, 2019 02:07 PM / Economy

Photo: VCG

Photo: VCG

More property developers filed for bankruptcy in 2019 than 2018 amid sluggish economic growth and tightening regulatory control over the market. Concerned bankruptcies could lead to an increase in unfinished homes, and homebuyers who bought off-plans losing out, some local governments have begun to implement specific measures.

As of Nov. 27, 459 real estate companies had filed for bankruptcy this year, which is slightly more than the 458 bankruptcy filings seen in the whole of 2018, according to data calculated by property market research institute China Real Estate Information based on public court records.

Some local governments have begun to tighten the regulations governing the funds that property developers take from the sale of off-plan homes. The government of the northwestern city of Xi'an has announced possible new regulations to order all funds that property buyers, including homebuyers, pay for off-plan real estate to be deposited in special accounts which are subject to regulatory oversight, according to a draft regulation issued last week by the city’s housing and urban-rural development bureau for public consultation.

Li Yujia, the chief researcher of a housing policy research institution in Guangdong province, said the move by Xi'an is to prevent homes from being unfinished due to a breakdown of developers’ fund chain.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: Home-Price Growth in China Slowest in Almost Two Years


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By Zhang Qi and Denise Jia / Dec 17, 2019 01:40 PM / Economy

Photo: VCG

Photo: VCG

The new head of the International Monetary Fund (IMF) applauded the phase one trade deal between China and the U.S. as a “very positive step” for both countries and the world economy, and called for continuous discussions on broader policy topics.

In an exclusive interview with Caixin in Washington Monday, IMF Managing Director Kristalina Georgieva said she expects the agreement between the two countries to boost China’s growth to around 6% next year, up from the IMF’s previous estimate of 5.8% made in October.

The earlier forecast was made before the U.S. and China agreed on the phase one deal on Friday which effectively pauses their 18-month trade war, rolls back certain tariffs, increases imports of some American agricultural products, and contains a commitment to structural reforms and other changes to China’s economic and trade system.

But Georgieva also warned that this is just a trade truce. “To sustain the positive impact for the world, we need to go from trade truce to trade peace,” she said.

Read the full story on Caixin Global now.

Contact reporter Denise Jia (huijuanjia@caixin.com)

Related: Global Outlook ‘Precarious,’ IMF Says, Cutting Forecasts for China and the World


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