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By Dave Yin / Jan 22, 2019 06:30 AM / Finance

Photo: VCG

Photo: VCG

Defaults on Chinese corporate bonds peaked last year, reflecting struggling businesses amid a cooling economy, The Financial Times reported.

Forty-five Chinese businesses defaulted on 117 bonds with a principal amount of 110.5 billion yuan ($16.3 billion), according to the report, which cited data from the rating agency Fitch. Both figures set new records, the report said.

According to the rating agency, five sectors contributed half of the total onshore corporate issuance amount in 2018: construction and engineering, industrial conglomerates, electric utilities, highways and multi-sector holdings.

Fears of slowing economic growth were confirmed Monday as official data showed China’s economy grew 6.6% in 2018, the slowest annual expansion since 1990.

Related: China’s Latest Measure to Calm Investors — Default-Resistant Corporate Bonds

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FINANCE

By Dave Yin / Jan 22, 2019 06:27 AM / Finance

Photo: VCG

Photo: VCG

Heavy losses in equity funds resulting from a cooling economy, sinking tech stocks and declining private profits turned 2018 into the worst year on record for China-facing investment managers, The Financial Times reported.

The report cited the MSCI China index, which sank 20.4% in dollar terms last year, its largest fall since 2008. Investors were rattled by ongoing trade frictions between China and the U.S., the report said.

Meanwhile, about two-thirds of a ranking of more than 320 greater China funds compiled by data provider Morningstar failed to match the weak performance of the MSCI China benchmark, according to the report.

Related: Opinion: China's Equities to Hit Tipping Point in 2019

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By Han Wei / Jan 18, 2019 03:13 AM / Finance

Photo: VCG

Photo: VCG

Global financial messaging provider Society for Worldwide Interbank Financial Telecommunication (SWIFT) will set up a wholly owned subsidiary in Beijing in a move to tap the Chinese financial services market.

The Belgium-based organization, which describes itself on its website as “a global, member-owned cooperative and the world’s leading provider of secure financial messaging services,” signed a memorandum for a partnership with the Beijing municipal government Wednesday. The new venture will offer localized services in China and accept the yuan as a settlement currency, along with the U.S. dollar and the euro.

SWIFT also signed a letter of intent with China's Cross-Border Inter-Bank Payments System (CIPS) to deepen cooperation in cross-border payment services.

Gottfried Leibbrandt, SWIFT’s chief executive officer, said the new China venture is the company’s latest effort to support the yuan’s internationalization.

China's cross-border yuan settlement business reached 5.11 trillion yuan ($755 billion) in 2018, up from 4.36 trillion yuan in 2017, according to the central bank.

Related: How Did an Ambitious Cross-Border Settlement Firm’s Dream Turn Sour?

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By Han Wei / Jan 17, 2019 03:49 AM / Finance

Photo:Chinanews

Photo:Chinanews

China’s central bank Wednesday injected a record net 560 billion yuan ($83 billion) into the banking system through open-market operations in a move to expand liquidity amid slowing economic growth.

The People’s Bank of China said it would carry out reverse repos that pump 570 billion yuan into the financial system Wednesday, while 10 billion yuan of previous reverse repos will mature the same day.

The 560 billion yuan net injection is the highest ever recorded for a single day.

“At the peak of the tax season, the total liquidity of the banking system is falling rapidly,” the central bank said in a statement.

Chinese authorities have taken a raft of measures since last year, including expanding infrastructure spending, cutting taxes and reducing bank reserve requirements, to bolster an economy suffering from slowing growth amid a trade war with the U.S.

Wednesday’s injection came after the central bank announced cuts in banks’ reserve ratios earlier this month, which will free up a total of $116 billion for new bank lending.

Related:Central Bank Official Leaves Interest Rate Cut on the Table

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By Noelle Mateer / Jan 15, 2019 04:39 PM / Finance

Photo: VCG

Photo: VCG

Northern China’s Hebei province has proposed an unusual way to stimulate its economy: 2.5-day weekends.

If municipalities in the province are “prepared,” they can let workers take off Friday afternoons as an early start to the weekend, according to SCMP.

The local government said the move was aimed at boosting consumption.

But the announcement wasn’t celebrated by all of the province’s workers. One Weibo user told SCMP: “This would end up as privilege for civil servants. Many companies do not even guarantee two days for weekends or legal holidays, let alone 2.5 days.”

Talk has been swirling for months of a potential “consumption downgrade” — meaning people spend less on higher quality products. And though some analysts said these fears are overblown, growth in retail sales has slowed nationwide amid an overall slowing economy.

Related: Local Governments Warn High Home Prices Are Stifling Consumption

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By Dave Yin / Jan 15, 2019 04:47 AM / Finance

Photo: VCG

Photo: VCG

China’s central bank has still not formally acknowledged applications from Visa Inc. and Mastercard Inc. to process yuan payments even though the two global credit-card giants reportedly filed the documents more than a year ago, the Financial Times reported.

Under China’s current process, acceptance of an application is the first step toward approval. After that, the People’s Bank of China must make a decision within 90 days under rules published in 2017 to facilitate the entry of foreign players into China’s $110-trillion bank card-clearing market monopolized by state-controlled China UnionPay.

The delayed consideration of Visa and Mastercard’s applications highlights complaints from foreign companies and governments over China’s slow movement to open the sector as pledged.

In November, American Express Co. said it became the first foreign player to win access to the country’s bank card-clearing market, a move observers say was only possible because of the company’s small size, which would limit its potential market share and profits.

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By Han Wei / Jan 12, 2019 01:54 AM / Finance

Photo: VCG

Photo: VCG

China’s biggest state-owned lenders cut average costs of credit for small businesses by 1.1 percentage points in the fourth quarter compared with the first quarter of 2018, according to the top banking regulator.

The lower charges are part of a far-reaching campaign by the government to expand financial support to the private sector as economic growth slows. Authorities have taken a range of steps, including four reductions in the reserves banks are required to hold. Top officials have repeatedly pressured banks to increase lending to small and private companies.

As of the end of November, about 23.8% of total outstanding bank loans, or 33.3 trillion yuan ($4.9 trillion), were directed to small and micro borrowers, according to Zhang Jinping, an official at the China Banking and Insurance Regulatory Commission (CBIRC).

Loans to businesses with credit lines of less than 10 million yuan totaled 9.1 trillion yuan, an 18.8% increase from the beginning of 2018, Zhang said, and 3.76 million more small borrowers got loans from banks compared with the beginning of the year.

China’s State Council in November called on the country’s major commercial banks to lower average lending rates for small enterprises by 1 percentage point from the level of the first quarter. CBIRC chief Guo Shuqing said at least a third of big banks’ new corporate loans should go to private companies, and lending to the private sector should account for no less than half of banks’ new corporate loans in three years.

Related:Cabinet Urges Lower Lending Rates for Private Sector

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By Leng Cheng / Jan 11, 2019 10:19 PM / Finance

Photo: VCG

Photo: VCG

China will consider new measures this year to further expand foreign firms’ access to the country’s financial markets, a senior official with the banking and insurance watchdog said Friday.

The country is in great need of foreign institutions with “specialized knowledge” and a “strong sense of regulation compliance” to “make up for the shortcomings of our financial sector,” said Xiao Yuanqi, spokesperson for the China Banking and Insurance Regulatory Commission (CBIRC), at a news briefing.

“We will carry out a study on new policies to expand the scope and improve the strength of the opening-up drive,” he said.

The measures will target foreign insurers, banks and other specialized players such as asset managers to encourage them to bring in not only investments but also technologies, management experience, new products and talent, he said.

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By Han Wei / Jan 11, 2019 03:33 AM / Finance

Photo:VCG

Photo:VCG

Chinese enterprises are retreating from an overseas spending spree in 2018, reflecting the cooling domestic economy, deleveraging policies and rising regulatory hurdles abroad. The weakening trend is expected to continue this year, according to the London-based law firm Freshfields Bruckhaus Deringer LLP.

China’s foreign mergers and acquisitions totaled $64.5 billion in 2018, a 40.7% drop from the previous year. In contrast, global mergers and acquisitions in 2018 rose 13.7% year-on-year to $3.5 trillion, according to Freshfields.

The total value of Chinese companies’ merger deals dropped 2.8% in the United States and 51% in Europe. Deals in countries covered by China’s Belt and Road initiative declined 65.9% year-on-year, according to Freshfields.

Amid government efforts to cut corporate debt and the slowdown in China’s economic growth, several leading Chinese dealmakers, including Anbang Insurance Group and HNA Group, pared back their foreign assets last year.

Wang Qing, a partner of Freshfields, said he expects even weaker efforts by Chinese companies to buy foreign assets this year in the face of rising regulatory hurdles in other countries and uncertainties related to trade tensions with the U.S.

Related: China M&A Loans Sink to 3-Year Low as Trade War Curbs Demand

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By Fran Wang / Jan 10, 2019 06:21 PM / Finance

Foreign investors are expected to snap up more commercial properties in Beijing this year after their interest grew strongly in 2018, services firm JLL said Thursday.

About a quarter of all purchases of commercial real estate – such as offices and shopping malls – in the Chinese capital was made by foreign investors last year, Mi Yang, acting head of research at JLL North China, told reporters at a briefing on the company’s latest Beijing Property Review.

“That marked a significant increase from 2017 and the previous years,” he said. “That reflected foreign investors’ confidence in China’s overall economy and the Beijing market in the medium to long term.”

Mi attributed the surge in foreign interest last year to investors hoping to do some bottom fishing after seeing Chinese property developers face increasing difficulties in financing. The Chinese government’s crackdown on shadow banking activities last year to curb financial risks led to a liquidity squeeze on many companies, with property firms among the worst hit.

Foreign purchases made up less than 5% of all deals in 2017 and less than 10% in 2016, according to the company’s figures.

Domestic owners will be eager to complete pending deals left over from last year as the financial pressure they face intensifies, the company said in a press release.

“Given the situation, we are likely to see more foreign investors participating in the process as opportunities arise,” said Michael Wang, head of capital markets for Beijing at JLL, in the statement. "This increased activity in the market is expected to result in a greater number of deals transacted by foreign investors in 2019."

Related: Trump Tower Becomes Unattractive Home, Neighbor for Chinese Companies

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By Dave Yin / Jan 05, 2019 03:11 AM / Finance

Photo: VCG

Photo: VCG

Foreign investors are buying up Chinese debt again, thanks to a strong yuan and falling bond yields.

Overseas funds added 82.7 billion yuan ($12 billion) to their onshore bond portfolios by the end of 2018 for a total of 1.5 trillion yuan, Bloomberg reported, citing data from the China Central Depository & Clearing Co. The December increase was the second-highest since data became available in 2014, according to Bloomberg.

The increase in Chinese debt holdings among foreign investors was also the most since June, reversing November’s net selling trend, according to the report.

The about-face was attributed to a rise in the yuan’s value, riding on hopes of a possible trade deal with the U.S., as well as lower hedging costs and a rally in bonds. China was one of the world’s best-performing government bond markets in 2018 as the government eased monetary policy and investors shunned the sluggish stock market, according to Bloomberg. The report predicted further gains this year.

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By Leng Cheng / Jan 04, 2019 03:33 PM / Finance

China’s largest over-the-counter stock market will launch five new indexes tracking high-quality private firms, aiming to stimulate investor interest in small and midsized companies.

One new index will focus on innovative companies from the board and another on bellwether stocks of private firms. The other three will track manufacturers, service providers and pharmaceutical firms, the National Equities Exchange and Quotations (NEEQ) said.

The five indices will officially launch on Jan.14, the operator said in a statement on Dec. 28.

Founded in 2012, the NEEQ is now home to 10,691 Chinese startups and midsize companies. Also known as the New Third Board, the platform was designed to be a cradle for these companies to grow and then graduate to list on main boards. However, lack of liquidity and poor corporate governance among listed firms has given investors pause.

The NEEQ said brokerages, fund houses and private investment funds can use the newly launched indexes to develop new products, but it is not yet clear whether those indexes will bring in new investment for the board.

Daily turnover of the New Third Board has hovered around 200 to 300 million yuan ($29 million to $44 million) since the start of 2019. Listed companies raised 60.1 billion yuan from the board in 2018, a year-on-year drop of 55%.

Related: China’s Over-the-Counter Market Tries to Stay Relevant

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By Han Wei / Jan 03, 2019 03:41 AM / Finance

Photo:VCG

Photo:VCG

In yet another move to steer loans to the cash-starved private sector, China’s central bank doubled its criteria for credit lines that qualify lenders for small-business loan incentives.

Under the new policy, companies with bank credit lines of less than 10 million yuan ($1.5 million) now are seen as small and micro enterprises, the People’s Bank of China said Wednesday in a statement. Previously, small-business lending benefits were linked to credit lines of less than 5 million yuan.

China’s policymakers are making concerted efforts to bolster the private sector in the face of slowing economic growth. Since last year, the central bank has taken a series of steps to expand credit supply to private companies, including targeted reserve requirement cuts and bond tools.

Under current rules, banks that lend as much as 1.5% of their credit portfolios to small companies can qualify for a 0.5 percentage-point reduction in their reserve-requirement ratio. Those that lend more can qualify for an even lower requirement.

Related:In Depth: China’s Unprecedented Private Sector Rescue

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By Dave Yin / Jan 01, 2019 02:57 AM / Finance

Photo: VCG

Photo: VCG

The year 2018 was chaotic for global equity markets, but Chinese bourses led the worldwide slide, largely because of the U.S. trade tensions, a cooling economy and a crackdown on shadow banking.

China’s stock market lost $2.3 trillion in 2018, or about a quarter of its value, making it the world’s worst-performing major market, according to the Financial Times.

Bloomberg data show that China’s CSI 300 index of major listed companies in Shenzhen and Shanghai declined more than 25% from the 2018 starting point, far outpacing losses in the Japanese, U.S. and U.K. markets. In Hong Kong, the benchmark Hang Seng Index closed Monday down 13.6% for 2018, representing the worst year since 2011, according to market data provider CEIC.

In comparison, Japan's Nikkei 225 slid about 14% over the year. The Dow Jones Industrial Average started the final day of 2018 down 6.7% for 2018 following a three-month slide. But the benchmark index also gained on the year’s final day after President Donald Trump tweeted that China and the U.S. were making progress on trade talks.

Analysts say the government’s efforts to deleverage China’s financial system contributed to the market declines despite being overshadowed by trade-war headlines much of the year. Stocks may benefit as both the Chinese and U.S. governments hint at progress in the trade talks.

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By Leng Cheng / Dec 31, 2018 05:44 PM / Finance

Photo: VCG

Photo: VCG

U.S. investment banking giant Goldman Sachs denied Monday alleged links to a widely reported trading loss of China’s largest oil-trading company, saying it neither engaged in nor proposed the deal.

The statement comes days after Unipec, a trading arm of China’s largest oil refiner Sinopec Corp., suspended two top officials as it suffered losses on crude oil transactions due to oil price slumps. Unipec sources said an investigation is underway into the risk management flaws in company’s hedging operations.

Amid a lack of detailed information from Unipec or Sinopec, some media reports and online rumors depicted Goldman Sachs as a key player behind the loss who might have offered advice or services relating to the deal.

“We are not going to comment on a specific client relationship other than to say that we have neither engaged in or proposed the types and sizes of trades being discussed on social media in relation to Sinopec or its subsidiaries.” the statement said. “The accusations contained in these social media posts are false and malicious.”

Sinopec’s Shanghai-listed shares sank a total 10.3% on Thursday and Friday, while its Hong Kong-traded stock dropped a 9.5% in two days following the news, and rebounded by 3.3% on Monday.

Related: China’s Biggest Oil Refiner Suspends Executives After Trading Loss

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By Han Wei / Dec 27, 2018 06:27 AM / Finance

Photo: VCG

Photo: VCG

China’s cyber watchdog Wednesday issued new regulations to put domestic financial information providers under closer scrutiny in a bid to curb content distribution that may hurt the country’s financial stability.

The Cyberspace Administration of China (CAC) said in a statement that financial information providers are not allowed to publish and distribute content distorting the country’s fiscal and monetary policies or disturbing the economic order.

Content instigating financial fraud and involving false information that could move stock, fund, futures and foreign exchange markets are also strictly banned, according to the statement.

The new regulation, to take effect Feb. 1, will be applied to domestic content providers offering information services to clients in financial analysis, financial trading and financial decision-making. News agencies are not included, according to the CAC.

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By Denise Jia / Dec 25, 2018 07:10 AM / Finance

Photo: IC

Photo: IC

Citic Securities Co., one of China’s largest full-service investment banks, announced Monday the plan to take full control of a small brokerage house in Guangzhou.

Citic agreed to buy 100% of Guangzhou Securities from Guangzhou Yuexiu Financial Holdings Group Co. The companies will negotiate specifics including the price and number of shares issued, Citic said in a statement.

Based on what Yuexiu Financial paid for its Guangzhou Securities stake in September, the company could be valued at 19.1 billion yuan ($2.77 billion).

Trading of Citic’s and Yuexiu Financial’s Shenzhen-listed shares will be halted starting Tuesday. The companies said they aim to resume share trading in no more than five business days.

In the first 11 months of 2018, Guangzhou Securities had a net loss of 119 million yuan. As of the end of November, the company had net assets of 11 billion yuan.

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By Leng Cheng / Dec 24, 2018 03:04 PM / Finance

Photo: VCG

Photo: VCG

It’s official. UBS Group on Monday became the first foreign bank to control a Chinese securities firm.

Three weeks after getting the green light from regulators, the Swiss multinational has finalized its increase in shares of UBS Securities, its brokerage joint venture in China, from 24.99% to 51%.

The move is intended to “better leverage its close ties with UBS Group’s operations in the region” and “further take advantage of the wide range of opportunities on offer in China's capital markets,” the bank said in a statement released Monday.

China has vowed to grant foreign investors wider access to its financial markets, including allowing foreign financial firms to take controlling stakes in their securities joint ventures. In April, the country’s securities watchdog issued new rules raising the ceiling on foreign ownership of a Chinese securities firm to 51% from the previous 49%.


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By Han Wei / Dec 21, 2018 01:04 AM / Finance

Photo:VCG

Photo:VCG

China’s central bank will strengthen oversight of the reserve funds that banks are required to deposit in an effort to enhance supervision of financial institutions and prevent risks, the People’s Bank of China said Thursday.

Banks are required to make full and timely payments of the deposits with the central bank. Those that delay payments will be punished, the PBOC said in a statement.

The move will help “ensure the unity of the deposit reserve management system and promote healthy operations of financial institutions,” the central bank said.

Several commercial banks and other lenders have been punished this year for reserve payment arrearages. In June, Dezhou Bank was fined 401,000 yuan ($58,000) for failing to make full payment on time, shortly after the Shanghai branch of CTBC Bank was fined 225,100 yuan for a similar flaw.

The reserve ratio for major commercial lenders stands at 14.5% following four reserve requirement cuts this year to support lending to the private sector.

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By Timmy Shen / Dec 18, 2018 03:24 PM / Finance

Photo: VCG

Photo: VCG

China may allow local governments to issue bonds at an earlier-than-usual date next year, underlining the urgency to invigorate the country's slowing growth.

The Ministry of Finance usually starts granting quotas for new local government bond issuance in April, after the National People's Congress (NPC) approves the figures at their annual sessions in March. But in 2019, such quotas are expected to be granted in the first quarter, according to a proposed meeting agenda on the NPC website.

The move could beef up local authorities' financial strength to invest in infrastructure and boost growth next year, which analysts have widely expected to slow from this year.

Analysts are also betting the PBOC may cut the reserve requirement ratio, the amount of cash banks must keep in reserves, in January to offset the impact of the earlier sale of local government bonds, because the debt issuance may squeeze banks' ability to lend and push up interest rates.

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