Lots of economic data out today, but the main stories are 1. another spike in interbank lending, and 2. the Shanghai Composite has gone under the 2000 barrier. The systemic reasons for the sharp rise inter-bank lending are interesting, but we seem to be entering very dangerous territory for the Chinese economy, with the banks at particularly risk Their lazy days of soaking up low interest-paying deposits from the public to lend to SOEs are over. With the shadow banking industry also at risk, we are likely to see some severe pain in the financial sector. Accordingly, several state-owned banks are trading below their book value.
These are very delicate times.
ECONOMY
Crunch Escalates as Money Funds Rival Shadow Banks: China Credit – Bloomberg A doubling in China’s money-market funds in the past six months is draining bank deposits and raising the risk of financial failures during cash crunches, according to Fitch Ratings.
China Money Market Rates Soar – WSJ.com China’s financial system is showing fresh signs of stress with short-term borrowing costs for banks soaring on heavy demand for cash ahead of the Lunar New Year holiday and rising worries over the vast shadow-banking sector.
The rising rates in the money markets is also hammering stocks with the benchmark Shanghai Composite falling past the key level of 2000 to 1996.47, its weakest in almost six months and down 5.7% this year, the worst performer in Asia.
China banks in bond market push | News | IFRAsia China’s biggest banks are stepping up their use of the international capital markets in search of cheaper, longer-term funding.
Two Chinese lenders raised US$1.95bn in the US dollar bond market in the first two weeks of this year, more than half the US$2.67bn issued by China’s entire banking sector in 2013.
The deals have pushed credit spreads wider as market participants brace for a record volume of G3 bonds from Chinese banks in 2014.
Pressure Rises on Chinese Shadow Lender – WSJ.com Pressure is building on China’s largest bank and a major shadow lender to bail out investors facing a nearly $500 million hit, potentially the first loss for a key part of China’s vast but loosely regulated shadow-banking sector.
China Credit Trust Co., the shadow lender, told investors on Thursday that it may take legal action to recoup three billion yuan ($496 million) related to a troubled loan, without specifying against whom, according to a document reviewed by The Wall Street Journal.
Major banks in China see share prices fall below NAV｜Markets｜Business｜WantChinaTimes.com Prices of China’s A-share banking stocks have one by one fallen below their net asset value (NAV) per share. The Industrial & Commercial Bank of China (ICBC) saw its prices fall as of Jan. 15, with the country’s other major state-run banks set to quickly follow, according to Shanghai Securities News and our sister paper Want Daily.
Among the 16 listed banks, 12 have seen their share prices fall below their NAV per share. The remaining four banks — Ping An Bank, Bank of Ningbo, China Minsheng Bank, and China Merchants Bank — may soon approach the line however, as there their price-to-book ratio, or P/B ratio, stands at just 1.01, 1.01, 1.09 and 1.04, respectively.
China’s economic growth slows in line with forecasts – Economic Report – MarketWatch Among other data released Monday, industrial production slowed to 9.7% annual growth in December, from November’s 10% gain. The Wall Street Journal and Reuters surveys put the median forecast at 9.8%.
December retail sales increased by 13.6% compared to the year-earlier period, after a 13.7% rise in November, with the result matching the projected increase from the Reuters survey.
China economic growth continues to cool – FT.com Gross domestic product in the world’s second-largest economy expanded 7.7 per cent in the fourth quarter compared with the same period a year earlier – a slowing from 7.8 per cent growth in the third quarter, according to figures released by the government on Monday.
China’s full-year GDP growth in 2014 is expected by economists to come in at about 7.4 per cent, which would be the country’s slowest pace since 1990, when Beijing faced international sanctions as a result of the 1989 Tiananmen Square massacre.
China’s economy grows 7.7 percent in 2013, more cooling seen | Reuters China’s economy grew 7.7 percent in 2013 after easing in the final three months on sagging investment growth, a cooldown that some analysts say is a sign of the more sober times ahead as the government wrestles to implement major reforms.
How Much Did Consumption Contribute to China’s 2013 GDP Growth? – China Real Time Report – WSJ Economists may not know for months how much China’s emerging consumer class contributed to last year’s 7.7% growth. But by one economist’s estimate, last year it continued to slide.
Ma Jiantang, chief of China’s National Bureau of Statistics, said consumption contributed 50% of GDP last year and investment 54.4%. Trade of goods and services was a negative 4.4%, he said.
China central bank guides yuan slightly lower, downside seen limited – The Economic Times China’s yuan edged down against the dollar on Monday after the central bank fixed a slightly weaker midpoint, but traders said any sharp correction would be suppressed by the central bank.
Spot yuan was trading at 6.0522 per dollar at midday, falling 0.03 per cent from 6.0502 at Friday’s close, after the People’s Bank of China (PBOC) set its midpoint at 6.1083, down 0.07 per cent from Friday’s 6.1041. Traders said December and 2013 economic data published by the government on Monday had no impact on trading as the yuan’s exchange rate remained in the tight grip of the central bank.
China 2013 new home sales surge past $1.1tn – FT.com China’s real estate frenzy continued unabated last year, with buyers snapping up more than $1.1trn worth of new homes, roughly the same amount as was spent on all home sales in the US in 2012.
China – which only embraced home ownership less than two decades ago – ramped up sales as the new premier Li Keqiang eased off on the previous administration’s attempt to artificially cap house prices.
Beijing land sales likely to set new monthly record｜Markets｜Business｜WantChinaTimes.com By Jan. 16, the revenues from land sales in Beijing had exceeded 30 billion yuan (US$4.9 billion), but still many plots of lands are to be auctioned in the remainder of the month, said a department from the Beijing Municipal Bureau of Land and Resources.
Exporters in Guangdong’s Pearl River Delta seek relief from surging yuan | South China Morning Post A stronger yuan adds salt to the wounds of factory owners already suffering from rising wages, worsening labour shortages, weak demand and government policies of weeding out labour-intensive, pollution-inducing and energy-consuming industries.
The yuan’s appreciation shows no signs of abating, and it is on track to gain a further 2 to 3 per cent against the US dollar this year, economists say.
Chinese shipbuilding industry rides wave of restructuring – Xinhua | English.news.cn Though Chinese shipbuilding has yet to come in from the cold, recent restructuring, cuts in overcapacity and upgrades have given the troubled industry more hope, a report showed.
The industry received in 2013 new orders with dead weight tons (DWT) of 70 million, up 242 percent year on year, according to a report posted by the Information and Technology Ministry.
Lock-up shares worth 23 bln yuan come online – Xinhua | English.news.cn Lock-up shares worth 22.6 billion yuan (3.7 billion U.S. dollars) will become eligible for trade next week in China.
The volume marks a slight rise from the 20.83 billion yuan from Jan. 13 to Jan. 17, according to information from the Shanghai and Shenzhen stock exchanges.
Under the mainland’s market rules, major shareholders of non-tradable stocks are subject to one or two years of lock-up before they are permitted to trade.
Beijing Lays Siege to China’s Steel Output – China Real Time Report – WSJ The steel slowdown began in September, with the deceleration becoming most marked in November. In December, daily average production of the industrial metal fell to 2.01 million metric tons, China’s lowest level for the year.
The slide stems in part from an all-out campaign that President Xi Jinping’s government is waging to cut the industry’s bloated capacity and environmental pollution. China produces about half the world’s steel, and the amount of redundant capacity in the country is more than the annual steel output of the U.S. The overproduction has already weakened Chinese steel prices, which ended the year 7.2% lower than when 2013 began. Global composite carbon steel prices followed the trend, falling 2% last year, according to data from the consultancy MEPS.
Beijing-owned US debt sustains growth; not political tool: CNS｜WantChinaTimes.com As of November 2013, China owned US debt amounting to a total of US$1.3 trillion, and remains the country’s largest creditor.
US debts owned by China increased by 11% in 2013 from the previous year, the report said, adding that US debt remains an important market for China.
Minimum wage raised in 26 provinces, cities in China｜Policy｜Business｜WantChinaTimes.com The paper reported that the minimum wage in Beijing, Zhejiang, Henan, Guizhou, Shanxi, Shandong, Jiangxi, Guangxi, Gansu, Ningxia, Tianjin, Shanxi, Shanghai, Guangdong, Yunnan, Xinjiang, Sichuan, Jiangsu, Jilin, Liaoning, Anhui, Fujian, Hunan, Hainan, Shenzhen and Inner Mongolia has been raised as of Dec. 31, 2013. The minimum monthly wage in Shanghai is now US$216, while the minimum hourly wage for a blue-collar worker in Xinjiang is US$2.
For China, north is a new way to go west – The Globe and Mail China is not an Arctic country. Its northernmost point on the Russian border – a settlement called Mohe that is nicknamed “China’s north pole” – is well shy of the Arctic Circle.
Yet in Beijing lately, officials have made a point of calling their country a “near Arctic” state. China is increasingly casting a hungry gaze north: Its companies are exploring for oil and resources that can be mined, its diplomats are making friends with Nordic countries – with the notable exception of Canada – and its yuan are paying for polar research projects in the Antarctic and Norway.
Hard luxury brands set up shop in Macau – FT.com Macau, the special administrative region of China and undisputed champion of the global gambling industry, is going through a period of unprecedented growth.
Given a Chinese population eager to place bets, and a gambling revenue of $45bn in 2013 – an increase of nearly 20 per cent on the previous year – it is easy to see why. And Macau’s gamblers have an appetite for luxury goods.
Citi offers automated RMB cross-border pooling in Shanghai free trade zone | Reuters Citi (C.N) said on Monday it had launched an automated RMB cross-border pooling solution for its clients in the China (Shanghai) Free Trade Zone, a move that could help multinational companies optimize their cash management and enhance capital efficiency.
The solution enables companies to automatically sweep RMB between their onshore and offshore entities freely, without providing supporting documents or applying for approvals on a deal basis.
Shanghai mayor vows progress on free-trade zone this year | South China Morning Post At the annual meeting of the city’s legislature, which opened yesterday, Yang Xiong underscored the significance of making the yuan fully convertible inside the 28.8-square-kilometre testing ground for economic reforms in the country.
The mainland’s first free-trade zone was launched in late September with the aim of allowing the yuan to be convertible on the capital account, meaning for investment and financial transactions. The details of the zone have yet to be announced.
Premier vows to help startups – Chinadaily.com.cn The premier promised better support from the government for student entrepreneurs facing difficult job-hunting prospects, and he said their perseverance will lead to larger possibilities of success when building up businesses.
Growth in China’s outbound investment not dramatic but steady – as it should be | South China Morning Post Official data may show faster growth for last year, but it will be still be nothing like the explosive gains in the middle of last decade.
Why not? Beijing just pegged foreign exchange reserves at US$3.82 trillion. There are hundreds of billions of dollars in foreign currency more at domestic banks. In that light, another US$50 billion last year would have been a drop in the bucket.
A Sino-British pact on cross-border fund sales? Not so fast | South China Morning Post As China opened up its economy to the world, Hong Kong has long enjoyed the exclusive right to develop certain new products and services.
Now there are straws in the wind that the mainland may not only sign a mutual recognition agreement with Hong Kong to allow the selling of fund products in each other’s markets but may soon also sign a similar accord with Britain.
London sees renminbi transactions take off – Business – Chinadaily.com.cn Rapidly rising renminbi transaction volumes are supporting London’s ambition of becoming the Western world’s offshore yuan center, according to figures released on Thursday by the City of London Corp.
Trade finance transactions using the Chinese currency totaled 27.94 billion yuan ($4.61 billion) in the first half of 2013, up from 13.8 billion yuan a year earlier.
China Vehicle Sales Reach 22 million Units in 2013 | China Briefing News China became the first country to sell in excess of 20 million auto units last year, with nearly 22 million passenger and commercial vehicles being sold in the country over that time. This figure represented a 14 percent increase over 2012, and was double the China Association of Automobile Manufacturers estimate. Of these, 59.7 percent of the market was taken by foreign joint ventures. Volkswagen replaced General Motors as the top China seller for the first time since 2003, while Ford sales grew by 49 percent and Japan’s Toyota enjoyed a record year, despite political problems with China.
COMPANIES
Dalian Wanda to List Two Businesses This Year: Wang Jianlin -Caijing Wan Jianlin, the richest Chinese man said he is attempting to list two of Dalian Wanda Group’s businesses this year as his conglomerate keeps growing fast in a slow-down of the world’s second largest economy.
The Dalian Wanda chairman didn’t disclose which businesses he is planning to list but speculations have been focusing on Wanda Cinema Line, the largest cinema operator in Asia and Wanda Commercial Properties Co. Ltd., which both which have been waiting for an IPO on mainland markets for three years.
Petrochina Buy at Chinavestor Based on gas pricing reforms and higher oil prices, we expect Petrochina’s business prospects to improve over the forthcoming quarters. Given Petrochina’s share of the natural gas market, they are likely to overturn downstream losses incurred in 2012 and improve their share price significantly in 2013. The revisions in gas prices are predicted to be considerably higher for industrial users than residential users. Petrochina has traded at PER of 12.5x in 2012, reflecting a 56% premium over CNOOC (NYSE:CEO) , who utilizes more aggressive E&P tactics and realised higher EPS values.
China Grand Automotive Readies Hong Kong IPO – WSJ.com China Grand Automotive Services Co., in which U.S.-based private-equity firm TPG Capital has a stake, is planning to raise $500 million to $800 million in a Hong Kong initial public offering in the second quarter at the earliest, people with a direct knowledge of the deal said Monday.
Steel firms in China’s dirty North get the hammer｜WantChinaTimes.com New Wuan Iron and Steel Group, the largest private steel firm in China’s largest steel-producing province, is slimming down its annual capacity to 8 million tons by 2017. The slash, more than 50% of its 2013 output, is indicative of major tremors in the nation’s steel industry, reports the Chinese-language Economic Observer.
Game firms in China solicit endorsements from Japanese porn stars｜Markets｜Business｜WantChinaTimes.com Two years ago, when Japanese adult film star Sola Aoi showed up on stage at online clothing retailer VANCL’s end of year party and was hugged by Chinese business tycoons, it was seen by many in the industry as a fun way of boosting morale. Now, more and more internet firms are following suit, Sina’s technology news webportal reports.
Recently, Qihoo 360 Technology, an antivirus software firm, invited another Japanese adult film star, Takizawa Laura, to its annual party, attracting media attention, while one unnamed Shanghai video game firm, in addition to inviting a Japanese porn star to endorse one of its video games, reportedly offered a special prize for its best performing employee at its end of year party of a one-night-stand with the porn star.
China’s re-opened IPO highway proving a bumpy ride – FT.com In China, initial public offerings are a bit like London buses – you wait 14 months, and then 50 come along at once.
On Friday, the first new listed company since November 2012 – Neway Valve – made its trading debut in Shanghai. The stock rose more than 40 per cent, an encouraging sign for the hundreds of other new listings that are expected through the year.
1 Android Player That Wants to Piggyback on Apple Chinese manufacturer Huawei looks to stand out in the Android crowd with reverse charging in its Ascend Mate 2. It’s a solidly built 6-inch device, but do consumers really want to use one phone to charge another?
Opportunity in China’s food crunch – Craig Stephen’s This Week in China – MarketWatch The imminent listing of Shuanghui International Holdings in Hong Kong — which last year gobbled up America’s largest hog producer — is set to put China’s food industry in the spotlight. There is big money to be made feeding China as it faces up to a self-made food crunch.
Baidu continues to enter households with wireless music box Baidu (NASDA: BIDU), the Chinese internet giant best known for its search engine, has recently unveiled its latest hardware product – a wireless music-streaming box that retails for a smooth RMB 99 (about $16).
Chinese firm constructs high-speed railway in Turkey – People’s Daily Online A photo taken on Jan. 4, 2014 shows a trial train take a test run on the Ankara-Istanbul high-speed railway constructed by China Railway Construction Corporation Limited (CRCC) in Turkey. Chinese railway department officals said on Jan. 17 that second phrase of the principal project of Ankara-Istanbul high-speed railway has been completed, marking the first of its kind in overseas market is about to open to traffic in a short term.
Shell, PetroChina Gas Venture in Australia Reviewing Job Numbers – WSJ.com Royal Dutch Shell PLC (RDSB) and PetroChina Co. (PTR) are looking to cut jobs in an effort to contain costs at their venture in eastern Australia, where the energy companies plan to build a multibillion-dollar operation for extracting and exporting natural gas trapped in underground coal seams.
A spokesman for Arrow Energy Pty. Ltd., a 50-50 venture between Shell and its Chinese partner, said the company is focused on reducing overall costs and continues to assess options to develop its gas reserves. Those options include looking at possible collaboration opportunities, he said.
Xiaomi, Gionee grab 10th largest market share from HTC｜Technology｜Business｜WantChinaTimes.com Taiwan’s HTC dropped out of the top ten for global smartphone market share last year as its Chinese rivals Xiaomi and Gionee saw their market shares increase, according to market research institution TrendForce and our Chinese-language sister newspaper Commercial Times.
US mulling partnership with China in Congo Inga 3 dam project | South China Morning Post In an unusual move, the US government is considering partnering with Chinese state firms in financing the US$12 billion Inga 3 dam in the Democratic Republic of Congo, one of the world’s costliest and possibly most controversial dams.
A Chinese consortium comprising Sinohydro and China Three Gorges Corp, both state-owned enterprises (SOEs), are bidding for the project, according to media reports.
Jidong Cement reaps hefty profit in 2013 – Xinhua | English.news.cn Tangshan Jidong Cement Co., Ltd, the largest cement supplier in northern China, estimated net profits in 2013 would rise between 70 percent and 100 percent year on year to reach over 306 million yuan (50 million U.S. dollars).
Earnings per share for Jidong stood at the range of 0.227 yuan and 0.267 yuan, up around 0.1 yuan from a year earlier, the company said in a business report filed on Saturday to the Shenzhen Stock Exchange.
Goubuli to slash bun prices in Tianjin – BUSINESS – Globaltimes.cn The price cut came shortly after Goubuli’s revelation of its plan to buy a famous American coffee chain. Without revealing the name of the coffee chain, Goubuli said on January 8 that the deal is expected to take place in the first half of the year.
Posted from Diigo.
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