China Economic News

[CityFarmer]

One more major default of loan in China, involving tenth of billion of yuan...

Chinese steel transporter says US$326m of loans overdue, chairman arrested
24 Sep 2014 11:16
[SHANGHAI] Chinese steel transporter Anhui Wanjiang Logistics said 2 billion yuan (US$326 million) of its loans were overdue and its chairman had been detained by police, in the latest sign of strain in the country's troubled steel sector.

The news comes after Chinese state metals trader Sinosteel Corp said on Tuesday that it was facing financial problems although it denied rumours it was struggling under the weight of overdue loans amounting to 10 billion yuan.

Shanghai-listed Anhui Wanjiang, which specialises in steel cargo logistics, said in a statement late on Tuesday that it had about 16.7 billion yuan in debt, including 12.7 billion yuan owed to 19 banks, of which almost 1 billion yuan was overdue.

It also had an additional 1.1 billion yuan in non-bank loans overdue.
...
Source: Business Times Breaking News

[Behappyalways]

China has a large trade surplus. It should have control of domestic liquidity. Hence, a periodic injection of liquidity, for whatever claimed purpose, is actually to prop up troubled financial institutions and their troubled borrowers. Capital and elite attention are all focused on rearranging the tables and chairs to keep a leaking boat afloat.
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Fiscal stimulus can stabilise the economy. Financial reforms must then follow. Too many financial institutions, even some large ones, are merely Ponzi schemes.


Reform, not monetary stimulus, is China's only choice to revive growth
http://www.scmp.com/comment/article/1598...ive-growth

http://investideas.net/forum/viewtopic.p...7&start=60

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http://www.cnbc.com/id/102055831

China debt fix is ‘short-term pain, long-term gain’
Leslie Shaffer | Writer for CNBC.com
2 Hours Ago
CNBC.com


hudiemm | iStock/360 | Getty Images
China's debt loads have long loomed as a serious economic risk, and while analysts say new plans to clean up local government borrowing will bring near-term pain, a longer-term fix may be in sight.

"[The new plan] represents the first concrete step by the central government to clean up the debt problems at the local governments," analysts at Bernstein Research said in a note Friday.

Read More China's parliament authorizes local governments to issue bonds
Provincial governments' debt, often issued via local government financing vehicles, or LGFVs, has worried economists for years. Outstanding debt climbed to around 17.9 trillion yuan ($2.92 trillion) by the end of the first half of 2013, according to the most recent national audit, from around 10.7 trillion in 2010.

On Thursday, China's State Council, its highest authority, set quotas on the amount of debt that local governments can issue, required it to be used for public projects rather than operational spending and tied debt levels to local officials' performance reviews. It also barred local governments from using LGFVs and state-owned enterprises (SOEs) to raise debt and from guaranteeing or covering the liabilities of financial institutions or local corporates.

Read More China's local government debt burden varies widely: Moody's

"It's a tick in the right box," said Freya Beamish, an economist at Lombard Street Research, noting it indicates Beijing is willing to accept slower growth as a step toward avoiding an "Armageddon" scenario over its debt.

"While this may bring short-term pain in terms of slowing economic growth and accelerating credit losses at LGFVs, we think the reform will benefit the economy and the Chinese banking sector in the long term," Bernstein said.

It expects the reforms will weaken economic growth in debt-laden provinces as they incorporate existing and new debt into their budgets, as well as spurring an increase in the number of defaults among existing LGFV and local SOE debts.

Read More 'Perfect storm' to hit China economy in 2016
But on the flip side, Bernstein expects more discipline in local government borrowing and budgets and reduced reliance on shadow banking.

OCBC echoes the "short-term pain, long-term gain" view, seeing positives in separating government from corporate debt.


"There is no clear cut [line] between local government debt and corporate debt," Tommy Xie, an economist at OCBC, said in a note Thursday.

"The switch of funding channel from local government funding vehicles to a more transparent bond market will be positive for the development of onshore bond market," Xie said. "Given the leverage ratio is likely to be shifted from the corporate sector to sovereign under the reform, coupled with other reform, this may help lower the funding costs for the real economy."

Read More Commentary: China's economy is not experiencing a hard landing
To be sure, there were some grains of salt to go with the positives.

Lombard's Beamish believes the cap on local government debt doesn't go far enough.

"That's the easy part," said Beamish, who has been bearish on China's outlook. She's looking for tougher reforms, such as liberalizing interest rates and the capital account.

She's also concerned that the cap on debt just sets another control on the local governments.

Read More Why China property isn't facing Armageddon
"The reason all this shadow banking arose around local governments was that they had unpleasant [growth] targets they couldn't meet without taking on debt," when they weren't allowed to issue bonds, she noted, adding she's concerned the caps will spur local officials to search for other financing routes.

Others cautioned that while the changes are important, there won't be any instant results.

"All of this debt on their balance sheets won't be converted to [bonds] within 12 months," said Debra Roane, a senior credit officer at Moody's Investor Service.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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China won't bail out local govts
DOW JONES NEWSWIRES OCTOBER 03, 2014 11:45PM

In its latest effort to force further financial discipline on local governments and keep debt levels in check, China's cabinet said that Beijing won't bail them out when they fail to repay their debts and will impose ceilings on their borrowing.

The State Council's move is an attempt to change the behavior of localities, which, researchers and legislators say, have had little incentive to restrain their borrowing because they assume Beijing will eventually bail them out if needed.

The cabinet's statement, issued on Thursday, said that local governments having trouble repaying their debts must reduce the size of construction projects, cut administrative spending, sell state assets or take similar measures to meet repayment obligations themselves.

Local authorities also must report any imminent defaults to higher-level governments in a timely manner, and local and higher-level governments must kick off "emergency response systems" to contain any risks, the cabinet said. The notice said that local officials will be held responsible for failing to curb debt levels.

The cabinet also said it would ban the use of local government financing vehicles -- special companies that have relied on the country's extensive shadow-banking system to raise funds for projects, raising the potential for hidden debts. Beijing has tightened its grip on these instruments over the past two years, fearful that they could shake the financial system in the world's second-largest economy.

"As a knee-jerk reaction, the local governments are likely to be more cautious in terms of spending, which may possibly trigger deleveraging," said Xie Dongming, an economist with OCBC.

Local governments have had a tough time this year repaying debt as fiscal revenue growth has slowed in the face of a weaker national economy and China's property market downturn. China's combined central and local fiscal revenue rose 6.1 per cent in August from a year earlier, compared with a year-over-year increase of 9.2 per cent in August 2013, data from the finance ministry showed.

Almost 40 per cent of the 17.9 trillion yuan in local government debt and guarantees will mature by the end of this year, placing huge pressure on local governments to make repayments, according to a report released by the state auditor late last year.

Beijing has tried repeatedly to rein in local government debt in recent years, but its efforts have often been thwarted by weak incentives, poor fiscal discipline and structural problems. Chief among those is a mismatch between the amount of revenue local governments collect and their mounting social responsibilities. China has given provinces and some cities the authority to issue bonds directly, although analysts say many municipalities could have trouble meeting fiscal-solvency requirements.

The State Council said Thursday that it would determine the maximum amount of debt that local governments can raise in different regions, based on the Finance Ministry's evaluations of their financial health, including their debt levels and fiscal capacities.

The statement didn't specify when the policy would go into effect or how local debt ceilings would be calculated. It also didn't provide any debt-reduction target.

In the long run, OCBC's Mr Xie said, the policy changes would help lower funding costs for the real economy and reduce companies' leverage ratios.

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China's central bank sees 'very low' risk of hard landing
Business | Updated today at 12:25 AM
WASHINGTON (REUTERS) - The chance of a hard landing for China's economy is very small in spite of worries about the country's real-estate sector, the chief economist of the People's Bank of China said on Saturday.

Ma Jun told a panel on the sidelines of the IMF and World Bank fall meetings in Washington that the property sector, which accounts for 20 per cent of total investment in China, was the main downside risk to the Chinese economy.

However, he said the sector was not the only driver of growth.

"I think the chance of a hard landing is very low," Ma said. "Although we worry about some downside risk like the real-estate slowing down and so on, there are also growth engines, including the service sector in general, the Internet in particular ... and healthcare is rising very rapidly."

Ma said the slowdown in real estate was putting downward pressure on the economy and some further deceleration in the sector was possible given weak public sales.

He said leveraging in the real-estate sector, in state-owned enterprises and in local government financing vehicles was too high and had been rising in the past few years.

This was a key reason for the government's policy of avoiding "excessive stimulus" to the economy.

"At the macro level, I think we need to avoid excessive stimulus, which could increase leveraging significantly in the longer term, even though GDP growth is slowing a bit," he said.

During a visit to Germany on Friday, Chinese Premier Li Keqiang said he was confident his country's economy would continue to grow at a "medium-to-high tempo", forecasting growth of about 7.5 per cent this year.

A Reuters poll of 20 economists on Friday, however, showed China's economy likely grew at its weakest pace in more than five years in the third quarter as the property downturn weighed on demand.

According to the poll, the economy may have expanded 7.3 per cent in the third quarter from a year earlier, the weakest reading since the first quarter of 2009, when growth hit 6.6 per cent.

China's Vice-Finance Minister Zhu Guangyao said on Friday that China was watching its property market closely, but saw no need for any big stimulus for the sector or the rest of the economy.

Zhu said a decline in property prices was not seen as a problem because prices previously had been too high and market forces should be allowed to prevail.

Late last month, China cut mortgage rates and down payment levels for some home buyers for the first time since the 2008 global financial crisis, after home prices fell for a fourth consecutive month in August and new construction activity continued to slump.

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http://www.businesstimes.com.sg/banking-...e-currency

China hails ECB debate on yuan as a reserve currency
BT_20141013_YUAN13_1315403.jpg Internationalisation of the yuan will mark a major step for the importance of the Chinese currency, also known as the renminbi. PHOTO: REUTERS
13 Oct5:50 AM
Washington

POLICYMAKERS from Beijing to Kuala Lumpur welcomed plans by the European Central Bank (ECB) to consider adding the yuan to its foreign-currency reserves.

The internationalisation of China's currency emerged as a subject at the annual meeting of finance ministers and

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China's trade balance narrows in September
OCTOBER 13, 2014 1:45PM

Mitchell Neems

Business Spectator Reporter
Melbourne
China's trade balance narrowed in September, coming in well below analyst expectations according to official data.

In the month, China's trade surplus was $US30.94 billion, from $US49.84bn in August and well below the consensus of analysts surveyed by Bloomberg at $US41.1bn.

In September, exports from China rose 15.3 per cent, against expectations of a 12 per cent lift.

Meanwhile, exports out of the nation grew seven per cent, well ahead of expectations of a two per cent decline.

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http://www.cnbc.com/id/102086180

Status of China central bank chief remains a mystery after meetings
Michelle Caruso-Cabrera | @MCaruso_Cabrera
5 Hours Ago
CNBC.com
3
COMMENTSJoin the Discussion
Those hoping for clarity about the future of the leadership of China's Central Bank were disappointed this past weekend.

Zhou Xiaochuan
Getty Images
Zhou Xiaochuan
Zhou Xiaochuan, governor of the People's Bank of China, was very visible at the International Monetary Fund meetings in Washington, D.C. over the weekend, but did not address publicly—nor it appears privately—speculation about his future and possible departure.
Recent reports in the Wall Street Journal and elsewhere have suggested Zhou might be leaving his post or even pushed out—which has in turn led to questions about the future of reforms in China if he leaves. He has long been a promoter of key reforms, such as allowing interest rates to float.
There was a ripple of excitement when Zhou arrived at a JPMorgan cocktail reception where CNBC was present on Saturday night. There also was anticipation he might say something about the status of his tenure at a low-key meeting held on Sunday morning with the world's top central bankers, as well as at a Sunday afternoon meeting of the Institute of International Finance. But people in attendance at those events told CNBC that he did not address his future—nor was he asked about it.

Read MoreIMF Deputy MD: Asia must prepare for bond re-pricing
On Sunday morning, Zhou appeared on a panel called "The Outlook for Global Growth" alongside Janet Yellen of the U.S. Federal Reserve, Governor Haruhiko Kuroda of the Bank of Japan, and Portuguese economist Vitor Constancio, vice president of the European Central Bank. The panel was moderated by Jean-Claude Trichet, former head of the European Central Bank. The panel was held at the Inter-American Development Bank.

The panel was part of an off-the-record event held every year by the Group of 30, known as the G30, on the Sunday morning of the IMF fall meetings.


The G30 is a nonprofit, international body, and its website indicates that it primarily comprises current and formal central bankers from around the world, along with leading economists. The yearly meeting is called the International Banking Seminar and is by invitation only; reporters are never invited, according to Stuart Mackintosh, the group's executive director.
According to four people in attendance at the meeting, however, Zhou did not discuss whether he would remain the head of the PBOC. His comments were limited to the economy of China, the Chinese savings rate, and China's currency, the renminbi.

Read MoreFeds are worry about possible sale of Waldorf to Chinese

Attendees who spoke with CNBC did so on condition of anonymity because of the private nature of the event.

None of Zhou's comments departed from the current consensus about the Chinese economy—annual GDP growth of about 7 percent or slightly above—according to those who spoke with us.

At a meeting of trustees of the Institute of International Finance, the topic of Zhou's tenure did not come up either.

Michelle Caruso Cabrera
Michelle Caruso-Cabrera
CNBC Chief International Correspondent

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Closing China infrastructure investment gap a priority for APEC
THE AUSTRALIAN OCTOBER 21, 2014 12:00AM

Scott Murdoch

China Correspondent
Beijing
Key Speakers At The Asian Financial Forum
Alan Bollard, executive director of the APEC secretariat Source: Supplied
FIXING the widening infrastructure investment gap in the Asian region to help boost trade growth between the major countries is emerging as the key issue confronting world finance leaders meeting in Beijing this week.

The APEC finance ministers meeting begins tomorrow as a precursor to the major leaders forum, which will be attended by Tony Abbott, due to be held next month in the Chinese capital.

Ahead of the meeting, APEC secretariat executive director Alan Bollard, the former Reserve Bank of New Zealand governor, said the future pace and scope of infrastructure investment was a key challenge for regional policymakers in light of economic and trade growth rates moderating sharply.

“For Australia specifically, infrastructure has been a very good driver of growth, but we have seen that slow quite a lot, although lately there has been more focus on that,” Dr Bollard told The Australian. “There is going to be a lot of discussions around infrastructure development. People tend to see infrastructure as a silver bullet, but of course it’s not.

“It is a topic that China has a lot of interest in and it is something they want to show the rest of the world how to do it.”

The meeting is expected to make progress on the Connect­ivity Blueprint that aims to reduce the barriers of cross-country ­infrastructure investment and ­facilitation, especially for small-to-medium enterprises, and to ­increase the potential use of public private partnerships between countries.

Indonesia this year opened a pilot PPP centre, under APEC guidance, to boost cross-country investment between the sectors.

A number of parallel working group meetings will also be held on the side of the main economic leader’s forum to examine ways to increase trade facilitation between APEC member nations. The Asian Development Bank ­estimates $US8 trillion ($9.13 trillion) worth of infrastructure investment is needed in the Asian region over the next six years to help ease ­bottlenecks and support future trade growth.

China, the host country of the meeting, is expected to use the forum this week to promote its plans to develop an Asian ­Infrastructure Investment Bank (AAIB) to fund future development projects.

The plan has received a mixed response, some APEC member nations concerned about the governance and management styles that would be put in place by the Chinese authorities.

Singapore has supported the plan while Japan opposes it and Australia is yet to release a formal response.

“A lot of countries are looking at the governance arrangements that are being opposed and whether this is going to be a ‘soft bank’,” Dr Bollard said.

“But the Chinese authorities are out asking, ‘What would you like to see in terms of governance arrangements’.

“If there is $US8 trillion worth of projects that are needed, that is far more than the level of ­financing that is available at the moment.”

Dr Bollard said China’s future medium-term growth rates and its current structural adjustments would be discussed by the financial leaders, especially the emerging middle-income trend that is occurring in the world’s second- largest economy.

There is ongoing speculation that China will miss its 2014 official growth rate target of 7.5 per cent, but Dr Bollard said the country’s longer-term prospects were more important for regional policymakers.

“If China’s growth is 7.3 per cent or 7.6 per cent, that does not make a lot of difference in the ­medium term,” he said.

“It is more important whether China is undergoing the structural change it said it would and is moving from being reliant on domestic demand or exports.”

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China GDP growth slows to 7.3pc
RICHARD SILK THE WALL STREET JOURNAL OCTOBER 21, 2014 4:02PM

CHINA’S economy grew at its slowest pace in more than five years in the third quarter, as it battles a slumping real-estate market and weak domestic demand and industrial production.

Gross domestic product rose 7.3 per cent from a year earlier in the third quarter, down from 7.5 per cent growth in the second quarter of this year, China’s National Bureau of Statistics said.

The third quarter economic growth rate is the slowest since the first quarter of 2009, when it rose 6.6 per cent.

The results make it increasingly likely that China will miss its annual growth target for the first time since 1998, in the midst of the Asian financial crisis. Chinese leaders in recent months have at times emphasized that their target is an approximate one, of about 7.5 per cent, and that a level slightly below that figure is acceptable to Beijing.

The data will also keep pressure on policy makers to pursue targeted easing measures into the fourth quarter to keep growth on track and avoid a fourth-quarter stumble.

“I still see downward risk going forward,” said Citibank economist Shuang Ding. “Fourth quarter growth could be lower than the third.”

At the same time, the results aren’t severe enough to push Beijing to rely on the sort of broad-based stimulus program that could worsen China’s debt problems and fuel overcapacity.

Jittery global markets have paid close attention to growth prospects in the world’s second-largest economy amid weak output in Japan and the euro zone and growing concern over low inflation. A weaker performance could damp demand for China-related equities, commodities and currencies. Still, Asian markets were mildly positive early today after the results came in slightly higher than some expectations. The China-sensitive Australian dollar was stronger against the US currency.

CHINA GROWTH: To “slow sharply”

The 7.3 per cent third-quarter growth rate was slightly faster than a median 7.2 per cent gain forecast by 15 economists in a Wall Street Journal survey.

Value-added industrial output in China rose by a larger-than-expected 8 per cent in September from a year earlier, accelerating from a 6.9 per cent year-over-year increase in August, the statistics bureau said.

Industrial production also increased 0.91 per cent in September from August, when it rose 0.2 per cent from the preceding month, it said.

Fixed-asset investment in non-rural areas climbed 16.1 per cent in the January-September period compared with the same period a year earlier, slower than the 16.5 per cent increase recorded in the January-August period, while retail sales rose 11.6 per cent in September from a year earlier compared with a 11.9 per cent on-year increase in August.

China’s property sector, which accounts for half of GDP when related industries such as steel, appliances and construction are included, has been a major drag on output this year. Housing sales fell 10.8 per cent by value during the first nine months of this year, the statistics agency said.

While 7 per cent plus growth would be the envy of most countries, China has said it needs at least 7.2 per cent growth to create some 10 million jobs annually for its huge population.

As growth has slowed this year, China has rolled out a series of targeted fiscal and monetary stimulus measures, including stepped-up spending on railways, energy, public housing, expanded credit to farmers and private businesses and more relaxed rules for the housing sector.

“The increased frequency of these targeted measures, particularly on the monetary side, smacks of their feeling they need more support,” said ING economist Tim Condon. “As long as growth holds up, though, they’re not going to panic.”

Wall Street Journal