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China’s Resident Deposit Balance Saw a Sharp Decline in April

Well-known Chinese news site Tencent recently reported, based on data that the Chinese central bank recently released, that as of the end of April, the balance of the total deposits of China’s residents fell to RMB 67.4 trillion, which was 1.32 trillion less than the same number at the end of March. This is the largest single-month decline in history. It also represents a 2.1 trillion year-over-year decline. For many years, China has been considered a country with a high rate of savings. However, in 2017, the balance of resident’s deposits started to see a net reduction. In 2008, China’s household savings rate was 53.2 percent. In 2017, that rate dropped to 7.7 percent. In the first quarter of this year, all major domestic national banks saw negative growth for the balance of individual savings. In the same period of time, consumer spending did not show any significant growth. Statistics showed that people have been putting more and more money into investment funds and the real estate market. The savings decline can have a major impact on the economy. It may result in slower bank investments into the economy, an increased cost of borrowing, and more resources sucked into the real estate bubble.

Source: Tencent Financial News, May 18, 2018
https://finance.qq.com/a/20180518/006822.htm

Briefings | | |   Economy/Resources

Zhu Min: China’s Debt Level Is at 220 Percent

Well-known Chinese news site Sohu recently reported that Zhu Min, the former Deputy Managing Director of the International Monetary Fund (IMF) and current Director of Tsinghua University’s National Institute of Financial Research, delivered a speech on financial openness at a global finance forum conference held in Beijing. Zhu emphasized that at the core of the openness is the establishment an internationalized Chinese financial market. International investments currently have a share of 1.26 percent in China’s banking market, a share of 1.15 percent in China’s stock market, a share of 2.44 percent in China’s bond market, and a share of 6.1 percent in China’s insurance market. At the same time, China’s debt level has reached 220 percent. Japan suffered a financial crisis at 220 percent, Thailand’s financial market crashed at 180 percent, and the United States had its financial crisis at the debt level of 180 percent. China’s loan efficiency dropped 75 percent in the last five years. He called for opening up the Chinese financial market in order to improve the domestic financial system with healthy competition.

Source: Sohu, May 19, 2018
http://www.sohu.com/a/232164447_100160903?_f=index_betapagehotnews_1

Briefings | | |   Economy/Resources

Tianqi Lithium to Acquire World’s Second Largest Lithium Manufacturer

Well-known Chinese news site Sohu recently reported that China’s largest Lithium-based battery material vendor Tianqi Lithium is in the process of acquiring 24 percent of Chile’s Sociedad Quimica Y Minera (SQM) with US$4.3 billion. SQM is the world’s second largest Lithium manufacturer. Canadian fertilizer manufacturer Nutrien previously owned the shares. Tianqi already owns 2.1 percent of the shares of SQM. The additional 24 percent can allow Tianqi to name three seats in the eight-seat SQM board. SQM currently produces 48,000 tons of Lithium Carbonate annually. The expected production in 2019 is 100,000 tons. Lithium Carbonate is the primary material to make rechargeable batteries to be used in products like hybrid cars. Since 2000, the global market for Lithium Carbonate has been growing at an annual pace of 7.2 percent. The deal is still pending approval from the Chilean government, which is conducting an antitrust review.

Source: Sohu, May 17, 2018
http://www.sohu.com/a/231891205_618572

Briefings | | |   Economy/Resources Geo-Strategic Trend

CEFC China Energy Company Failed To Make Its ROSNEFT Stock Purchase

According Russian news agency Sputnik, Glencore, an Anglo–Swiss multinational commodity trading and mining company, announced that it would stop selling the ROSNEFT shares that Glencore and the Qatar sovereign fund QIA owned jointly to CEFC China Energy Company. ROSNEFT is Russia’s national oil company. The cancelled US$9.1 billion deal would have allowed CEFC China Energy to acquire 14.16 percent of ROSNEFT. The Chinese financial news organization Caixin confirmed the news and also reported that CEFC China Energy currently faces the deep trouble of a debt crisis. Its phase-one payment on the ROSNEFT deal was not in place. CEFC China Energy’s US$400 million deposit will not be refunded.

Sources:
1. Sputnik Chinese, May 5, 2018
http://sputniknews.cn/politics/201805051025315260/

2. Caixin, May 5, 2018
http://companies.caixin.com/2018-05-05/101244298.html

Briefings | | |   Economy/Resources Geo-Strategic Trend

Chinese Central Bank Banned Using RMB to Acquire Foreign Currencies outside China

Well-known new Chinese news site The Paper recently reported that China’s central bank just announced a new regulation restricting RMB-based RQDII (RMB Qualified Domestic Institutional Investor) investment behavior. RQDII are typically foreign banks or other financial institutions permitted to provide RMB-based financial services in Mainland China. With the new regulation in place, a RQDII investor can no longer transfer RMB to accounts outside China for foreign currency exchanges. The Shanghai Headquarter of the Chinese central bank is now tasked with overseeing cross-border RMB activities. All RQDII doing overseas investments are required to report to Shanghai HQ on their basic information, partner Chinese bank, sources of funds, scale of funds, investment plans, remittance of funds, and overseas positions. In recent years, China has been tightening up the control of overseas RMB flows.

Source: The Paper, May 3, 2018
https://m.thepaper.cn/newsDetail_forward_2108384

Briefings | | |   Economy/Resources

Higher Income Tax, Social Security Fees and an Over-priced Housing Market Drove Up Labor Costs in China

Well-known Chinese news site Sina recently published a news article discussing the 2018 China Green Companies Summit that the China Entrepreneur Club sponsored. Xu Shanda, the former Deputy Director-General of the Tax System Reformation Department of the State Administration of Taxation (SAT) spoke at the summit.  Xu stated that the higher personal income tax rate, social security fees, and the over-priced housing market are the three main causes that have driven the increase in labor costs in China. Currently, the personal income tax rate in China is at 45 percent, which is much higher than in developed countries. Xu also called for speeding up personal income tax reform.

Source: Sina, April 22, 2018
http://finance.sina.com.cn/china/2018-04-22/doc-ifznefkh8378239.shtml

Briefings | | |   Economy/Resources

HKET: China Smartphone Market Suffered Largest Quarterly Setback in History

Hong Kong Economic Times (HKET), the leading financial daily in Hong Kong, recently reported that the Mainland’s first quarter smartphone sales suffered a year-over-year decline of 21 percent. Total smartphone handset volume dropped below 100 million to 91 million. This was the lowest point since 2013 and was the biggest quarterly decline in history. With the exception of Huawei and Xiaomi, all smartphone vendors saw a sales decline. Apple iPhone’s sales ranking fell out of the top-four list. At this point, Huawei, Oppo, Vivo and Xiaomi – all are domestic manufacturers – lead China’s smartphone market. The top-four occupy 73 percent of the Chinese Mainland market. Analysts expressed the belief that Apple’s lack of innovation (except for the iPhone X) and high price were the reasons for its loss. In the past two quarters, China’s smartphone market had already suffered a decline. Most of the consumers in the market have completed the conversion from basic phone to smartphone. As the quality and lifespan of a smartphone improve, customers have less of an interest in switching to a handset.

Source: Hong Kong Economic Times, April 27, 2018
https://bit.ly/2vWadXp

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