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FT Chinese: Offshore Funds Are Leaving the Chinese Stock Market

On July 15, 2015, Financial Times Chinese published an article on its website titled, “Offshore Funds Pull Out of the Chinese Stock Market.” The article stated, “As of yesterday, global investors had been pulling capital out of Chinese stocks via Shanghai – Hong Kong Stock Connect for seven straight trading days. Since July 6, 2015, overseas buyers have liquidated 44.2 billion Chinese yuan (about 7.1 billion US dollars) from their Chinese stock holdings via the Stock Connect trading link between Hong Kong and Shanghai.

Beijing initiated tough rescue measures to save China’s stock market. It is allowing more than half of listed companies to suspend stock trading. Major shareholders have been banned from selling any shares of their stocks. China’s Central Bank has injected liquidity into the stock market.

For now, the rescue efforts have succeeded in containing the panic in the stock market. "Some rescue measures, however, have shocked Western investors, such as requiring listed companies to report good news in order to boost the price of their stock." Many analysts have recently criticized the Chinese government’s rescue efforts. They describe the current market improvement as a government induced rebound after a decline.

Michael Lai, investment director at GAM, wrote, “The final straw was allowing half the companies listed to suspend trading, effectively turning A-shares (Chinese domestic stocks) into an unsalable market.” Some investors doubt Beijing’s ability to support the market.

Source: Financial Times Chinese, July 15, 2015
http://www.ftchinese.com/story/001063008?full=y

Briefings | | |   Economy/Resources

Xinhua: China’s Serious Soil Pollution Is Worsening

Xinhua recently reported that the Chinese Ministry of Environmental Protection realized that China faces a serious worsening of its soil pollution. The Ministry will come up with a six to seven year plan to get the situation under control. Li Ganjie, the Deputy Minister of the Ministry, called for immediate action to design laws that help protect China’s soil. Currently there is no law that governs the area of soil pollution prevention. According to the United Nations’ title, 2015 is the “International Year of Soil.” In a recent summit of high ranking Chinese government officials, the “soil safety” issue was raised as a serious threat to national food safety, water safety, and the entire safety of the environment. Over the past 20 years, China has faced a significant area reduction of high quality arable land, soil erosion, soil acidification, and various other types of soil pollution. Urgent needs have been identified in the areas of technological innovation and legal protection as well. 
Source: Xinhua, July 11, 2015
http://politics.people.com.cn/n/2015/0711/c1001-27289421.html
Briefings | | |   Economy/Resources

SASAC Notice: SOEs Losing Money to Reduce Financial Losses by 50 Percent over Next Three Years

According to China Review News, State Owned Enterprises (SOEs) were first given the direction to “increase revenue and reduce spending.” Then recently, the State-owned Assets Supervision and Administration Commission (SASAC) issued another notice urging SOEs that are losing money to reduce their financial losses by 50 percent over the next three years. The article said that, in order to reach the target, in addition to increasing revenue and reducing spending, the SOEs will need to improve their internal controls and speed up the reform and reorganization process, especially regarding the control of SOE asset loss.

Source: China Review News, July 8, 2015
http://hk.crntt.com/doc/1038/3/4/0/103834024.html?coluid=45&kindid=0&docid=103834024&mdate=0708103814

Briefings | | |   Economy/Resources

China’s June PPI Down 4.8 Percent Year on Year

According to the latest release from the National Bureau of Statistics on July 9, China’s producer prices continued to fall in June, indicating a prolonged weakness in demand. 

In June, China’s Producer Price Index (PPI), which measures the average change in the price of goods and services sold by manufacturers and producers in the wholesale market, fell 4.8 percent year on year, compared to the 4.6 percent drop in May. Month on month, the producer price index in June went down 0.4 percent. The drop in June marks the 40th consecutive month of the decline of the index and represents the sharpest drop since 2009. 
For the 4.8 percent PPI drop, prices of production materials fell 6.2 percent in June, contributing 4.7 percentage points to the PPI drop during the month. Prices of consumer goods were down 0.2 percent. 

Source: National Bureau of Statistics, July 9, 2015 http://www.stats.gov.cn/tjsj/zxfb/201507/t20150709_1211569.html

Briefings | | |   Economy/Resources

China IPOs Blocked in the Near-Term

Late on July 4, the Shanghai and Shenzhen exchanges announced that 28 planned IPOs of “A Shares” will be delayed, 10 at Shanghai Stock Exchange and 18 at Shenzhen Stock Exchange. On July 3, China Securities Regulatory Commission expressed that, in light of the recent market situation, there would be no new IPOs in the near-term and the number and volume of deals down the line would be greatly reduced. 

This is the ninth "A Share" IPO delay in history.  The previous delays were as follows:
1. July 21 to December 7, 1994 
2. January 19 to June 9, 1995 
3. July 5, 1995, to January 3, 1996 
4. July 31 to November 2, 2001 
5. August 26, 2004, to January 23, 2005 
6. May 25, 2005, to June 2, 2006 
7. September 16, 2008, to July 10, 2009 
8. November 16, 2012, to December 30, 2013 
China’s A shares are generally only available for purchase by mainland citizens; investment from outside mainland China is restricted to select foreign institutions or under mutual market access arrangements between the Shanghai Stock Exchange and the Hong Kong Stock Exchange, subject to aggregate and daily quotas.

Source: The Beijing News, July 5, 2015 
http://epaper.bjnews.com.cn/html/2015-07/05/content_585764.htm
Briefings | | |   Economy/Resources

VOA Blog: He Qinglian on Blaming the Stock Market Plunge on a Foreign Conspiracy

Well known economist and sociologist, He Qinglian, who blogs regularly on Voice of America, looked into the theory that has been widely circulated in China that a foreign conspiracy accounted for the crash in China’s stock market causing Beijing to roll out a slew of support measures to stem the stock market slide. 

In her July 5 blog, He Qinglian noted that, over the past year, the total market capitalization of publicly traded companies in the Shanghai and Shenzhen stock exchanges has grow by US$6.7 trillion to US$10.05 trillion, far exceeding that of the Japanese stock market at around US$5.0 trillion. 
One critical step in Beijing’s game plan is to overtake the US equity market cap of US$25 trillion and to have its A shares included in MSCI’s Emerging Market Index (an index created by Morgan Stanley Capital International). US$1.7 trillion in funds worldwide track this index. According to MSCI’s estimate, a decision to include domestic Chinese stocks in the index would have injected an estimated US$400 billion of funds from asset managers, pension funds, and insurers into mainland China’s equity markets over time. 
On the evening of June 9, 2015, MSCI decided against including mainland China’s equity in the gigantic MSCI Emerging Markets Index, citing a number of regulatory matters it has yet to iron out with Chinese securities agencies. 
When refuting speculation that foreign institutions were accountable for the crash of China’s stock market, the author questioned Beijing’s confidence and ability in managing the economy through artificially propelling a bull market, attracting foreign investors to fuel its growth, and counting on Chinese investors’ patriotism to reverse the stock market plunge. 
Source: Voice of America, July 5, 2015 
http://www.voachinese.com/content/heqinglian-blog-china-economy-20150705/2849767.html
Briefings | | |   Economy/Resources

HSBC PMI Number for Chinese Manufacturing Remains Low

Well-known Chinese news site Sina recently reported that the June HSBC PMI (Purchasing Managers Index) number for the Chinese manufacturing industry remains low, at 49.4. The employment sub-index under the manufacturing PMI reached a six-year low (46.6). Despite the slight recovery of new orders and new export orders, the manufacturing industry continues to cut jobs. Also in the news, the Chinese Mainland’s new media company Caixin Media just announced that, starting August 1, Caixin Media will replace HSBC to sponsor the same PMI number, which has been managed and calculated by the British market study company Markit. Caixin confirmed that there will be no change in the data collection methodology or the formulas. The HSBC PMI is typically lower than the official PMI number that the Chinese government releases. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.
Source: Sina, July 1, 2015
http://finance.sina.com.cn/money/forex/hbfx/20150701/102122561455.shtml
Briefings | | |   Economy/Resources

Economic Downturn Will Impact 2015 Fiscal Revenue

China’s Finance Minister Lou Jiwei predicted that, in the next few months, the State will face considerable pressure to meet its 2015 revenue target. He made these remarks when speaking to the People’s Congress on June 28, 2015. "In the next several months, due to factors such as the pressure of the economic downturn, we expect to face considerable pressure to meet the central government’s fiscal revenue target."

Lou set out five priorities for the future. In regards to in-depth reforms of the taxation system, Lou stated that efforts will be made to study a reform proposal on the personal income tax and to support real estate tax legislation. 
Source: Ministry of Finance of China, June 29, 2015 http://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/201506/t20150629_1262257.html
Briefings | | |   Economy/Resources