Economy/Resources - 2. page

To promote used car exports, China’s Ministry of Commerce and four other departments jointly issued a notice on February 5 regarding matters related to the export of used cars. On February 7, they released a “Notice on Further Improving the Practice of Used Car Exports” (the “Notice”), to implement used car export businesses in 10 pilot cities nationwide.

The Notice encourages localities to establish used car export bases, achieving efficient results by integrating functions such as showrooms, handling of transactions, maintenance, inspection and certification, customs clearance, support for exports, warehousing, logistics, and financial services. As after-sales service is the biggest challenge for the used car dealers, the Notice directed companies to establish overseas maintenance service systems through self-construction, resource sharing, or multi-channel cooperation. This means setting up additional after-sales service outlets overseas and ensuring a supply of spare parts through multiple channels. It supports automotive companies further expanding their international marketing networks and fully leveraging brand and channel advantages. It also encourages companies to establish public showroom and sales centers and overseas warehouses in key markets.

China’s customs data shows that the volume of China’s used car exports has repeatedly reached new highs since the used car export pilot launched in 2019. In 2021, China exported 15,000 used cars. This figure soared to 69,000 in 2022. As of 2023, used Chinese cars have been sold in more than 140 countries and regions worldwide. The main markets are the five Central Asian countries, Africa, and some Southeast Asian countries. Since 2022, Russia has also become an important market. Now, the Western and Eastern Europe markets are increasing significantly due to energy shortages; a considerable portion of the used cars exported from China are electric vehicles.

Source: Xinhua, February 27, 2024
http://www.xinhuanet.com/auto/20240227/bee6287a6d464b1faaf7b7cfd04fb1fa/c.html

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, amid the “shock waves” of the real estate market downturn and early mortgage repayments, Chinese banks’ personal mortgage businesses continue to face pressure. By the end of 2023, the total mortgage loan balance of the six major state-owned banks was approximately RMB 26 trillion yuan (around US$3.66 trillion), a decrease of approximately RMB 500 billion yuan (around US$70.34 billion) from the end of the previous year.

Among the six major state-owned banks, the balance of personal housing loans of the five largest banks all decreased year-over-year. Only one of the six largest banks — the Postal Savings Bank of China — saw an increase. In terms of asset quality, five of the six major banks had suffered a year-over-year increase in non-performing mortgage loan ratios by the end of 2023. The Chinese central bank’s “Statistical Report on Loan Investment by Financial Institutions in 2023” showed that the balance of personal housing loans at the end of 2023 suffered an overall year-over-year decrease of 1.6 percent.

In response to the significant decrease in mortgage loans on their books, most banks have been intensifying their efforts to issue new mortgage loans. That being said, increasing early mortgage repayments in 2023 brought further pressure on outstanding mortgage loans and banks’ loan yields.

Source: Sina, April 8, 2024
https://finance.sina.com.cn/wm/2024-04-08/doc-inararwv6421091.shtml

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that, according to Chinese customs data, China’s imports and exports both experienced sharp declines in March, far below market expectations. Export shipments fell 7.5 percent year-over-year, while imports also fell 1.9 percent year-over-year. Chinese policymakers are facing challenges as they try to shore up a fragile economic recovery.

Exports suffered their biggest drop since last August, well above the 2.3 percent decline forecasted by economists. Exports for the period January through February increased by 7.1 percent year-over-year.

Over the past year, China’s exporters experienced many difficulties due to weak overseas demand and a tightening global monetary environment. At this point, with the U.S. Federal Reserve and other developed countries showing no urgency regarding the need for interest rate cuts, Chinese manufacturers may continue to face challenges as they try to boost international sales. Analysts warned that Western concerns about overcapacity in certain Chinese industries [and the impact of such overcapacity on Western markets] could bring more trade barriers to China’s manufacturing sector.

China’s imports for March fell 1.9 percent year-over-year, compared with a growth of 3.5 percent in the previous two months, indicating weakness in domestic demand. Analysts do not believe China’s economy will fully recover any time soon, mainly because the crisis in the Chinese real estate industry has been going on for quite some time.

Global ratings agency Fitch recently downgraded China’s sovereign credit rating outlook to negative, citing risks to public finances as the country’s economy faces growing uncertainty during a shift to a new growth model. Structural flaws in China’s economy have reduced the effectiveness of its central bank’s monetary policy tools.

Source: NetEase, April 12, 2024
https://www.163.com/dy/article/IVJQBCIC055292RI.html

As China’s economy slides downward and banks strive for survival, several banks have asked their employees to return bonuses and subsidies.

Taiwan’s Central News Agency cited a Securities Times post on WeChat saying that several Chinese banks are reclaiming performance bonuses “totaling nearly 100 million yuan (US$ 13.8 million). The China Merchants Bank, Bohai Bank, and Bank of China together accounted for a total of 89.48 million yuan.”

“In 2022, more than half of the approximately 40 listed banks disclosed such bonus reclamations in their annual reports. For example, China Merchants Bank reclaimed a total of 58.24 million yuan in 2022, and 43.29 million yuan in 2023.”

Source: Central News Agency (Taiwan), April 3, 2024
https://www.cna.com.tw/news/acn/202404030315.aspx

Recovery of China’s consumer spending has been slow, impacting not only small shops but also department stores. According to the “2023-2024 China Department Store Retail Industry Development Report,” 70.1% of department stores reported foot traffic has not returned to 2019 levels, and 64.9% say sales have not returned to 2019 levels.

Over 10 department stores have closed so far this year, including Shanghai Meilong Town Isetan Department Store. At least 21 stores closed in 2023, and 35 closed in 2022. Stores reported an 8.8% increase in department store sales in 2023; this increase was due to the low base period in 2022 caused by the COVID-19 pandemic. Challenges persist, including the impact of e-commerce, rising costs leading to staff cuts, and declining foot traffic.

Source: Central News Agency (Taiwan), April 6, 2024
https://www.cna.com.tw/news/acn/202404060151.aspx

Financial strains related to real estate in China are increasingly evident in local banks. By December 2023, non-performing loans (NPLs) had risen by about 30% compared to the previous year. This impedes banks’ ability to grow their lending, possibly hindering China’s economic recovery. Hong Kong investors are shying away from trading Chinese local bank stocks due to concerns over the banks’ exposure to real estate woes.

The rise in NPLs is confirmed by 2023 fiscal reports of 27 Hong Kong-listed large and mid-sized banks, with NPLs totaling 106.8 billion yuan, a 27% increase from the previous year. The average NPL ratio for real estate loans reached 6.5%, indicating a surge in bad loans.

Analysis shows a worsening situation for local banks in economically challenged regions, such as the northeastern provinces, with Jiutai Rural Commercial Bank experiencing a 37% increase in real estate-related NPLs.

Government responses have been conflicted, as it is difficult to stimulate the economy while also maintaining stability in the banking sector. The government introduced a mechanism for coordination of real estate financing, potentially aggravating financial risks by pushing banks to lend out funds to whitelisted projects. Meanwhile, concerns have arisen over banks’ ability to handle bad loans in the face of shrinking net interest margins (NIMs). By December 2023, NIMs had reached a historic low of 1.69%, prompting speculation that the People’s Bank of China (PBOC) may cut interest rates in the future to stimulate demand. At the same time, a further reduction in interest rates could lead to further strain on banks’ resources and ability to manage bad loans.

Source: Nikkei Chinese, April 9, 2024
https://zh.cn.nikkei.com/china/ceconomy/55288-2024-04-09-05-00-00.html