Economy/Resources - 84. page

Well-known Chinese news site Sina recently reported, based on data released by the Chinese central bank, that, in the month of March, international investors unloaded around RMB 208.4 billion (US$29.5 billion) in stocks and around RMB 20 billion (US$2.83 billion) in bonds. Starting this February, international investors began unloading Chinese assets and the March numbers showed an acceleration. Analysts pointed out that, with the expansion of the coronavirus pandemic, the lack of U.S. dollars in the international market caused a panic selling of Chinese assets. This wave of sell-out resulted in a quite obvious decline in the Chinese foreign currency reserve. The spokesperson for the Chinese State Administration of Foreign Exchange (SAFE) commented at a press conference that the global market headed downwards in the first quarter, which triggered a trend of risk aversion; it is understandable. SAFE expressed the belief that the Chinese market remains attractive, regardless of which channel (direct investment, bonds, or stocks) international investors prefer.

Source: Sina, April 30, 2020
https://finance.sina.com.cn/money/forex/forexinfo/2020-04-30/doc-iircuyvi0762804.shtml

China Business Network (CBN) recently reported that, in the past couple of months, Moody’s downgraded 24 Chinese non-financial companies. These companies are mainly in the fields of transportation, real estate and automobile manufacturing. Seven of the transportation companies now have a negative outlook and the ratings of all five automobile manufacturers were lowered. Among the 24 companies, 17 also have China’s domestic ratings and 16 of them remained unchanged. These companies are typically large enterprises and the new development will hurt their capacity to issue bonds, especially overseas bonds. However, under the global pandemic environment, companies can hardly maintain a good posture, so we are in a time of competition for the title of not-too-bad. Chinese ratings agencies have a long reputation for overrating companies, so established international ratings agencies like Moody’s are more trustworthy.

Source: CBN, April 28, 2020
https://www.yicai.com/news/100611750.html

Guangzhou Daily reported that China’s central bank, The People’s Bank of China, is testing the use of digital currency in the accounts of the Bank of Agriculture through transportation subsidies.

According to the central bank’s Digital Currency Research Institute, the digital renminbi is being used in pilot tests in Shenzhen, Suzhou, Xiong’an, Chengdu, and the future Winter Olympics site.  Because these are internal, closed pilot tests, such testing does not mean that the digital RMB is officially issued or will affect commercial operations. Nor will it affect the RMB issuance and circulation system, the financial market, and the social economy beyond the testing environment.

The central bank has been studying official digital currency since 2014. At the end of 2017, with the approval of China’s State Council, the central bank organized some commercial banks and relevant institutions to research and develop a digital RMB system jointly.

It is expected that the central bank will follow a gradual promotion for its digital currency, starting with the four major banks’ payroll payment clients and public service clients, and then gradually expand to online companies and operators.

Unlike Alipay and WeChat Pay, the functions and attributes of the central bank’s digital currency are similar to paper money, except that it is digital. Third-party Internet payments such as Alipay and WeChat Pay use commercial bank deposit currency settlements.

Source: Xinhua, April 20
http://www.xinhuanet.com/fortune/2020-04/20/c_1125878094.htm

Taiwanese technology news site Tech News recently reported that, despite China’s global propaganda, a new scientific study showed that the Chinese economy did not rebound. According to the Broad Activity Index (BAI), provided by U.S economic analysis vendor SpaceKnow, Chinese supply chain industrial activities continued to shrink. As of early April, the Chinese BAI was -0.2 percent. The company deployed cutting-edge technology which uses three satellites to monitor over 5,000 supply chain checkpoints in China. Satellite based methane and ozone studies also showed Chinese economic activities remain on a very low level compared to “normal” times. However, the night-time lighting level did not change much. It was discovered that factory closures were replaced by hospital openings. The study concluded that the Chinese economy didn’t even start to rebound.

Source: Tech News, April 13, 2020
https://finance.technews.tw/2020/04/13/spaceknow-survey-china-economy/

Recently two conglomerate giants the HNA Group and the Founders Group found themselves to be in a deep financial crisis. On April 14, during a creditor’s meeting, the HNA Group’s request for a one-year debt extension was turned down. On February 29, the heavily indebted HNA announced that it has entered into the takeover process and is working with a task team that the Hainan Provincial Government formed during the transition. Meanwhile the Founders Group announced that it will be unable to meet its debit payment and has entered into a bankruptcy procedure. It is currently working with the bank, the department of Education, and other financial institutions on the restructuring process.

According to Sina, both companies were expanding rapidly in recent years through a large numbers of mergers and acquisitions, using capital operations to inflate their assets. The source of the funds was that they were incurring debts from the banks and from strategic investors. The risk to this model was that, as soon as it received the profit from the subsequent investment, it was unable to cover the interest from its previous debt and the company faced a cash flow risk. In 2018, the HNA group started to have cash flow and liquidity issues. Despite the fact that it sold more than 300 billion of its assets in 2018, it was still unable to improve its capital structure. {Editor’s note: According to sources from overseas media, HNA’s expansion could also be partially related to unspecified private cash investments that top party officials in China made in order to transfer their assets overseas.}

Source: Sina, April 15, 2020
https://finance.sina.com.cn/stock/s/2020-04-15/doc-iircuyvh7999067.shtml

Affected by COVID 19, the Chinese auto industry is facing parts and order shortages. Despite the fact that the Chinese government recently introduced a stimulus plan for electric vehicles and used cars, it is believed that the fate of the Chinese auto industry is dependent on the recovery of the supply chain outside of China. The Central News Agency reported that, due to uncertain future orders, once they are caught up making the existing safety stock orders, many auto manufacturing plants may have to shut down. To reduce their costs, some factories have started to give workers three days off a week from their work shift. Meanwhile the auto market demand is weak as well. Auto sales revenue in the last week of March was down 24 percent compared to the same period in 2019. Airtex in Tianjing is predicting a 30 percent order reduction once the U.S. can get out of its COVID 19 lockdown. As most countries in Europe and the US are dealing with COVID 19, auto makers in China, especially electric auto manufacturers who rely on imports of key components and parts, will face a parts shortage. It is expected that the risk to the auto industry will come in the second half the year.

Source: Central News Agency, April 11, 2020
https://www.cna.com.tw/news/acn/202004110162.aspx

Beijing News recently reported that, according to the Food and Agriculture Organization of the United Nations (FAO), food safety may become an issue in some countries and regions due to the lack of labor and to supply chain disruptions. The FAO expects the worst case may occur in April or May. Multiple food exporters are limiting or even banning the export of food. For example, Kazakhstan has banned exports of wheat, carrots, sugar and potatoes. Serbia has stopped exporting sunflower oil. Vietnam has also restricted rice exports and Russia has stopped exporting finished grains. China is seeing high volume of food purchases in many cities. China imports around 100 million tons of food every year, which is a quarter of the world’s food trade volume. China has enough wheat, rice and corn stock as well as the capacity to produce domestically. However, soybeans, which hold an 80 percent share of the 100 million annual food imports, may be impacted. However, the impact is not obvious at the moment. In the future, the bottleneck could be on the transportation side, since the United States and Brazil are China’s primary suppliers. A temporary halt could happen, yet it is expected to be a very short one.

Source: Beijing News, April 1, 2020
http://www.bjnews.com.cn/feature/2020/04/01/711816.html

COVID 19 has hit China’s economy hard, especially in the retail industry. In the Xinjiekou commercial area of Nanjing, Jiangsu province, some netizens took pictures which show that there were more than a dozen shops on the street with “For Sale” signs on them. Scholars believe that as the COVID 19 outbreak continues to worsen in the US and other Western countries, foreign countries will stop imports from China. Thus there will be more Chinese companies that will face bankruptcy. One resident in Wuhan said that many small businesses are trying to think of a backup plan. Once the lock-down in Wuhan has ended, many of the small businesses won’t be able to survive even with a loan from the government. This applies to retail business in Zhejiang, Fujian province and all the way to Helongjiang province in the northeast part of China. A retired Economics Professor at Sichuan University told Radio Free Asia (RFA) that there will be a wave of business shutdowns. As COVID 19 continues to spread around the world, more businesses will close. The impact is no different from a world war.

According to private surveys, nearly 30 percent of China’s population has no savings in the bank. Since the national economy has been shut down for the past two months, the local government’s fiscal revenue has also been greatly affected. Provinces and municipalities have recently announced their February fiscal revenue. Among them, Hubei is the worst. After deducting the income from land, the fiscal revenue fell 98.5 percent compared to the same period last year. Henan, the neighboring province of Hubei also fell 30 percent and Guangdong, a major export province, fell 27 percent. Most provinces and cities have fallen by more than 20 percent.

Source: Radio Free Asia, April 3, 2020
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql2-04032020055206.html