Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
China will not set an economic growth goal for this year as it deals with the fallout from the coronavirus pandemic.
It is the first time Beijing has not had a gross domestic product (GDP) target since 1990 when records began.
The announcement was made by Premier Li Keqiang at the start of the country’s annual parliament meeting.
The world’s second largest economy shrank by 6.8% in the first quarter from a year ago as lockdowns paralysed businesses.
“This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment,” Premier Li said.
The country’s leadership has promised to boost economic support measures amid growing concerns that rising unemployment could threaten social stability.
The move comes as tensions between Beijing and Washington are becoming increasingly strained over the coronavirus pandemic, trade and Hong Kong.
On Thursday, President Donald Trump stepped up his attacks on China, suggesting that the country’s leader, Xi Jinping, is behind a “disinformation and propaganda attack on the United States and Europe.”
It came as Mr Trump and other Republicans have escalated their criticism of Beijing’s handling of the early stages of the outbreak.
Also on Thursday, China announced plans to impose new national security legislation on Hong Kong after last year’s pro-democracy protests.
The announcement was met with a warning from Mr Trump that the US would react “very strongly” against any attempt to gain more control over the former British colony.
Separately, two US senators have proposed legislation to punish Chinese entities involved in enforcing the planned new laws and penalise banks that do business with them.
Earlier this week, the US Senate unanimously passed a proposal to delist Chinese companies from American stock exchanges if they fail to comply with US financial reporting standards.
US-listed Chinese companies have come under increasing scrutiny in recent weeks after Luckin Coffee revealed that an internal investigation found hundreds of millions of dollars of its sales last year were “fabricated”.
BEIJING/SHANGHAI (Reuters) – China’s biggest listed banks posted higher profits in the first quarter despite the wider impact of the coronavirus pandemic on the economy, though margins shrank.
The world’s largest commercial lender Industrial and Commercial Bank of China Ltd (ICBC) (601398.SS)(1398.HK) on Tuesday reported a 3.04% rise in first quarter net profit compared to a year earlier, while Bank of Communications Co Ltd (BoCom) (601328.SS)(3328.HK) reported a 1.8% rise.
Meanwhile at Agricultural Bank of China Ltd (AgBank) (1288.HK)(601288.SS) and China Construction Bank Ltd (CCB) (601939.SS)(0939.HK), first quarter net profit rose 4.79% and 5% respectively from the same period last year.
Following suit, Bank of China Ltd (BOC) (601988.SS) (3988.HK) posted on Wednesday a 3.17% rise in first-quarter net profit.
The growth came despite China’s economy posting the first quarterly contraction since at least 1992 due to the coronavirus pandemic. The government restricted people from travelling and going back to work to contain the spread of the virus, reducing revenue for companies and income for residents.
China’s largest banks are historically more resilient than their smaller kin, as they lend more to state-backed enterprises and have larger capital reserves.
However, despite this firmer base, net interest margins shrank at four of the five lenders, as loan prime rate reform and looser monetary policy weighed, said analysts.
AgBank did not report its net interest margin, the difference between what banks pay on deposits and earn on loans.
SOURED DEBT
ICBC, AgBank and CCB bucked the trend of the wider banking sector by posting steady non-performing loan (NPL) ratios.
The banking sector’s NPL ratio climbed in the first quarter to 2.04%, the banking and insurance regulator said, the highest level since the global financial crisis.
The rise came despite Chinese regulators moving to give banks leeway, allowing them to postpone some loan repayments until the end of June, as credit card and mortgage defaults surged.
About one-third of Chinese bank loans are to sectors including transport and retail that are significantly stressed by the pandemic, according to S&P Global.
“You can see generally from banks’ results that some lenders have reported falling asset quality, the NPL ratios have risen quite a lot,” said Richard Cao, an analyst at Guotai Junan International on Monday.
The largest banks are best placed to absorb such losses with a better ability to get financing and withstand a substantial volume of bad loans, S&P said in a research note in April.
Concerns are rising that China is repeating its mistake of a decade ago by pursuing short-term debt-fuelled economic growth at the cost of long-term sustainability
Local governments are stepping up spending on infrastructure projects in a bid to offset the slowdown caused by the coronavirus outbreak and subsequent lockdowns
Construction of high-speed railways, motorways and airports is an old tactic that Beijing dusted off after the pandemic led to a 6.8 per cent economic contraction in the first quarter. Photo: Xinhua
China’s huge stockpile of local government debt, one of the biggest “grey rhino” risks threatening the Chinese economy’s future, is set to rise steeply as local authorities rush to increase capital spending to help offset the damage caused by the coronavirus outbreak.
As Beijing discusses increasing the central government budget deficit and monetary policy easing to spur economic growth, many local governments see the situation as a golden opportunity to realise their investment ambitions, fanning concerns that China is repeating its mistake of a decade ago by pursuing short-term debt-fuelled economic growth at the cost of long-term sustainability.
In one of the latest investment drives, the southeastern province of Fujian announced on Sunday that it had signed contracts for 391 new projects with a combined investment value of 783.6 billion yuan (US$110.6 billion). Projects undertaken by central government-owned companies, which received significant lending support in the first quarter, accounted for more than half of the promised investment in Fujian, some 92 projects worth 424.5 billion yuan.
The landlocked eastern province of Anhui is also planning 2,583 new projects this year at a cost of 450 billion yuan, a third of which have been created in the last two weeks.
Construction begins for major sea crossing to link Shenzhen and Zhongshan in Greater Bay Area
In addition to work on existing construction projects, costing around 850 billion yuan, the province has also prepared a list of 3,300 reserve projects with a total investment value of 5.4 trillion yuan (US$762 billion) which could theoretically be started at any point in the future, pending government approval and funding support.
“The most powerful and effective way to offset the economic slowdown is to increase the size of investments,” Wang Qikang, an official with the Anhui economic planning office said on Friday. “[We] must quicken the pace of construction, working day and night to win back the lost time [from the coronavirus lockdowns].”
Construction of high-speed railways, motorways and airports is an old tactic that Beijing dusted off after the pandemic led to a 6.8 per cent economic contraction in the first quarter.
Infrastructure construction has already been hit hard amid the lockdowns, plunging 19.7 per cent in the first three months of the year compared to a year earlier.
Many [local governments] are still striving to achieve a high growth rate without the guidance of a national [gross domestic product] target – Liu Xuezhi
“The investment stimulus mindset has hardly been eradicated at the local level,” said Liu Xuezhi, a senior researcher with the Bank of Communications in Shanghai. “In particular, many [local governments] are still striving to achieve a high growth rate without the guidance of a national [gross domestic product] target.”
Before the start of the coronavirus outbreak, Beijing was thought to be targeting a
of around 6 per cent this year after achieving 6.1 per cent in 2019, although many local governments appear to be setting their own annual targets still using the original expected goal as a guide.
However, that target was never made public because the meeting of the
scheduled for early March, where the growth target would normally have been released, was postponed due to the virus.
The government announced on Wednesday that the NPC will be held from May 22, when a new, likely lower, growth target could be announced.
China’s first-quarter GDP shrinks for the first time since 1976 as coronavirus cripples economy
International rating agency Moody’s warned that greater infrastructure spending would result in higher debt for regional and local governments, increasing their financial risks amid a sharp slowdown in tax revenues.
“Such investments are less likely to be a main support measure [chosen by Beijing] now given the government’s focus on avoiding a rapid increase in leverage and asset price inflation,” Moody’s analysts Michael Taylor and Lilian Li said on Tuesday.
At the end of March, local government debt stood at 22.8 trillion yuan (US$3.2 trillion), according to the Ministry of Finance. But implicit liabilities, which are hidden in local financing vehicles, state firms and public-private partnership projects, are believed to be much larger, with some estimates pointing towards an additional debt of over 30 trillion yuan.
Chinese central bank governor Yi Gang, along with other officials, have already warned against excessive economic stimulus, saying it would add risks to China’s financial system.
A key risk is that local governments are front-loading China’s long-term investment plan, especially in the railway sector, with more than 357 railway projects proposed by local governments.
Shandong province, for example, is preparing to build four new railway lines, including the Shandong portion of a second high-speed railway between Beijing to Shanghai.
“There is still a chance for infrastructure investment growth to hit 10 per cent if the government releases 2 trillion yuan (US$282 billion) in funding through local special purpose bonds and special treasury bonds,” said Haitong Securities’ chief economist Jiang Chao on Monday.
However, a local government debt monitoring report issued on Tuesday by the National Institution of Finance and Development warned that China’s local government fiscal situation is worsening rapidly as expenses surge and revenues drop.
“All levels of local governments in China will face huge debt repayment pressure in five years,” warned Yin Jianfeng, deputy director of the Beijing-based think-tank.
BEIJING (Reuters) – China’s factory activity likely rose for a second straight month in April as more businesses re-opened from strict lockdowns implemented to contain the coronavirus outbreak, which has now paralysed the global economy.
The official manufacturing Purchasing Manager’s Index (PMI), due for release on Thursday, is forecast to fall to 51 in April, from 52 in March, according to the median forecast of 32 economists polled by Reuters. A reading above the 50-point mark indicates an expansion in activity.
While the forecast PMI would show a slight moderation in China’s factory activity growth, it would be a stark contrast to recent PMIs in other economies, which plummeted to previously unimaginable lows.
That global slump, caused by heavy government-ordered lockdowns, as well as the cautious resumption of business in China, suggests any recovery in the world’s second-largest economy is likely to be some way off.
“The recovery so far has been led by a bounce-back in production, however, the growth bottleneck has decisively shifted to the demand side, as global growth has weakened and consumption recovery has lagged amid continued social distancing,” Morgan Stanley said in a note.
“The expected slump in external demand has likely capped further recovery in industrial production.”
The latest official data showed 84% of mid-sized and small business had reopened as of April 15, compared with 71.7% on March 24.
Hobbled by the coronavirus, China’s economy shrank 6.8% in the first quarter from a year earlier, the first contraction since current quarterly records began.
That has left Chinese manufacturers with reduced export orders and a logistics logjam, as many exporters grapple with rising inventory, high costs and falling profits. Some have let workers go as part of the cost-cutting efforts.
A China-based brokerage Zhongtai Securities estimated that the country’s real unemployment rate, measured using international standards, could exceed 20%, equal to more than 70 million job losses and much higher than March’s official reading of 5.9%.
Sheng Laiyun, deputy head at the statistics bureau, said on Sunday migrant workers and college graduates are facing increasing pressures to secure jobs, while official jobless surveys show nearly 20% of employed workers not working in March.
Chinese authorities have rolled out more support to revive the economy. The People’s Bank of China earlier in April cut the amount of cash banks must hold as reserves and reduced the interest rate on lenders’ excess reserves.
SHANGHAI (Reuters) – China’s smog-prone northern province of Hebei met its air quality targets by a big margin over the winter after concerted efforts to tackle emissions, a local official said on Sunday, without mentioning coronavirus-related factory shutdowns.
Average PM2.5 concentrations over the October-March period dropped 15% from a year earlier to 61 micrograms per cubic metre, while sulphur dioxide also fell by a third, said He Litao, vice-head of the provincial environmental bureau.
Most experts have attributed the significant decline in air pollution throughout China in the first quarter to the coronavirus outbreak and tough containment measures, which saw cities and entire provinces locked down and sharply reduced traffic and industrial activity throughout the country.
With millions staying at home, concentrations of lung-damaging PM2.5 particles fell by nearly 15% in more than 300 Chinese cities in the first three months of 2020.
Shanghai saw emissions fall by nearly 20% in the first quarter, while in Wuhan, where the pandemic originated, monthly averages dropped more than a third compared to last year.
However, He of the Hebei environmental bureau attributed the local decline in pollution to the “conscientious implementation” of government decisions even in the face of unfavourable weather conditions.
According to a winter action plan published last year, 10 cities in Hebei were expected to cut lung-damaging small particles known as PM2.5 by 1%-6% compared to the previous year.
Despite the decline, average PM2.5 was still much higher than China’s official standard of 35 micrograms, and the recommended World Health Organization level of 10 micrograms.
Image copyright GETTY IMAGES
CHINDIA ALERT: You'll be living in their world, very soon 