CHINESE banks extended a forecast-beating amount of new loans in September while broad money supply growth also accelerated, buoyed by credit demand from the real economy.
New yuan-denominated lending in September hit 1.27 trillion yuan (US$192.8 billion), up from 1.09 trillion yuan in August, well above market expectations, central bank data showed Saturday.
The M2, a broad measure of money supply that covers cash in circulation and all deposits, at the end of September rose 9.2 percent from a year earlier, accelerating from 8.9 percent recorded a month ago, the People’s Bank of China said in a statement on its website.
It marked the first time M2 growth has picked up in eight months, but the rate was still 2.3 percentage points lower from a year earlier.
Newly added total social financing, a broader measure of new credit in the economy, reached 1.82 trillion yuan in September, up from 1.48 trillion yuan in August.
The combined data reflected the sharp drop in loans from banks to other financial firms, which is considered a key channel for financing shadow banking transactions, Bloomberg chief Asia economist Tom Orlik said in a research note.
The PBOC has been trying to strike a balance between defusing risks arising from shadow banking activities and guiding funds into the real economy to shore up growth.
“The government is aiming to deleverage without moving any great distance from its commitment to 6.5 percent annual GDP growth out to 2020. That implies credit to the real economy will have to stay on a rapid growth path,” Orlik said.
In a bid to improve credit support for small and micro-sized enterprises, startups and agricultural production, the PBOC recently announced a targeted reserve requirement ratio reduction.
The new policy, which goes into effect in 2018, offers commercial banks an RRR cut of 0.5 to 1.5 percentage points from next year if their annual outstanding or new loans in inclusive financing reach certain requirements.
China International Capital Corporation had previously estimated that the cut, after implementation, may release more than 800 billion yuan of liquidity into the economy.
According to Jiang Chao, chief economist at Haitong Securities, the announcement, together with Saturday’s M2 data, was not an indication that the central bank is loosening its stance on financial deleveraging.
“Taking into account the high leverage in the domestic real estate market and potential interest rate hike by the Federal Reserve, it’s unlikely the PBOC will loosen its monetary policy,” Jiang said.
PBOC data also showed that in the first three quarters, Chinese banks extended 11.16 trillion yuan of new loans, 998 billion yuan more than the same period last year.
New loans made to non-financial enterprises and government institutions hit 5.73 trillion yuan in the first nine months, indicating credit demand from the real economy.
Medium to long-term loans made to home buyers, mainly consisting of personal housing mortgages, added 4.2 trillion yuan during the period.
By the end of September, outstanding yuan loans grew 13.1 percent from a year earlier to 117.76 trillion yuan.
THE banking sector of the China (Shanghai) Pilot Free Trade Zone has reaped the maximum benefit from a slew of policies since the establishment of the zone in 2013.
China has been actively working toward full yuan onvertibility that will grant greater flexibility to Chinese investment overseas.
In Shanghai FTZ, the free trade account functions as an instrument in piloting the country’s capital account conversion in a risk-controlled environment.
The past four years has witnessed a wider convertibility of yuan and in cross-border payment. By the end of July this year, the outstanding cross-border yuan settlement within the zone had reached 673.6 billion yuan (US$101.2 billion), accounting for almost 60 percent of the city’s total volume, according to the Shanghai Financial Services Office.
Nearly 700 enterprises have used the two-way cross-border yuan capital pool service. A total of 68,700 free trade accounts had been set up by the end of July, with the transaction volume reaching 4 trillion yuan since the beginning of 2017, the regulator said.
As of June 30, there were 477 banking establishments in the region and the outstanding foreign loans surged by 131 percent year on year, far exceeding the average loan growth rate of 14.5 percent.
The ratio of non-performing loans in the area was 0.58 percent during the same period, much lower than the nation’s average level, data from the Shanghai Bureau of the China Banking Regulatory Commission revealed.
On its fourth anniversary, the FTZ received a big birthday gift after Aland Group, a Jiangsu-based healthcare enterprise, became the first international company to implement the functions of a global treasury center under the advanced cross-border pooling program led by Citi China.
This new structure is an expansion of the free trade account initiative to implement the People’s Bank of China’s policy and expand the financial service functions and support technological innovation and economic progress in the zone.
Foreign-funded banks enjoy unique advantages while carrying out businesses in the pilot zone. Owing to its vast cash management network spanning over 160 countries, Citi China’s annual settlement volume of cross-border pooling ranked at the top among the 29 Chinese and foreign banks.
“About 45 to 50 percent of our clients in the zone are multinational companies who crave for better internal capital efficiency, while the small- and medium-sized local companies tend to seek more tangible benefits like yuan-foreign exchange trading,” Cline Zhang, branch manager of Citibank (China) Shanghai Branch, told Shanghai Daily.
“Citi China regards its FTZ sub-branch as an ‘internal test field,’ whose fruits have been replicated and promoted nationwide,” Zhang added.
To provide better cross-border financing options for Chinese firms venturing abroad, United Overseas Bank (UOB) China has launched a credit facility with a locally-headquartered private conglomerate via its FTZ sub-branch’s free trade accounting unit. Through this arrangement, the offshore borrower can get the loan directly from the onshore lender and enjoy convenient banking services like account opening, loan application and legal documentation.
By adhering to the concept of serving real economy, the Shanghai branch of the Industrial and Commercial Bank of China has created more than 20 innovative businesses tailored for the zone-based enterprises.
ICBC set up the first fully functional cross-border two-way yuan pool this June to facilitate one subsidiary of the RT-Mart International, a Taiwan-based hypermarket chain.
“With this innovative measure, enterprises can select whatever currency they like from the pool for cash concentration, and thereby reduce the exchange cost,” said Qiu Yanling, head of correspondent banking division of the international banking department of ICBC’s Shanghai branch.
Relying on the free trade account platform, the bank has been involved in a number of overseas syndicates, and provided financial support for large cross-border merger and acquisition deals totaling more than 10 billion yuan.
To help reduce the financing cost of the enterprises and ensure the convenience of finance for real economy, the Agricultural Bank of China’s Shanghai branch established fund-financing channels by using its right to independent pricing for loan interest rate. By the end of May, 56 core clients of the bank were granted credit with outstanding loans amounting to 39.6 billion yuan.
By applying blockchain technology to free trade account remittance, China Merchants Bank helped one of its foreign clients to make cross-border Hong Kong dollar payment from a free trade non-resident account in the experimental area to a Hong Kong account.
China Everbright Bank’s Shanghai branch keeps providing comprehensive financial services to their customers in the zone by introducing and improving its “sunshine free trade” product system covering settlement, financing, investment and financing, treasury trading and online banking. By the end of 2016, there was a nine-fold year-on-year growth of its customers under the separate accounting unit and the total accounts soared by 15 times annually.
Shanghai HuaRui Bank, the first local private bank which was set up in 2015, has been focusing on exploring the segmented markets of serving the small and micro public. The lender has introduced preferential policies related to fee to those companies registered in the zone.
“With a clear and differentiated strategy, we are banking on our business in the free trade zone, online finance and lending to high-tech start-ups,” Xie Qiang, vice president and chief risk officer of the bank told Shanghai Daily.
Eight measures by CBRC
To support the operations of banks in the FTZ, simplify access modes and improve the regulatory service system.
PBOC FTZ 30 Rules
To set out the operational rules for the relevant cross-border use of yuan businesses in the FTZ.
To enable two-way cross-border yuan cash pooling and centralized current account yuan payments and collections, etc.
Foreign currency cross-border treasury center pilot program by PBOC’s Shanghai head office
To allow companies to achieve centralized fund management by integrating foreign currency cross-border pooling and payment netting.
Shanghai FTZ 40 Rules by PBOC, the Ministry of Commerce, CBRC, CSRC, CIRC, the SAFE and the Shanghai government
To encourage trial program of yuan convertibility under the capital account.
Circular 122 by PBOC’s Shanghai head office
To encourage the establishment of a fully functional onshore cross-border yuan pool.
Access simplification policy by CBRC Shanghai Bureau
To streamline administrative procedures for the FTZ.
SHANGHAI aims to play the role of a “bridgehead” by expanding its overseas trading under China’s Belt and Road initiative.
Over the past three years, Shanghai has invested US$5.5 billion in 246 projects in countries along the Belt and Road and sealed contracts worth US$21.7 billion, which soared 160 percent and 9.4 percent annually respectively on average, said Tang Zhiping, deputy secretary-general of the Shanghai government.
Shanghai’s trade with the Belt and Road countries has exceeded 500 billion yuan (US$76 billion), taking up over 20 percent of the city’s total trade.
Echoing the central government’s call to set up more advanced infrastructure to link China and Eurasian countries, Shanghai aims to be a “bridgehead,” whereby the city will grow its trade with Belt and Road countries and regions.
Shanghai Electric, one of China’s largest industrial equipment producers, has built nearly 30 electrical substations by mid-2017 in countries such as Sudan, Ethiopia, Pakistan and Malaysia under Belt and Road Initiative, while the company has netted US$2.4 billion in contracts to build power stations in those countries.
Its income overseas accounted for 14 percent of its total last year. It has also merged with foreign manufacturing giants in the Netherlands and Italy.
Shanghai-based China COSCO Shipping Corp has assigned 131 of its ships for Belt and Road Initiative by mid-2017. These vessels have a total handling capacity of 1.2 million TEUs (twenty-foot equivalent unit) — standard capacity for a container — a year, accounting for 68 percent of total capacity of the shipper’s container ships.
After acquiring 67 percent shares of Greece’s largest port last year, China COSCO has been upgrading the port with automated technologies, “injecting China’s advanced independent technology to the world,” said Zhang Dayu, deputy managing director of COSCO Shipping Ports.
A local private company, Shanghai Aowei Technology Development Co, has helped produce the first batch of capacitor vehicles (electric buses that are fully charged in several minutes by using ultracapacitors) in Minsk, capital of Belarus, in May after it joined the China-Belarus Industrial Park which was established under the Belt and Road Initiative.
The Minsk government has announced the production of another 60 buses by 2018 to help make the city “greener.”
In order to track more comprehensively China’s freight trade with relevant countries through Shanghai port under Belt and Road Initiative, the Shanghai Shipping Exchange launched the Belt and Road Shipping Indices on July 11.
The indices showed that by the end of September the value of trade between China and countries under the Belt and Road Initiative has grown 13 percent from 2015 while it rose 4.1 percent from one month earlier.
“Shanghai, the world’s largest port, is expected to take a more important role in helping boost the initiative’s implementation,” said Liu Yue, manager of the exchange’s information department.
OVER 15 years, the Shanghai Gold Exchange (SGE) has evolved into a hub and pivot of the country’s gold market and is now teaming up with more foreign peers.
As the world’s largest gold producer and consumer, China has never played a major role in the global gold fixing until 2016, when it introduced a new pricing mechanism for benchmarking the price of gold.
This landmark move is aimed at building the country’s influence in the global market, which has been long dominated by UK and US.
Also known as “Shanghai Gold,” the yuan-denominated new contracts enriched the current gold-trading varieties with new standards and trading rules. It enabled the foreign investors to participate in China’s rapidly growing bullion trading market.
It is a natural progression for China to launch a pricing mechanism and is a step in the right direction, according to Alastair McIntyre, president at Malagash Metals and Mining Advisory.
Market insiders and experts said “Shanghai Gold” is now elevating China’s position in the international gold market.
The SGE has been the world’s largest spot physical gold exchange for 10 consecutive years since 2007. However, as the gold price is denominated by the US dollar, market insiders are of the view that the old pricing system cannot reflect the real market situation in different regions.
Till the end of 2016, the exchange had recruited 253 members, among which 69 are international members, including heavyweights like HSBC, UBS and Standard Chartered.
Twelve financial institutions, including the top five state-owned lenders, are listed by SGE as market makers for the “Shanghai fix”.
Positioning itself for global pricing, the exchange aims to find price discovery among its members, local or foreign, who are either buying or selling physical gold.
As SGE is primarily a physical market, it suggests that its pricing will represent a true balance of supply and demand, industry observers said.
In the past two years, the exchange has been expanding its partners worldwide, especially along the Belt and Road.
Last March, a Memorandum of Understanding was signed between the SGE and the Hong Kong Exchanges and Clearing Limited (HKEX). The two sides aim to pursue cooperation opportunities in product development and cross-market connectivity.
The bourse also signed an agreement with the Dubai Gold and Commodities Exchange (DGCX) last October, which makes it the first foreign exchange to use the SGE’s yuan-denominated gold benchmark. The contracts began trading this April and was well-received by countries along the Belt and Road.
“We are in talks with other exchanges about similar cooperation. Progress has been made with Moscow Exchange, Bursa Malaysia Derivatives (BMD) and Myanmar Gold Entrepreneurs Association,” said Jiao Jinpu, chairman of the SGE.
“As an integral player in China and global gold community, SGE is committed to innovation and the opening-up of the gold market,” Jiao said.
It also signed strategic cooperation agreements with seven provinces like Guangxi, Yunnan and Xinjiang and helped them to upgrade their gold industry.
“We are now jointly preparing for the Belt and Road initiative gold development fund, along with upstream and downstream enterprises, with a preliminary scale of around 100 to 200 billion yuan (US$30.36 billion),” Jiao said.
“We will try to attract more enterprises and financial institutions along the Belt and Road to use our benchmark price and promote market participants to develop more application scenarios and related derivatives. We are committed to enhancing the influence of “Shanghai Gold” along the route,” Jiao added.
As a bridgehead of China’s reform and opening up, Shanghai has firmly grasped the historical opportunity of the Belt and Road Initiative and has recorded substantial progress especially in its financial sectors. It is now going at full steam to build the city into an investment and financing hub.Among a slew of stimulus packages, the China (Shanghai) Pilot Free Trade Zone (FTZ) is promoting yuan-denominated financial products in the local bourse to attract overseas investors.“Shanghai FTZ plans to attract sovereign funds from countries along the Belt and Road to invest in onshore yuan-denominated assets,” Li Jun, vice director of the Shanghai Financial Service Office, told Shanghai Daily during a media briefing.“It supports qualified foreign companies to develop and expand its business by making use of China’s capital market,” Li added.Encouraged by the policy, Russian aluminum giant UC Rusalan offered 1 billion yuan (US$145.3 million) worth of seven-year yuan-denominated onshore bonds earlier this year to fund its locally-purchased equipment. It thus became the first company along the Belt and Road route to issue panda bonds on the Shanghai Stock Exchange.Since then, more international organizations have made similar arrangements. Foreign federal and state governments and overseas non-financial enterprises have issued bonds totaling over 200 billion yuan.Thanks to its competitive edges, Shanghai has managed to lure a number of foreign banks along the route to set up branches. As of August 31, five banks, 13 foreign bank branches and 11 representative offices from 15 countries were set up in Shanghai with total assets of almost 212 billion yuan.With the opening of Shanghai-Hong Kong Stock Connect for equities and gold as well as the Bond Connect, interconnectivity between the onshore and offshore financial markets has been enhanced.By the end of August, the Shanghai Gold Exchange had attracted 12 members from the Belt and Road countries and regions, which account for about 18 percent of its total international membership.To expand its financial market, the Shanghai government says it will strengthen bilateral and multilateral cooperation with nations along the region.
To the outside world, actuaries are seen to be part technicians, part fortunetellers.They use mathematical and economical models as their crystal balls to calculate probabilities of future events and hence help to manage long-term risks. Actuarial profession is relatively new in China, largely emerging alongside the development of China’s insurance industry. In 1999, the nation’s first vocational certificate examination was initiated for actuaries.Today, there are about 1,700 professionals in the industry in China, according to the China Association of Actuaries. The actuarial profession carries considerable prestige.However, the new technologies such as data science and artificial intelligence are posing new challenges for actuaries.Shanghai Daily sat down with Derek Cribb, the Chief Executive of the Institute and Faculty of Actuaries, to discuss the actuarial qualifications and how the profession is being changed by high technology.Merging from two of the world’s oldest actuarial bodies in the UK, the 170-year old IFoA is dedicated to educating, developing and regulating actuaries based both in the UK and internationally.Of its nearly 30,000 global members, about 1,000 are based in China’s mainland, Hong Kong, Macau and Taiwan. These include student actuaries.Q: Actuaries are experts in mathematics, economics and finance. What kind of skills and competence do they exactly need to acquire?A: An actuary is, above all else, a business professional. Actuarial qualification is not purely an academic qualification; it also requires strong technical and business skills. We train our actuaries to apply their technical skills in the business environment. Actuaries are high ethical people as they need to comply with high professional standards.To qualify as an IFoA fellow (FIA), our members have to pass 15 exams under our current curriculum. The first phase includes nine technical subjects on statistics, financial mathematics, probability, and basic business and accounting. We have accredited eight universities in the mainland and Hong Kong, including Antai College of Management and Economics in Shanghai, to allow students to claim exemptions from some or all of the CT exams after they graduate. The second phase provides our members with more practical skills, where students need to learn how to apply actuarial theories and technical skills to the real business world. The second phase is called the “specialist stage,” where students focus on specialized areas such as life insurance, general insurance, risk management, health management, or finance and investment.The IFoA therefore provides two levels of actuarial qualifications. Before reaching the specialist stage, one can qualify as an associate. That requires a member to pass 12 exams with at least one year work experience. If the member wants to become a fellow, then he/she needs to pass further three specialist exams and accumulate at least three years of work experience. Half of our members are fellows. But we are encouraging our members to go wider fields so not over specializing can be a good thing. I think any companies with long term liabilities can benefit the services of actuaries so there are great opportunities for actuaries in a wide range of businesses. Q: We tend to associate actuaries with the insurance industry. Could you elaborate actuaries’ work you just mentioned in the other sectors?A: Yes, more than half of our members are working in the insurance industry. But we are seeing growing number of members going into other industries as well. The essence of being an actuary is to have long term views and understand long-term labilities, unlike the accountants or management consultants who work with the past and mainly focus on what happens in the next year or two. So actuaries take a much longer-term view. For example, in the pharmaceutical industry, to develop a new drug, there may be a significant upfront cost in research. But after the drug is tested successful then there will be a series of cash inflows to the company in future years. To determine the financial impact on the company, one needs to analyze the initial investment, future possible cash flows and probabilities — all core skills of an actuary. The same might apply in the oil and gas industry, where there are long term liabilities and financial uncertainties. Q: How long does it take to pass all the IFoA exams to be an actuary?A: Some students go through the university exemption process as I mentioned earlier. Some just sit our professional exams after they have found jobs with their actuarial employers. On average, our members qualify in 3-6 years. To qualify as an actuary we also require our members to have at least three years of work experience. We believe work experience is essential to anyone who wants to become an actuary.Q: Computers are already challenging pure manual work in the finance industry. Should actuaries be worried about being replaced by high technology?A: Yes, it is a threat, but it’s also a massive opportunity for actuaries. There are no other professionals that I can think of that have such a rational data-thinking competence. Actuaries love data and they are good at working with data. There are three stages involved working with data. Stage one is identifying the problems — what issues the company has — and choosing the model which will help to understand the issues better. The second stage is data analysis — design the model and run the data. This is the stage where machine learning and artificial intelligence pose the greatest threat to manual work. As time progresses, I believe machines will replace man work in terms of pure model running. The final stage is understanding the output of the model and being able to interpret the results to business leaders for decision making and action taking. So artificial intelligence will eventually replace all work currently at stage two, but not stage one and three where detailed analysis and communications are required from actuaries. This is why I say our actuaries should be prepared to acquire business skills. Pure technical actuaries are at danger of being replaced. Q: So there will be no place for the pure technical actuaries?A: I think actuaries with strong business skills will progress more quickly through their careers. If they only have technical skills, they may still have a good career for now, but they are facing a lot of challenges in future. Q: Are actuaries all super rich?A: Various third parties conduct surveys on actuarial salaries on a regular basis. In the UK, the average annual basic salary for a newly qualified actuary is about 55,000 pounds (US$72,400). In Hong Kong, the average annual basic salary for actuaries with around 5 years experience is around 700,000 Hong Kong dollars (US$89,000). Chinese mainland employers are reluctant to disclose salaries but I think earning at the senior level can be aligned to that in Hong Kong.In the mainland, companies tend to hire more senior-level actuaries and have fewer openings for students who just finished their degrees. However the trend is changing nowadays with more companies willing to hire junior levels.
XU Li, a 35-year-old Shanghai computer scientist, offered a sweeping vision of the future of artificial intelligence at a recent global forum in the city.
The co-founder and chief executive of SenseTime has built a company valued at 10 billion yuan (US$1.5 billion), after it secured the biggest single round of financing in the worldwide artificial intelligence industry a few months ago.
The company’s algorithm has become an invaluable assistant to police and smartphone users. It can set up facial recognition systems to nab criminals, “read” thousands of X-ray films in one night and optimize aperture setups to take better photos with handsets.
“We offer unified AI services like Lego to business clients,” Xu told the 2017 Global (Shanghai) Artificial Intelligence Innovation Summit, which attracted top government and industry officials. “Using that, clients can build castles, parks or vehicles on their own.”
SenseTime is a relative latecomer in the industry, compared with Facebook or Google’s AlphaGo, but that doesn’t dim Xu’s confidence. He said he wants to help define China’s own artificial intelligence standards and eco-system instead of piggybacking on the developments of others.
That’s the sort of pluck the Chinese government likes to hear. The nation’s leaders have adopted a strategy of encouraging innovation in the technology sector, led by entrepreneurs with bright ideas and bold ambitions.
A domestically developed standard for artificial intelligence is also considered vital to national security.
According to the blueprint put forth by the State Council, China’s cabinet, the value of the nation’s core AI industries will exceed 150 billion yuan by 2020 and 400 billion yuan by 2025.
The accuracy rate of natural language comprehension, voice recognition, and image and device recognition has already crossed the industry’s “red line,” meaning accuracy beyond that of human beings, analysts said.
China has natural advantages in the development of artificial intelligence, with its large population and already huge volume of data and industrial applications. But Xu said AI can’t really redefine and change the whole economy without China’s possessing its own core system and standards.
Offering services such as facial recognition, smart surveillance and deep learning, SenseTime’s clientele includes China Mobile, UnionPay, Huawei, Xiaomi, OPPO, Vivo, Weibo and other industry giants.
The company charges a licensing fee for its Intelligent Video Analytics service, which covers more than 100 million people, including smartphone users who want optimized selfies and the “bokeh,” or artistic blur, effect.
Xu said the Lego business model results in unified services and stable income flow. The bulk of the company’s income comes from Beijing in the north and the Shenzhen region in the south, but Xu said he sees great market opportunities in Shanghai, where he attended university.
“Shanghai has unique advantages in international professional talent, advanced information structures and finance,” Xu told the Shanghai summit.
SenseTime has already attracted clients in the city, spanning smart manufacturing, self-driving cars and financial technology — areas where Shanghai occupies a leading national role.
The city seeks to establish itself as “China’s artificial intelligence highland” by providing incentive policies and funding to attract top artificial intelligence firms to Shanghai technology parks, according to summit speakers who included Shanghai Vice Mayor Zhou Bo.
In July, SenseTime announced it had raised US$410 million in its latest round of funding. Major investors included CDH Investments and Sailing Capital, and almost 20 financial institutions such as China International Capital Corp, China Everbright Holdings, China Renaissance and China Merchants Securities (Hong Kong).
The capital injection will support technology and applications development at SenseTime, Xu said. Among the hot areas of development are autonomous cars. Xu said they will become a reality in a decade or so, and currently present an ideal sector for the company’s involvement.
By 2020, artificial intelligence is expected to become a US$1 trillion global industry. By 2030, its value will exceed the combined gross domestic products of China and India, according to a recent report by professional services firm PwC.
Talent pools are a key element in the success of artificial intelligence companies, Xu said. SenseTime now employs more than 120 engineers with doctoral or post-doctoral degrees.
China has become a magnet for attracting talent and investment in the realm of artificial intelligence, narrowing the gap with the US, LinkedIn said in a report.
Deutsche Telekom CTO Bruno Jacobfeuerborn (right) presents 5G ultra high-speed next generation mobile antennas technology in Berlin yesterday, a milestone in the race to provide the fast response times needed for virtual reality and autonomous driving. Telekom said it was the first use of the technology in a real world setting in Europe.
CHINA said yesterday that the European Union’s new trade rules against Chinese imports lacked awareness of World Trade Organization rules, urging the EU to abide by those requirements.
The EU’s new anti-dumping rules that grant separate treatment for imports under “significant market distortions” are not in compliance with WTO obligations, Ministry of Commerce spokesman Gao Feng said at a regular briefing in Beijing.
The concept of “significant market distortions” is not stated in the anti-dumping rules of the WTO, Gao said.
The move is thus groundless and will harm the effectiveness of the WTO anti-dumping legal system, as it adds uncertainty to the rules’ applications, Gao added.
The EU agreed to new rules last week in Strasbourg on new investigation methods for anti-dumping, which introduced “significant market distortions” other than the “analogue country methodology” when calculating dumping margins.
The informal agreement was due to be put to a vote in the international trade committee yesterday.
When asked about the United States deferring a decision on anti-dumping tariffs on imports of Chinese aluminum foil and China’s non-market economy status, Gao said the phrase non-market economy showed “Cold War” thinking.
The concept of non-market economy countries does not exist in WTO rules and has only been adopted by some of the organization’s individual members, Gao said, adding that the concept of “non-market economy country” also does not exist in WTO rules.
PROPERTY tycoon Xu Jiayin saw his wealth more than triple to US$43 billion, topping the Hurun Rich List this year.
Xu, chairman of Evergrande Group, becomes the 12th person to top the list — which covers the Chinese mainland — since the compilation began 19 years ago.
The average wealth of billionaires on the rich list rose 12.5 percent to US$1.2 billion, with the top 100 shooting up 60 percent annually, according to the list, which was released yesterday.
Wealth calculations are based on market data as of August 15.
“This year we found more than 2,000 individuals with wealth worth US$300 million, double that of five years ago and four times that of 10 years ago,” said Rupert Hoogewerf, Hurun’s chairman and chief researcher.
Tencent Chairman Pony Ma saw his assets rise 52 percent to US$37 billion, surpassing Alibaba’s Jack Ma, whose assets dropped to US$30 billion after cutting his stake in Ant Financial last year to 1.2 percent from 35.5 percent.
Xu has knocked Wang Jianlin, founder of the Dalian Wanda entertainment and real estate empire, off his long-time position at No. 1 on the list.
Xu has been likened by some media to Donald Trump, having built his fortune on a real estate business that has blossomed under a mountain of debt.
The 59-year-old Xu’s Evergrande has a market value of US$47 billion, although its total debt stands at more than US$100 billion, an issue that has prompted some wary investors to short the stock.
Evergrande, China’s second-most indebted company, has now pledged to cut its net debt ratio to around 70 percent by June 2020 from 240 percent.
Xu’s wealth has climbed by US$30 billion in the past year thanks to a boom in the value of Chinese property assets.
He founded Evergrande in 1996 and listed it in Hong Kong in 2009. Acquisition-hungry Evergrande, which has developed thousands of middle-class homes in China, made headlines in 2010 when it bought the main soccer club in its home town of Guangzhou for 100 million yuan (US$15 million).
In 2014, Xu sold a half stake in the club to China’s biggest e-commerce company Alibaba for US$192 million.
Female millionaires make up just over a quarter of the Hurun list (26 percent), and 70 percent of those women’s fortunes are self-made.
Yang Huiyan, the majority shareholder of Country Garden Holdings, has again become the richest woman in China — after an 11-year gap.
Manufacturing is the key industry for the rich list, accounting for 28 percent of millionaires listed, followed by real estate, TMT (technology, media and telecom), investment and health care.
New entries making it to the top 10 of the Hurun Rich List this year are Yang, Wang Wei from SF Express, and in 10th place Geely’s Li Shufu together with his son Li Xingxing.
The number of dollar billionaires in China rose to 647, up 53 from last year.
A total of 43 individuals from e-commerce giant Alibaba and its financial affiliate Ant Financial were included in the rich list, thanks to the booming popularity and market value of the two companies.
The 26-year-old founder of bike-sharing service ofo, Dai Wei, became the youngest self-made entrepreneur on the list.
Jia Yueting of LeEco dropped down from 31st place last year to 1,978th place, after his wealth shrank 95 percent due to supply chain stress and cash-flow problems.
Beijing is still the preferred city of residence for 300 individuals on the list, ahead of Shenzhen’s 223.
Hangzhou is catching up with Shanghai fast, with 153 billionaire residents compared with Shanghai’s 174.
The Hurun Report is regarded as the leading China-based organization ranking the wealth of the country’s rich and famous.
STEEL maker Kobe Steel apologized yesterday after finding wider problems, dating back to 2011, with faked inspections data for metals used in many products, including cars, bullet trains, aircraft and appliances.
Kobe Steel’s president, Hiroya Kawasaki, bowed deeply in a formal apology, lamenting that “Trust in our company has dropped to zero.”
He promised a senior trade ministry official that the company, Japan’s third-largest steelmaker, would provide results of safety inspections within two weeks and a report on the cause of the problem within a month.
Akihiro Tada, director of the ministry’s Manufacturing Industries Bureau, urged the company to move quickly in resolving the problems, which are thought to have affected many of the country’s largest manufacturers.
The company said in a statement late Wednesday that it had uncovered manipulation of data on steel powder used in metallurgy and also on high-tech materials used to create films used in computer chips. The government has urged Kobe Steel to clarify the extent of the misconduct.
The latest discovery was of falsification of data on 140 tons of steel powder supplied to one customer in fiscal 2016, between April 2016 and March 2017.
Another case involved 6,611 items of sputtering target materials shipped to 70 customers beginning in November 2011. Kobe Steel said it had failed to carry out tests it had agreed to conduct, and improperly “rewrote” inspection data.
But it said most of those materials, used to deposit thin films from various materials onto components such as computer chips, were re-inspected and are thought to have met customers’ specifications.
Earlier the company said that in the year up to August 31 it had sold materials such as aluminum flat-rolled products, aluminum extrusions, copper strips, copper tubes and aluminum castings and forgings using falsified data on such things as the products’ strength.
The government has asked the company to provide more information about the products supplied to more than 200 Kobe Steel customers, reportedly including some of the country’s biggest manufacturers, including defense contractor Mitsubishi Heavy Industries and a number of automakers.
JPMORGAN Chase & Co’s third-quarter profit rose 7 percent from a year earlier, as the bank was able to increase revenue in its consumer banking business even though the company had to set aside additional funds to cover bad loans, most notably in its credit card division.
The biggest bank by deposits and assets said yesterday it earned a profit of US$6.73 billion, or US$1.76 per share, compared with US$6.29 billion, or US$1.58 a share, in the same period a year earlier. The results beat analysts’ hopes, who were looking for JPMorgan to earn US$1.65 a share, according to FactSet.
JPMorgan’s consumer bank was the driver of this quarter’s growth, reporting a 16 percent rise in net income. The bank saw higher deposit growth and increased revenue in its credit card division, which the bank has been expanding aggressively in the last year with a new high-end credit card known as Chase Sapphire Reserve. Charge-offs in that business have been creeping steadily higher for several quarters, however, and the bank had to set aside an additional US$300 million to cover potential losses.
Despite the creep up in delinquencies, “the US consumer remains healthy,” JPMorgan Chase CEO Jamie Dimon said in a statement.
The gains in JPMorgan’s consumer banking division were more than enough to make up for declines in corporate and investment banking, its other major business. That division suffered a 13 percent fall in profits from a year earlier, mostly due to lower trading revenues. Bond trading revenue slumped 27 percent and stock trading revenue fell 4 percent, the bank said. Revenue across the bank was US$26.2 billion on a managed basis.
YEARS of struggle for Germany’s second-ranked airline Air Berlin appeared on their final stretch yesterday, as Lufthansa announced plans to buy more than half the bankrupt carrier’s planes.
The deal has sparked controversy in the European aviation sector, with the German government facing accusations it helped steer the process under a plan to build the Frankfurt-based carrier into an all-conquering juggernaut.
Lufthansa will take over Air Berlin’s Austrian subsidiary Niki, German subsidiary LGW and 20 further aircraft, guaranteeing all jobs at the two smaller firms, Air Berlin said in a statement.
The deal includes 81 of Air Berlin’s 144 aircraft and 3,000 of its 8,500 staff, Lufthansa chief executive Carsten Spohr said in Berlin, hailing it as a “great day” for his company.
Meanwhile, negotiations with Easyjet — the other bidder chosen for exclusive takeover talks — “are continuing”, Air Berlin said, offering no information about what the British firm hopes to buy or whether any Air Berlin staff will keep their jobs.
Spohr has suggested Easyjet is interested in up to 30 aircraft.
Lufthansa has yet to say how much it will pay under the deal, but Spohr told newspaper Rheinische Post yesterday that the group would invest 1.5 billion euros (US$1.8 billion) in its low-cost subsidiary Eurowings following the takeover.
He added that 80 planes was the largest addition to Lufthansa’s fleet that competition authorities would accept.
FOR the first time in years the International Monetary Fund is optimistic about global economic growth. But it sees a new problem: mounting debt in the world’s largest countries.
“Debt levels are increasing in G20 economies,” Tobias Adrian, who heads the IMF’s monetary and capital markets division, said Wednesday.
Among private businesses in those countries, leverage is higher than before the financial crisis. And the weight of debt service has also jumped in several top economies, he noted.
With central banks in the United States and Europe expected to tighten monetary conditions, he said, “This poses greater risks over time from sharp increases in interest rates.”
Introducing the IMF’s newest assessment of risk in the world’s financial system, Adrian noted that the extremely low interest rates of the past several years have allowed countries to borrow easily to finance their rebound from recessions.
And recovery is not yet complete, he noted, saying low rates are still needed.
At the same time, he said, “this environment is breeding complacency,” with risks building on several fronts.
Another side of the problem is the dependence of emerging market and lower-income economies on external funding, especially portfolio investment inflows. Around US$300 billion in such funds will flow into these countries in 2017, supporting their growth.
“This is broadly good news,” said Adrian.
“But this greater reliance on foreign borrowing may at some point become a vulnerability, particularly for low-income countries, if those resources are not put to good use.”
That leaves such markets vulnerable to shocks like geopolitical turmoil and jumps in interest rates, which would increase the cost of debt, and could spark sharp outflows in portfolio investment.
“It’s going to be a challenge especially when you move to a world where the Federal Reserve is going to raise US interest rates, global rates will rise, and debt service will rise,” Sonja Gibbs, of the Institute of International Finance, said.
German solar panel component maker Heraeus said yesterday its sales surged 50 percent annually in China’s solar power sector over the first nine months of the year.The firm, however, didn’t unveil the sales figure but it said China contributed 65 percent to its global sales in solar power business this year. The company’s solar power sales has jumped since the start of the year boosted by China’s surging solar farm installations, said Andreas Liebheit, president of Heraeus’s global photovoltaic business.Heraeus is the world’s largest silver paste maker with a 40 percent share of the global market. Silver paste is a component used in solar panels to conduct electricity.China installed 38.28 gigawatts of solar power from January to August, up 49.5 percent from the end of last year, according to the China Electricity Council.The rapid growth in solar power installation from last year was because "solar component costs are declining much faster,” said Alex Liu, analyst for energy and public utilities at UBS.The cost to generate one kilowatt-hour of solar power fell to 0.6 yuan by the end of last year from 1.5 yuan five years ago.Alongside the cost drop, China's solar power industry will also benefit from the government's call for more distributed power grids, Liebheit said. This “suggests the nation should be the long-term key market for global producers,” he said.
SHANGHAI will continue to increase land supply to build rental houses, the city’s top planning body said yesterday.
As a key part of the government’s land management plan, “the lands for rental houses will be largely increased, while those for commercial houses will rise steadily,” said Xu Yisong, director of the Shanghai Planning, Land and Resources Administration.
The supplies of affordable homes, including joint-ownership properties, will be guaranteed, he added. It is also part of the city’s “2040 Master Plan” which includes long-term measures to stabilize the real estate market.
“Rental houses will mainly be built near places with dense employment, main industrial sites and Metro stations,” Xu told a press conference. “The city will increase the land supply for housing and ensue the proportion of medium and small-size apartments,” he added.
Fifteen plots of land covering 500,000 square meters have been allocated for construction of rental houses, said Cen Fukang, deputy director of the administration. Most of them are in downtown or near major industrial and scientific parks as well as Metro stations.
The city government wants to emphasize that “houses are for people to live in, rather than for speculation.”
These rental homes will boast energy-saving features and are comfortable to live in. Supportive facilities such as sports, entertainment and commercial sites will be built nearby to “create a harmonious neighborhood atmosphere,” Cen said.
Shanghai has also been implementing the central government’s trial operations on joint-ownership properties, Cen said. These properties refer to homes in which city governments and home buyers share ownership. When the homes are sold, buyers pay back a certain portion of the profit.
The city has planned public rental houses in 22 major residential communities, Cen said, adding that many of them include joint-ownership properties.
The scheme on trial in Shanghai and Beijing aims to provide affordable housing to people who have difficulties in purchasing a home and push supply-side reform in the housing sector, said a notice from the Ministry of Housing and Urban-Rural Development.
TAIWANESE authorities have imposed a record fine of nearly US$800 million on Qualcomm for antitrust violations in the latest of a string of setbacks for the US computer chip giant.
Taiwan’s Fair Trade Commission slapped Qualcomm with a fine of NT$23.4 billion (US$774 million) for harming market competition and manipulating prices following an investigation launched in 2015.
“Qualcomm’s illegal actions have seriously affected the (market) competition... to ensure, maintain or enhance its dominance in the market,” the commission said in a statement late Wednesday.
According to the commission, Qualcomm had violated fair trade rules for at least seven years by refusing to offer licenses that are essential for manufacturing chipsets to rival manufacturers and had imposed unfair contracts on smartphone makers.
Qualcomm earned over US$13.33 billion in royalty fees and US$30 billion in baseband chip sales to local firms in that period, it added.
The world’s biggest handset chip supplier said yesterday it would appeal the fine.
“Qualcomm disagrees with the decision... and intends to seek to stay any required behavioral measures and appeal the decision to the Taiwanese courts,” it said in a statement.
Last year, Qualcomm was hit with a record fine exceeding US$850 million by South Korea’s antitrust watchdog for abusing its dominant market pole as a maker of baseband chipsets used in mobile phones.
CHINA’S auto sales rose 5.7 percent to 2.71 million vehicles in September from a year ago as momentum continued amid rising demand and strong economic growth.
In the first nine months of the year, auto sales added 4.5 percent to 20.22 million units, according to data from the China Association of Automobile Manufacturers.
The sales growth momentum in September continued from August whose sales expanded 5.3 percent. Analysts predicted that sales will further grow steadily till the end of this year amid rising demand from consumers lured by promotions by manufacturers and dealers amid a strong domestic macro-economic environment.
“There are several reasons to further drive the growth of the China auto market in the second half of this year, such as strong economic growth and increased income of urban and rural residents,” said Xu Haidong, a spokesman of the association.
Earlier this year, the association predicted that China’s auto sales are likely to rise 5 percent this year, a slowdown from 13.7 percent last year, citing reasons such as the reduction of a tax incentive for small-engine vehicles.
In September, passenger car sales rose 3.3 percent to 2.34 million units while those of commercial vehicles surged 23.9 percent to 367,000 units. Commercial vehicles expanded faster in September compared with a 12.81 percent growth in August.
Sales of sport-utility vehicles rose 10.5 percent in September from a year earlier to 971,000 units. Sedan sales added 3.7 percent to 1.16 million units. Multipurpose vehicle sales dropped 25.1 percent to 166,000 units.
Sales of new-energy vehicles jumped 79.1 percent to about 78,000 units in September, faster than a 76.3 percent surge in August. In the first nine months of this year, sales of new-energy vehicles soared 37.7 percent to 398,000 units.
Electric vehicle sales surged 83.4 percent to 64,000 units in September from a year ago. Sales of plug-in hybrids rose 61.9 percent from a year ago to 14,000 units last month.
SHANGHAI shares closed generally flat yesterday, with investors selling off coal shares while pursuing military counters.
The Shanghai Composite Index dipped 0.06 percent to end at 3,386.10 points.
Coal shares declined the most, with Shanxi Coking Co Ltd falling by 7.56 percent to 9.41 yuan, Jinneng Science & Technology Co Ltd losing 5.10 percent to 25.32 yuan and Baotailong New Materials Co Ltd shedding 2.73 percent.
Non-ferrous metals shares also fell. Sunstone Development Co Ltd lost 6.83 percent and Tibet Mineral Development Co Ltd fell 3.98 percent.
Military counters, however, were sought by investors, with Avic Aviation High Technology Co Ltd hitting the maximum daily cap of 10 percent to end at 13.8 yuan. AVIC Electromechanical Systems Co Ltd rose 5.29 percent and AVIC Helicopter Co Ltd climbed 5.08 percent.
TOP Japanese automakers said yesterday they were scrambling to assess the safety of vehicles containing products from Kobe Steel, which has admitted falsifying quality data in a growing scandal.
Toyota, Nissan, Honda, Mitsubishi Motor, Subaru and Mazda joined aviation firms and defense contractors Mitsubishi Heavy Industries, Kawasaki Heavy Industries and IHI that have used the steelmaker’s products.
The brewing crisis is the latest in a string of quality control and governance scandals to hit major Japanese businesses in recent years, undermining the country’s reputation for quality.
Japan’s famous “Shinkansen” bullet trains also used Kobe Steel’s aluminum, as did high-speed trains in Britain, said engineering firm Hitachi.
“Products used (for both Japanese and British trains) met safety standards. But they did not meet the specifications that were agreed between us and Kobe Steel,” a Hitachi spokesman said.
Honda spokesman Tamon Kusakabe said: “As to safety, we are still studying (a possible) impact.”
“At this point, we don’t see a critical problem as we have our own safety inspection on materials we use. But we are still investigating and it’s premature to say” if recalls will be necessary.
Toyota has already said Kobe Steel supplied materials to one of its Japanese factories, which used them in hoods, rear doors and surrounding areas of certain vehicles.
The industry ministry has pressed Kobe Steel to work with its clients, spread over a wide range of industries, to conduct urgent safety analysis.
Kobe Steel also admitted yesterday that it was in talks with one client who received steel powder that did not match specifications.
However, it declined comment on a media report that materials used in semiconductors were also impacted by the scandal.
ALIBABA surpassed its US counterpart Amazon as the world's biggest e-commerce company yesterday as the Hangzhou-based company reached the threshold of US$470 billion in market value.
Shares of Alibaba rose over 1.2 percent in mid-session yesterday to US$184.32, hitting a market capitalization of US$472.1 billion. Meanwhile, the stock of online retailer Amazon shed 0.87 percent to US$982.35 a share, making the company’s market value at US$471.9 billion.
Analysts said Alibaba regained its title as the world’s biggest e-commerce company after over two years thanks to its incredible performance this year.
As one of the top performers on the New York Stock Exchange, Alibaba has gained over 100 percent since January, while Amazon rose nearly 30 percent.
The Chinese company’s stock soared 12 percent in the past two months after it announced better-than-expected quarterly earnings in August.
Alibaba’s net profit jumped 96 percent to more than US$2.1 billion year on year in the first fiscal quarter ending June, beating market expectations.
Moreover, the number of active buyers on Alibaba’s retail platform climbed to 466 million, accounting for about one third of the Chinese population.
Investment banks J.P. Morgan and Morgan Stanley raised their long-term price targets for Alibaba from US$190.17 to US$205.2 respectively after the release of its quarterly report.
SHANGHAI stocks again ended higher yesterday, boosted by gains made by food and beverage counters.
The Shanghai Composite Index added 0.16 percent to close at 3,388.28 points.
Food and beverage shares were the biggest gainers. Jiangxi Huangshanghuang Group Food Co rose 9.99 percent to 22.47 yuan while liquor producers such as Jinhui Liquor Co Ltd advanced 6.96 percent to 22.89 yuan and Anhui Golden Seed Winery Co Ltd added 6.38 percent to 9.67 yuan.
Kweichow Moutai Co Ltd, China’s largest liquor maker by market value, climbed 1.06 percent to a new high yesterday. The liquor maker’s expected earnings per share may be raised to 17.93 yuan this year and 23.65 yuan next year, China Merchant Securities said, adding that target price could rise to 640 yuan.
Logistics firms also rose, with GuangDong GenSho Logistics Co Ltd, Guanghui Logistics Co Ltd and Nanjing Inform Storage Eqpmnt Grp Co Ltd all surging by the daily 10 percent cap. Yunda Holding Co Ltd rose 5 percent to to end at 50.62 yuan.
HUAWEI aims to cement its leading position in China’s domestic market with a price-aggressive strategy on full-display screen phone models, Shanghai Daily learned yesterday.
Huawei launched three full-display Honor models whose prices start from 1,299 yuan (US$197), less than one-fifth the price of Samsung and Apple’s flagship models which normally cost up to 8,000 yuan.
The new Honor models, which will be available on Tuesday, will “popularize” full-display screens in the market, said Zhao Ming, president of the Honor brand.
“It (full-view screen) is a ‘Wow’ product to woo consumers. And it will become a must-have feature soon, like dual-cameras,” said Jia Mo, analyst at research firm Canalys.
ALIBABA Group said it will strengthen its technology research input, aiming to invest more than US$15 billion in research and development over the next three years.
The initial investment would focus on the setting up of seven research labs including two in China, two in the United States, plus one each in Russia, Israel, and Singapore, the company said at its annual Computing Conference in Hangzhou yesterday.
The e-commerce giant’s global research program, called the Alibaba DAMO Academy (Academy for Discovery, Adventure, Momentum and Outlook), is expected to increase its technological collaborations worldwide in order to advance the development of cutting-edge technology.
Alibaba chairman Jack Ma said its ultimate aim is to make society more inclusive and more sustainable, and to create 100 million job opportunities for the world as well as connect businesses with consumers around the globe.
“The DAMO Academy strives to become a perfect integration of business and technology, real market application and ground level research work,” he added.
The DAMO Academy’s focus, he said, will be on “solving problems with fun and profit.”
“Only by doing so will a research institute solve problems. For any organization, if they can’t solve problems in society, they won’t last long,” Ma said.
It is also looking to recruit 100 talented researchers from around the world.
“We aim to discover breakthrough technologies that will enable greater efficiency, network security and ecosystem synergy for consumers and businesses everywhere,” Alibaba Group’s Chief Technology Officer Jeff Zhang said in a statement yesterday.
Zhang added the company is now looking for researchers and collaborators to join the quest for new disruptive technologies that would advance our daily lives, benefit small businesses and narrow the technology gap.
Alibaba’s financial affiliate Ant Financial also launched an independent personal ID verifying platform ZOLOZ yesterday to offer its biometric identification technology for more merchants and businesses.
Chen Jidong, ZOLOS’s China general manager, said Alipay has been using facial, voice and fingerprint recognition to help personal information identification and has served over 200 million Alipay users.
Blockchain, artificial intelligence, security, Internet of Things and cloud computing would be the basic technology capabilities.
APPLE is teaming up with award-winning director Steven Spielberg for its first major push into TV programming.
The iPhone maker is bringing back Spielberg’s 30-year-old anthology series “Amazing Stories” in its attempt to build an online video subscription service to challenge the digital networks operated by Netflix, Amazon, Hulu and HBO.
“We love being at the forefront of Apple’s investment in scripted programming, and can’t think of a better property than Spielberg’s beloved ‘Amazing Stories’ franchise,” NBC Entertainment President Jennifer Salke said in a statement yesterday. NBC Entertainment works with Spielberg’s Amblin Television on the series.
Apple declined to comment on the deal. The Wall Street Journal first reported Apple had secured the “Amazing Stories” rights.
The series aired on NBC from 1985 to 1987 and won five Emmy awards for its mixture of science fiction and horror episodes, although the series was never a big hit in the ratings.
It marked a return to TV for Spielberg, who first made a name for himself directing the ABC film “Duel” in 1971 before moving on to the movie theaters. His films include box-office blockbusters such as “Jaws,” “E.T.,” “Jurassic Park,” the “Indiana Jones” franchise and critically acclaimed pictures such as “Saving Private Ryan,” “Lincoln” and “Schindler’s List,” for which he won an Academy Award for best director.
Apple is planning to spend US$1 billion on original programming during the next year.
THE Ministry of Finance said yesterday it plans to issue US dollar-denominated sovereign bonds worth US$2 billion in Hong Kong, the first such sale in 13 years.
It is ready to sell US$1 billion worth of five-year notes and US$1 billion in 10-year notes in the near future, the ministry said.
The specific date will be released ahead of the issuance, the ministry added.
This is the first time that the ministry will issue dollar-denominated sovereign bonds in Hong Kong, which will offer a pricing benchmark for mainland businesses’ bond sales overseas, according to Shen Jianguang, chief economist with Mizuho Securities Asia Limited.
The sovereign bonds will be listed and traded at the Stock Exchange of Hong Kong after the official launch.
This will also be China’s first US-dollar sovereign bond sale since October 2004.
TWO major Chinese courier companies announced price rises on Tuesday and yesterday ahead of November 11, which is expected to be China’s largest ever online shopping festival.
Better services, according to ZTO Express and Yunda Express, mean rising costs in labor, materials and transport, but neither company was prepared to say by how much prices would rise. Other domestic couriers are expected to follow suit.
Wang Chao, a deliveryman with ZTO Express, said he usually works 11 or 12 hours a day. “I hear that it is just a slight rise and won’t make a big difference, but we will earn a little more,” he said.
China Express Association predicts that the industry will handle more than 1 billion packages between November 11-16.
November 11 is “Singles Day,” allegedly started by some college students in the 1990s to celebrate — or poke fun at — their unattached status. November 11 was chosen for the four solitary digits: 11-11.
It has grown into a Chinese version of Cyber Monday, the Monday after Thanksgiving in the United States, and promoted as an online shopping day.
Alibaba began Singles Day campaigning in 2009. TMall, Alibaba’s online marketplace, made only 50 million yuan (US$7.6 million) back then. Last year, the figure reached 120 billion yuan.
On the back of the e-commerce boom, China’s courier sector has been the world’s largest by delivery volume for three years but continual expansion has put heavy pressure on services, leading to problems in delivery delays and driver safety.
Lai Yang, a researcher in logistics, attributed the price rises to a shortage of labor.
IKEA will start selling furniture through third-party websites to find new ways to reach customers in the digital age, though “no decisions are made regarding what platforms/markets will be in the pilot.”
Kaisa Lyckdal, spokeswoman for the Swedish home furnishing giant, says the aim is to start a trial in 2018 and that Ikea is “curious” as to how to broaden its sales base. Lyckdal said yesterday in an e-mail to The Associated Press that Ikea would “develop it over the coming years.”
THE International Monetary Fund yesterday raised its growth forecast for China but again warned of risks stemming from the build-up of debt in the world’s second-largest economy.
The fund’s latest World Economic Outlook report also projects strengthening economic growth across most of Asia, raising its forecast for Japan but reducing it for India.
The fund expects China’s economy to expand by 6.8 percent this year, up from its previous estimate of 6.7 percent, due to stronger recorded growth in the first half.
If realized, the growth rate will outdo last year’s 6.7 percent, which was China’s slowest pace of expansion since 1990.
For 2018, the IMF raised its estimate to 6.5 percent from the 6.4 percent forecast in its July World Economic Outlook.
In raising the growth targets, the fund said it expects authorities to maintain a high level of investment-fueled growth “to meet their target of doubling real GDP between 2010 and 2020.”
The uptick in growth will result in greater debt levels over the long term, the IMF said, raising the prospect of a “sharp growth slowdown in China.”
The fund urged authorities to intensify efforts to rein in the expansion of credit.
Its latest World Economic Outlook predicts strengthening economic growth globally, building on healthy data from the first half of 2017.
China’s booming economy continues to propel Asia and drive worldwide economic growth. But despite the rosier near-term outlook, the fund is concerned about growing debt in the country.
China’s slower transition from an investment-based economy to a consumption-based one, the report said, “comes at the cost of further large increases in debt.”
The pace of China’s credit growth has alarmed analysts in recent years.
Since the global financial crisis in 2008 its debt load as a percentage of gross domestic product has grown more than 10 percent per year on average, according to IMF estimates, which assessed the ratio had ballooned to 234 percent of GDP by 2016.
Analysts will look for signals about China’s future economic and financial policies during the Party’s congress, which starts on October 18.
The government will publish third-quarter growth data on October 19.
Elsewhere in Asia, the fund raised Japan’s growth forecast to 1.5 percent this year from 1 percent last year.
But it was less optimistic on the country’s long-term prospects, citing the shrinking Japanese labor force.
In India, the “growth momentum slowed” due to the impact of a currency exchange initiative and the launch of a nationwide goods and services tax. The IMF lowered India’s forecast growth to 6.7 percent from the 7.2 percent predicted in July.
Strong global demand has also been a boon for the rest of Asia, where the fund forecasts sustained growth.
“In the rest of emerging market and developing Asia,” the fund wrote, “growth is expected to be vigorous.”
Ant Financial, the payment affiliate of Alibaba Group, has officially launched a home rental service, and people with good credit on Alipay may be eligible to rent an apartment deposit free, the firm said yesterday.More than one million apartments are now available on Alipay in Shanghai, Beijing, Shenzhen, Hangzhou, Nanjing, Chengdu, Xi’an and Zhengzhou.People with good credit on Alipay may be exempted from paying a deposit, which is the norm for home rentals. Wang Bo, head of Ant Financial’s innovation and smart services department, said deposit-free rentals are expected to be the mainstream in the future, with the help of new technologies that track people’s trustworthiness automatically based on consumption behavior.China has been promoting the rental of homes to address the problems of high property prices.Last year, China’s home rental market was worth 1.3 trillion yuan (US$200 billion).
SINCE the inception of the Qualified Domestic Institutional Investor (QDII) scheme in 2006, onshore Chinese investors have many channels through which to invest offshore including via money markets, fixed income, mutual funds and structured products. They also have recourse to products linked to offshore underlyings through back-to-back swaps between onshore and offshore banks. In addition, the Shanghai and Shenzhen Stock Connect schemes allow onshore investors access to constituent stocks under the Hang Seng Composite Large, Mid and Small-Cap indices as well as the H shares of dual-listed stocks.
Within this expanded universe, onshore investors are seeking to diversify beyond traditional asset classes to alternative investments offshore. According to Capgemini’s World Wealth Report 2016, high net worth individuals in China allocated 17 percent of their wealth in alternative investments.
Don’t put all eggs in one basket
The fundamental objective of the intelligent investor is to maximize returns and minimize risk. But how can this be achieved? In his publication Portfolio Selection, Nobel Laureate Harry M. Markowitz, pioneered the modern portfolio theory under which portfolio risk is reduced by holding combinations of assets that are not perfectly positively correlated. It thus makes sense to continue adding diversified assets into the portfolio, until they attain the “Markowitz-efficient portfolio” in which no further diversification is capable of lowering risk for a given expected return.
Diversification across asset classes has become increasingly important given the increased correlation within and across asset classes. If the pairwise correlation is high, active managers may struggle to outperform.
Capturing ‘alpha’ and ‘beta’
Nobel Laurette William Sharpe’s Capital Asset Pricing Model holds that the amount of systematic risk undertaken by the investor should be matched by a required rate of return to compensate for the risk. Outperformance of the required rate is known as “alpha”.
In 1949, Alfred Winslow Jones formed the first hedge fund with the objective of capturing “alpha” by combining leverage and short-selling to capture market mispricing. It was the first long-short equity strategy fund which aimed to provide absolute positive returns through having low net exposure to the market.
In 1975, John C. Bogle created the first index mutual fund. Bogle’s index fund sought to mimic index performance over the long run, to achieve a higher return than that of actively managed funds. In aggregate, actively managed equity funds have underperformed index funds. The total return of the MSCI World Index between August 2007 and August 2017 is 64.2 percent, compared to -4.9 percent by the HFRX Global Hedge Fund Index and 12.19 percent by the HFRX Fund of Funds Global Index.
This has led to the proliferation of investments through Exchange-Traded Products (ETPs), including Exchange-Traded Funds (ETFs). According to the BlackRock Global ETP Landscape report, at July 2017, US$4.234 trillion of assets under management were made up of ETPs against US$79 billion in 2000.
Capturing the best of both worlds
Once considered as alpha by long-short strategies, alternative risk premia are now viewed as alternative beta — sources of return that can be accessed in cost-efficient, transparent, liquid, and systematic ways.
Investors can access various asset classes ranging from equities, rates, commodities to foreign exchange, through rule-based strategies to capture “Alternative Beta”.
Risk premia can improve risk-adjusted returns and increase diversification of an existing asset allocation. Scandinavian sovereign wealth and pension funds are among the first wave of investors to incorporate risk premia into asset allocation techniques. Recently, a multi-billion occupational pension fund embarked on unwinding its traditional equity mandates and allocating to drivers of return within the equities market including developed markets risk premium, emerging markets risk premium, small cap risk premium, low volatility effect, dividends risk premium, implied volatility risk premium, value, momentum and merger arbitrage. Relative to traditional investments, risk premia investment is a cost-effective way to diversify asset allocation and generate consistent returns with low volatility, through a combination of “risk-on”, “defensive”, and “neutral” strategies.
Based on back-tested performance from May 2004 to February 2017, the UBS Risk Premia Portfolio delivers an annualized excess return of 8.5 percent at an annualized volatility of 3.9 percent.
Given their cost efficiency and the attractive risk-reward profile, risk premia products are poised to become an indispensable part of portfolio diversification, with the potential to replicate the success of ETFs in recent years.
SILICON Valley graphics chipmaker NVIDIA unveiled yesterday the first computer chips for developing fully autonomous vehicles and said it had more than 25 customers working to build a new class of driverless cars, robotaxis and long-haul trucks.
Deutsche Post DHL Group, the world’s largest mail and logistics company, and ZF, a top automotive parts supplier, plan to deploy a fleet of autonomous delivery trucks based on the new chips, starting in 2019, NVIDIA said.
The third generation of NVIDIA’s Drive PX automotive line, code-named Pegasus, are chips the size of car license plates with datacenter-class processing power.
They can handle 320 trillion operations per second, representing roughly a 13-fold increase over the calculating power of the current PX 2 class.
This dramatic improvement is a pre-condition for developing and testing future autonomous cars, experts said.
“NVIDIA is one step ahead. But you can be sure you can expect (rival chipmakers) Intel, NXP and Bosch not to be too far behind,” said Luca De Ambroggi, principal automotive electronics analyst with industry market research firm IHS Markit.
Computer chip giant Intel and its Mobileye automotive unit are working with German carmaker BMW and US auto supplier Delphi on their own autonomous driving platform due out in 2021. NXP has agreed to be acquired by Qualcomm to form the world’s largest auto electronics supplier, while Bosch, the industry’s top auto supplier, is working with carmaker Daimler
NVIDIA’s automotive director Danny Shapiro said in an interview that many of the first 25 customers using Pegasus chips would focus on robotaxis, which will be built without steering wheels or brakes and used only on dedicated routes.
Bigger name automakers will announce vehicles running on Pegasus at their own product launches in coming months, he said.
TUJIA, China’s Airbnb-like service provider, said yesterday it raised US$300 million in the latest round of financing, which marked a record high investment in China’s sharing accommodation industry.
The leading investors in the latest round were Ctrip and All-Stars Investment, as well as China Renaissance’s New Economy Fund, Glade Brook Capital and G Street Capital. Glade Brook used to be an investor in Airbnb and Uber, demonstrating the international capital market’s confidence, Tujia said.
Tujia raised US$300 million in the latest round or round E, with its online business platform valued at over US$1.5 billion. After the previous round of financing in 2015, Tujia separated its online and offline business.
The investment will be used to “work toward optimizing the user experience by standardizing aspects of our alternative travel accommodation such as linen washing, cleanliness, and smart capabilities” and to “further invest in the domestic high-end real estate market and in foreign markets,” said Luo Jun, Tujia’s founder and CEO.
Tujia is also set to tap the rising demand for family-friendly accommodation options.
SHANGHAI stocks closed higher yesterday as market sentiment was boosted by medical counters amid progress made in the government's health care reform.
The Shanghai Composite Index edged up by 0.26 percent to 3,382.99 points.
The medical companies got a shot in the arm from the progress the government made in reforming health care. Nearly 20 medical stocks such as Zhejiang DiAn Diagnostics Co Ltd, Shandong Intco Medical Products Co Ltd and Shenzhen Kangtai Biological Prods Co Ltd all surged by the daily limit of 10 percent.
Information technology companies also gained, with Inspur Software Co Ltd, Silkroad Visual Technology Co Ltd and Beijing Certificate Authority Co Ltd hitting the maximum daily 10 percent cap.
Banks also gained, with the Industrial Bank Co Ltd rising 1.95 percent to 17.80 yuan and Ping An Bank Co Ltd gaining 1.5 percent to 11.47 yuan.
JAPAN’S government sought yesterday to contain the fallout from the disclosure by the nation’s third-biggest steel maker, Kobe Steel Ltd, that it had fabricated data on components used in cars, aircraft and space rockets, sending shock waves through the Japanese manufacturing sector.
Faced with the latest in a series of missteps that have undermined Japan’s reputation for high-quality production, the industry ministry instructed Kobe Steel to assess the safety impact from the scandal.
The company said products used by about 200 companies were certified with falsified data. They included Toyota Motor Corp, Central Japan Railway, Mitsubishi Heavy Industries, Mazda Motor Corp and Subaru Corp, the companies confirmed.
Analysts say the announcement further tarnishes the reputation of Japan’s globe-trotting manufacturers, long celebrated for their high-quality products. It could also undermine confidence in Prime Minister Shinzo Abe’s moves to improve corporate governance as part of his program of Abenomics.
The admission from the steel and aluminum maker follows scandals involving falsified data at household names such as Nissan Motor, Mitsubishi Motors and Takata Corp, which filed for bankruptcy earlier this year.
Toshiba Corp is still battling the fallout of a scandal involving reporting inflated profits.
“Looking back over several years, foreign investors have bought Japanese stocks on expectations for Abenomics, but among the ‘three arrows,’ the growth strategy isn’t functioning,” said Makoto Kikuchi, CEO of Myojo Asset Management.
“While they say they’re strengthening corporate governance, improprieties focused on manufacturing have been popping up. Going forward, this will be a body blow to Japanese shares.”
Toyota called the revelations a “grave issue,” and said it was making checks on where the components were used and what effect they have on products using them.
In a statement on Sunday Kobe Steel said some aluminum and copper products shipped from September 2016 to August 2017 were falsely labeled.
Kobe Steel said the misconduct involved dozens of staff and possibly stretched back 10 years. It apologized and said it had appointed lawyers to investigate.
Aluminum castings, forgings and flat-rolled items, along with copper strips and tubes were among the products affected, the company said in a statement.
“These are improper actions that could shake the foundation of fair trade,” Yasuji Komiyama, director of the industry ministry’s metal industries division, said at a briefing on the revelations.
“We want Kobe Steel to make the utmost effort to restore trust from society,” he said.
WAL-MART Stores Inc yesterday unveiled a US$20 billion share buyback plan and forecast US online sales to increase by about 40 percent in the fiscal year ending January 2019.
Wal-Mart’s shares rose 1.6 percent to US$81.80 in premarket trading after the company also forecast overall net sales to increase by at least 3 percent in the same period.
The company, locked in a battle for market share with e-commerce giant Amazon.com Inc, has been doubling down on its online business and is leveraging its 4,700 plus stores to create a more hassle-free experience for its online shoppers.
Wal-Mart reported a 60 percent jump in online sales in the United States in its latest quarter ended July.
“It is clear that Wal-Mart intends to continue to turn up the heat online, with 40 percent annual growth an impressive goal, especially on the heels of the 30 percent outlined at the 2016 investor meeting, which at the time seemed aspirational in our view,” Moody’s Lead Retail Analyst Charlie O’Shea said.
The largest US grocery retailer also said it expects to add 1,000 locations for shipping online grocery orders in fiscal year 2019. It currently ships online orders from more than 900 US locations.
Competition in the grocery space has risen since Amazon bought Whole Foods and cut prices at the upmarket grocer in August.
The company forecast profit for fiscal year 2019 to climb 5 percent over the expected adjusted earnings of US$4.30-$4.40 per share for the year ending January 2018.
UBER said yesterday that paying National Insurance contributions for its British drivers would add tens of millions of pounds to the taxi app’s costs were they to be deemed employees.
Uber currently classifies its around 50,000 drivers in Britain as self-employed, affording them only basic entitlements, whilst employees also receive rights such as sick pay and the minimum wage.
Asked about how much it would cost in National Insurance payments if self-employed drivers were directly employed, the firm’s UK Head of Policy Andrew Byrne told parliament’s business committee:
“I don’t have the precise figures ... but I’m certain it would be the tens of millions certainly.”
Also appearing before lawmakers, Deliveroo’s UK and Ireland Managing Director Dan Warne said additional costs including National Insurance contributions, would add around 1 pound (US$1.32) to the cost of each hour.
National Insurance is collected by the government and helps pay for the state health service, pensions and certain other benefits.
Firms operating in the so-called gig economy — whereby people tend to work for different companies without a fixed contract — have been criticized by unions and some lawmakers for what they call exploitative practices.
Uber and Deliveroo both say their drivers enjoy the flexibility they offer but last year two drivers won a tribunal hearing against Uber and were granted worker rights, in a decision which the Silicon Valley firm appealed last month.
Uber’s Byrne said yesterday he expected the judge to make a ruling by around Christmas.
BRITISH military equipment maker BAE Systems said yesterday it plans to cut almost 2,000 jobs, mainly owing to weaker demand for Hawk and Eurofighter Typhoon fighter jets.
There will be cutbacks in BAE’s military, maritime and intelligence services divisions under moves to streamline the group overall.
“To ensure production continuity at competitive costs... and based on the profile of currently contracted and expected aircraft deliveries, actions continue to be taken to reduce the group’s current Typhoon and Hawk production rates,” BAE said in a trading update.
“As a result, the group has today announced a proposal to reduce the workforce of the military air and information business by up to 1,400 roles.”
Those job losses will fall across five sites over the next three years, including Warton and Samlesbury in northwestern England, where Eurofighter warplanes are assembled.
Approximately 375 redundancies will also hit BAE’s maritime servicing and support business, mainly affecting Portsmouth on the south coast.
The company’s cyber intelligence business in London and nearby Guildford will lose about 150 jobs.
BAE faces slowing demand for the Eurofighter Typhoon jet, developed with the help of Italy’s Finmeccanica and Airbus as part of a European consortium.
At the same time, the group is easing back Hawk production ahead of an expected order from Qatar.
Most of the military air job cuts will go in 2018 and 2019.
HONEYWELL International Inc unveiled a corporate makeover yesterday that will tie its growth more strongly to aerospace technology and spin off other businesses as two publicly-traded companies by the end of 2018.
The company also raised the low-end of its full-year 2017 earnings guidance by 5 cents to US$7.05-US$7.10, and said it would spend the proceeds from the spin-offs on share buybacks, acquisitions and paying down debt.
Honeywell Chief Executive Officer Darius Adamczyk, like his peers at other industrial conglomerates, has been under pressure to pull apart a portfolio of disparate businesses that includes automotive turbo chargers, burglar alarms and the Xtratuf boots popular in Alaska’s fishing industry.
Honeywell had been under pressure from hedge fund Third Point to spin off the aerospace division, which accounted for about 36 percent of total revenue in 2016 and which Third Point said could generate US$20 billion in shareholder value if sold.
The changes announced yesterday split off its home and ADI global distribution business — which deal with building systems running from air conditioning to smoke alarms — into one unit and transport systems into a second.
They include the low-margin automotive turbocharger business, joining other companies, including auto supplier Delphi Automotive Plc, in shedding technology tied to the internal combustion engine as regulators around the world crack down on emissions and talk of mandating a switch to battery-electric vehicles over the next two decades.
Honeywell said the two spun-off business units together would generate annualized revenue of about US$7.5 billion. It said it would gain US$3 billion from the spin-offs.
Ahead of its quarterly earnings report, the company also said third quarter sales were expected to be US$10.1 billion, an increase of 5 percent in organic terms compared to an earlier forecast range of +/-1 percent.
THE European Central Bank says banks under its jurisdiction appear well-prepared to face unexpectedly higher interest rates, but may be less ready for disruption from online banking.
The ECB’s banking supervision division released results yesterday of a stress test that showed suddenly rising rates would increase net interest income, an important part of bank finances.
Earnings at some banks have lagged due to the current very low interest rate environment that squeezes the margins between rates at which banks borrow and their lending rates.
The central bank said that in a hypothetical interest rate shock involving an increase of 2 percentage points, net interest income would rise by 4.1 percent this year and 10.5 percent next. The stress test imagined a sudden overnight increase. That is a highly unlikely scenario, but one which helps show whether bank finances are robust.
The ECB concluded that “interest rate risk is well managed by most European banks.”
It warned however that many banks are relying on questionable models to predict how their deposit customers might behave. The models were mostly constructed based on the years since 2008, which means they are based on experience from a period of falling rates. Deposits are usually one of the most stable sources of money for banks, and a sudden decision by lots of people to take their money elsewhere could hurt bank finances. That could happen if people chase higher rates elsewhere or get better offers for banking services from so-called fintech firms that use mobile banking, peer-to-peer lending or financial advice dispensed by software. The ECB said it would engage banks in discussion about their models.
The study showed that banks would show losses in the long-term value of their assets, such as investments in bonds and their mortgage business.
The ECB’s bank supervision division is kept separate from its monetary policy duties, so the stress test doesn’t provide any hints about its thinking on the future course of its rate policy.
ADVISERS to China’s Sinopec have offered its oil assets in Argentina to about a dozen potential suitors, three sources familiar with the matter said, as losses and labor headaches prompt Asia’s largest refiner to pull out.
The Argentine oil and gas assets, mainly in the southern province of Santa Cruz, could be worth US$750 million to US$1 billion, one of the sources said.
That would be less than half the US$2.45 billion Sinopec paid in 2010 to buy the Argentine assets from US-based Occidental Petroleum Corp, marking an aggressive drive to diversify its oil sources at the time.
Prospective buyers for the assets — mainly large energy firms from the United States, Europe, Africa and Latin America — include Angola’s state oil company Sonangol and two Russian energy giants, including Rosneft, said two of the sources.
Mexico’s Vista Oil & Gas has also expressed an interest, according to a separate source.
Meanwhile, Compania General de Combustibles, the energy arm of Argentine holding company Corporacion America, would also be studying some of the assets in Santa Cruz, Corporacion America spokeswoman Carolina Barros said.
One of the sources said there could be more than 15 prospective suitors.
Sinopec is being advised by Scotia Waterous, a unit of Canada’s Bank of Nova Scotia, which focuses on energy deals, two of the sources said.
All the sources declined to be named as the sale plans are confidential.
Sinopec and Sonangol did not respond to requests for comment. Asked about the sale and its interest, Rosneft said it was not able to confirm the information.
Vista, Scotia Waterous and Argentina’s energy ministry declined to comment.
In 2010, when Sinopec bought the Argentine assets, China — the world’s No. 2 oil consumer — was scouting for natural resources to feed its surging economy.
Worsening economic conditions and social unrest in Argentina, however, have “weighed” on the operation since then, Sinopec said in September last year.
BANKRUPT German airline Air Berlin must ground all flights by the end of October, the firm said yesterday, as talks continue with prospective buyers Lufthansa and Easyjet.
Flights “will as far as we know no longer be possible after October 28 at the latest” because of insolvency rules, chief executive Thomas Winkelmann wrote in a letter to employees.
Air Berlin triggered bankruptcy proceedings in August after losing a cash lifeline from its biggest shareholder Etihad Airways.
Its aircraft have been kept aloft by an emergency loan from the German government.
Subsidiaries Niki in Austria and LGW in Germany are not themselves bankrupt and will be able to continue flying after the late October cut-off.
Meanwhile, Lufthansa and British carrier Easyjet’s exclusive deal for talks to buy up chunks of the stricken airline ends Thursday, and any agreement will need a green light from European authorities — a process that could take “several weeks or months,” the firm expects.
“We will know more in a few days” about any agreement, Winkelmann said, adding that negotiations had been “intense.”
Unions have criticized management for not keeping some 8,000 employees informed of the progress of discussions.
Also yesterday, executives and worker representatives opened discussion of a redundancy program.
Many Air Berlin workers are likely to find new jobs at the prospective buyers.
MAJOR Japanese steelmaker Kobe Steel said it has systematically fabricated inspection data for aluminum and copper products that may have gone to around 200 clients, reportedly including Toyota.
The admission is the latest in a string of quality control and governance scandals that have hit major Japanese businesses in recent years undermining the country’s reputation for quality.
After conducting an in-house probe Kobe Steel admitted Sunday that it had shipped products that did not meet client specifications, including strength data.
The company said the fabrications, which might have started a decade ago, could affect products sent to as many as 200 companies.
It did not name any of the companies.
But the Nikkei newspaper said Toyota and Mitsubishi Heavy Industries, producer of the Mitsubishi Regional Jet passenger plane, are among notable clients affected.
When asked whether Kobe Steel “systematically” lied about product data, the firm’s Vice President Naoto Umehara replied: “Yes.”
“It has become clear that managers also took part in this or that they knew about it but did nothing about it,” Umehara told a Sunday press conference.
“We deeply apologize for this improper conduct,” he said, taking a traditional deep bow of apology.
Toyota has told local media that aluminium products from Kobe Steel were used in some car parts adding that it had started investigating the scandal’s impact on its vehicles.
Kobe Steel’s probe has so far found that data were fabricated for about 19,300 tons of aluminum products, 2,200 tons of copper products and 19,400 units of aluminum castings and forgings that were shipped to clients between September 2016 through August 2017.
The announcement followed a series of corporate scandals that have hit major Japanese brands.
Nissan announced a recall of more than a million vehicles after admitting that workers without proper certification routinely conducted the final inspections for new vehicles to be sold in the domestic market.
Airbag maker Takata went bankrupt after its defective products were linked to 16 deaths and scores of injuries worldwide.
Toshiba had to sell its prized memory chip unit as it attempted to recover from multi-billion-dollar losses at its US nuclear operation Westinghouse Electric.
Toshiba was also still trying to restore its reputation after it admitted that its top executives had pressured underlings to cover up weak results for years.
CHINA’S foreign exchange reserves rose modestly in September for an eighth straight month, and by slightly more than markets had expected, as tighter regulations and a stronger yuan continued to discourage capital outflows.
A dramatic slowdown in capital flight — which had been seen as one of the biggest risks to China — has helped boost confidence in the world’s second-largest economy.
Forex reserves rose US$17 billion in September to US$3.109 trillion, compared with an increase of US$10.5 billion in August, central bank data showed yesterday.
Economists polled by Reuters had expected reserves to rise by US$8 billion.
It was the first time that China’s reserves have climbed for eight months in a row since June 2014, and brought its stockpile — the world’s largest — to the highest since October last year.
The consistent rise has led some analysts to believe the People’s Bank of China may have become a net buyer of foreign exchange for the first time in nearly two years.
“But we believe any such purchases reflect a desire to create uncertainty over the short-run trajectory of the currency rather than resisting medium-term appreciation,” Julian Evans-Pritchard, China Economist at Capital Economics, wrote in a note.
China has tightened rules on moving capital outside the country since late last year.
Beijing burned through nearly US$320 billion of reserves last year and the yuan still fell about 6.5 percent against the surging dollar, its biggest annual drop since 1994.
However, the yuan has seen a sharp rebound so far this year, thanks to a reversal in the dollar and a further widening of Beijing’s forex controls, including a clampdown on some overseas acquisitions by Chinese firms which some suspected were really being used to channel money offshore.
The yuan had gained 7.5 percent against the dollar through early September, but authorities have allowed it to backtrack a bit in recent weeks, possibly due to concerns that its rapid run-up would start to hurt China’s exports.
The dollar’s recent resurgence has also pressured the yuan of late, though few China watchers believe Beijing will allow it to retreat much further and risk rekindling outflows.
Taken together, the regulatory measures, exchange rate forces and a stronger trade surplus may have brought China’s capital flows roughly into balance for the first time in years.
“We believe that Chinese officials view the outflows as a critical threat, as they deplete China’s FX reserves and invoke unpleasant memories of the Asian financial crisis,” economists at ANZ said in a recent note.
“Therefore, we think the authorities will prefer stability more than anything else in the near term.”
The country’s outbound non-financial investment slumped 41.8 percent in January-August from a year earlier, as authorities kept a tight grip on outflows for what they call “irrational” overseas projects.
The State Council, or Cabinet, said in August China will cap overseas investment in property, hotels, entertainment, sports clubs and film industry.
GLOBAL cloud IT infrastructure revenue surged nearly 26 percent year on year in the second quarter as the public cloud market boomed due to investment by top Internet and software giants, including those from China, International Data Corp said yesterday in a report.
The revenue from cloud infrastructure products — servers, storage and Ethernet switches which work for both public and private cloud services — grew 25.8 percent year over year in April to June to US$12.3 billion globally.
“The strength in public cloud growth continued at an accelerated pace through the first half of 2017,” said Kuba Stolarski, IDC’s analyst.
Huawei, the world’s fourth largest cloud infrastructure vendor, posted the fastest revenue growth of over 30 percent year on year among the top five vendors, according to IDC.
In the second quarter, Dell led the cloud infrastructure market with a 11.8 percent share, followed by HP/H3C’s 11.1 percent, Cisco’s 8.2 percent, Huawei’s 3.17 percent and NetApp’s 2.5 percent.
Google, Facebook, Microsoft, Apple, Alibaba, Tencent and Baidu are expanding into the cloud sector, analysts said.
China has identified cloud computing as key to innovating the economy.
China-based Neusoft partnered with state-owned Yunnan Investment Group to co-develop the healthcare industry’s IT services on cloud computing.
EXPANSION in China’s manufacturing and services sectors both slowed in September as downward pressure weighed on the economy in the fourth quarter, a private report showed yesterday.
The Caixin China General Services PMI fell to a 21-month low of 50.6 in September from 52.7 in August, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.
Business activity and new orders both rose more weakly while confidence in the 12-month outlook for activity fell to its lowest level in 10 months, the report said.
Meanwhile, inflationary pressure was weak across China’s services sector as input and output prices both rose marginally last month.
Released earlier, the Caixin China General Manufacturing PMI, an indicator of operational conditions of smaller manufacturers, fell from 51.6 in August to 51 in September.
Production and new orders both expanded weakly, with companies also signalling slower growth in export sales.
“The Chinese economy generally held up well in the third quarter,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. “However, the expansion in both manufacturing and services cooled in September, suggesting downward pressure on economic growth may re-emerge in the fourth quarter.”
The official manufacturing purchasing managers’ index, released on September 30 by the National Bureau of Statistics, came in at a five-year high of 52.4 last month, up from 51.7 in August and 51.4 in July.
China’s non-manufacturing sector grew at the fastest pace since June 2014 in September, with PMI rising to 55.4 from 53.4 in August, the bureau’s data showed.
The official and Caixin data diverge because the official PMI surveys cover thousands of large and small companies while the Caixin PMIs cover hundreds of small scale businesses.
SHANGHAI stocks closed at a 21-month high yesterday after the holiday break, driven by auto manufacturers and telecommunication counters.
The Shanghai Composite Index rose by 0.76 percent to end at 3,374.38 points.
Auto shares such as Yaxia Automobile Corp, Haima Automobile Group Co Ltd and Anhui Jianghuai Automobile Group Corp Ltd all surged by the daily limit of 10 percent.
Telecom shares also rose, with ZhongTongGuoMai Communication Co Ltd, Telling Telecom Holding Co Ltd and Beijing Bewinner Communications Co Ltd all hitting the maximum daily 10 percent cap.
Shares of home appliances companies advanced too, with Zhejiang Supor Co Ltd rising by 8.29 percent to 41.00 yuan (US$6.19) and Jiangsu Sunrain Solar Energy Co Ltd touching the maximum daily 10 percent cap to end at 9.13 yuan.
TOURISM has been booming in China during the National Day holiday, benefiting its economy and those of many other countries, official data yesterday showed.
One of China’s two Golden Weeks, the National Day holiday saw a surge in tourist revenue along with passenger flows. This year the holiday was extended by one day as the Mid-Autumn Festival, also known as the Moon Cake Festival, fell on Thursday.
A total of 705 million tourists traveled around the country during the holiday, generating 583.6 billion yuan (US$87.7 billion) of revenue, the China National Tourism Administration said.
The two figures marked jumps of 11.9 percent and 13.9 percent year on year respectively, the CNTA said.
Provinces with major scenic spots have seen rising numbers of tourists, with southwestern Guizhou having hosting over 46 million tourists who spent 30.5 billion yuan during the eight days, up 42.1 percent and 43.5 percent year on year respectively, said the CNTA.
Inner Mongolia in north China was visited by 106.2 million tourists who spent 8.3 billion yuan, up 24.5 percent and 38.3 percent respectively.
Most Chinese have chosen to indulge in food, cultural and rural tourism this year. Theme parks, museums and traditional culture streets have also seen an obvious growth in the number of visitors, according to CNTA.
The booming tourism was accompanied by busy traffic. Over 110 million trips have been made by rail since the holiday travel rush started on September 28, the China Railway Corporation said.
CRC scheduled thousands of extra trains during the holiday to ensure smooth travel. Airports were also expected to have seen passenger numbers rise, and highways have been clogged with more vehicles.
The economic impact of China’s mobile population has also been felt worldwide as more Chinese have opted to travel overseas.
Data complied by CNTA showed that around six million Chinese from nearly 300 cities traveled to 1,155 cities in 88 countries or regions during the National Day holiday.
Russia was the most popular destination for Chinese tourists, followed by Thailand, Vietnam, Singapore and Malaysia, while Moscow was the most popular city, followed by St Petersburg, Bangkok, Pattaya, and Singapore, CNTA data showed.
No figures are available as to how much Chinese have spent overseas during the eight-day holiday.
At a time when traditional growth drivers are losing steam, China has pinned hopes on services, including tourism, for new impetus to drive consumption and employment, and support economic growth and restructuring.
USERS of iPhone find it difficult to switch off Wi-Fi and Bluetooth after they upgrade their phones to the latest operating system iOS 11, which may consume unexpected power and data traffic and bring potential security risks.
Industry insiders warned users to be more cautious before the system update and wait for further updates.
Besides new features and changes, the new iOS 11 has its own bugs and software problems, like every major release of iOS, such as poor Wi-Fi connectivity, random connection drops and slow Internet speed, according to media report and forum posts.
In China, people don’t seem fond of the new Control Center, which can’t really switch off Wi-Fi and Bluetooth features after disconnecting ongoing connections. The networks are still “ready” for new connections like other Wi-Fi networks and devices like Apple Watch.
With the new system, users find the setup “unfriendly and unclear” and out of battery within “three to four hours”. Some tech-savvy users choose to downgrade the new system to the previous one, which is not recommended by Apple, according to posts in a Chinese social website.
“In an attempt to keep you connected to Apple devices and services, iOS 11 compromises users’ security,” said the Electronic Frontier Foundation.
RETAIL sales in Shanghai rose 10.7 percent year on year during the Mid-Autumn Festival and National Day holiday driven by spending in department stores and shopping malls, the Shanghai Commission of Commerce said in a statement yesterday.
A sample of 400 major retailers and restaurants in Shanghai revealed they had 11.16 billion yuan (US$1.68 billion) of sales during the eight-day holiday from October 1 to yesterday.
Convenience stores saw a drop in sales but sales at department stores, shopping malls, supermarkets, and specialty stores all rose, the commission said. Eight major shopping malls in Shanghai saw their sales grow over 20 percent year on year.
US employment fell in September for the first time in seven years as Hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring, the latest indication that the storms undercut economic activity in the third quarter.
The Labor Department said on Friday nonfarm payrolls fell by 33,000 jobs last month amid a record drop in employment in the leisure and hospitality sector. The decline in payrolls was the first since September 2010.
The department said Harvey and Irma, which wreaked havoc in Texas and Florida in late August and early September, reduced employment last month. But underlying details of the closely watched employment report were upbeat.
The unemployment rate hit a more than 16-1/2-year low of 4.2 percent and annual wage growth accelerated to 2.9 percent.
“Investors will find solace in a whole host of other labor market indicators that reveal an underlying labor market that continues to show evidence of resilience and continued tightening,” said Scott Anderson, chief US economist at Bank of the West in San Francisco.
Economists had forecast payrolls increasing 90,000 in September. Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed.
Many of the dislocated people will probably return to work. That, together with rebuilding and clean-up is expected to boost job growth in the coming months.
Leisure and hospitality payrolls plunged 111,000, the most since records started in 1939, as employment at restaurants and bars fell 104,700. There were also decreases in retail and manufacturing employment last month.
The economy created 13,000 more jobs than previously reported in August. Harvey and Irma did not have an impact on the jobless rate, which fell two-tenths of a percentage point from August to the lowest since February 2001. The smaller survey of households from which the jobless rate is derived treats persons as employed regardless of whether they missed work during the reference week and were unpaid as a result.
The decrease in the unemployment rate reflected a 906,000 surge in household employment, which eclipsed a 575,000 increase in the labor force.
CHINESE carmaker BYD unveiled on Friday its expanded battery-electric bus manufacturing facility, North America’s largest, in Lancaster in southern California.
BYD, which stands for “Build Your Dreams,” is also the world’s largest maker of rechargeable batteries. The company’s electric bus, supported by its solar panels, LED lighting and energy-efficient technologies, is able to run over 248 kilometers after a single charge, which is among the longest in the world.
This expansion is an addition of a new wing to the current BYD Coach and Bus space, bringing the total manufacturing facility to nearly 42,000 square meters, quadrupling the size of its facility from its initial 2013 footprint.
The growth of BYD Coach and Bus reflects a rapid transition to electric transport and will allow BYD to build up to 1,500 battery-electric buses annually.
“As BYD continues to develop cutting-edge technology that helps transform the transportation industry here in the Antelope Valley and around the country, this investment will help create jobs in our community, keep Lancaster on the forefront of technological advancement, and put emission-free vehicles on our streets,” Congressman Kevin McCarthy said Friday at BYD’s grand opening celebration.
Lancaster, a community of more than 156,000 inhabitants since 2013, boasts over 350 days of sunshine per year, making it the ideal place to pioneer new solar energy technologies.
BYD’s manufacturing facility is powered 100 percent by renewable energy, which is provided by the City of Lancaster’s energy company, Lancaster Choice Energy.
THE fifth day of the National Day holiday saw 93 million Chinese tourists traveling around the country yesterday, according to the China National Tourism Administration.
The figure represents an increase of 12.1 percent year on year, the administration added.
Domestic tourists spent 76.3 billion yuan (US$11.5 billion) on the day, up 14.7 percent from a year ago.
China Railway Corp scheduled 503 additional train services yesterday, with more than 11 million trips expected to be made.
The Ministry of Public Security has reported no road accident with at least five deaths during the holiday. The ministry asked local authorities to enhance road management to prepare for back-to-work traffic in the last three days of the holiday.
The surge in passenger flows during the National Day holiday, which runs from October 1 to 8, shows leisure travel has become a major holiday entertainment, boosted by improving living standards.
Some popular tourist sites including the Forbidden City, Huangshan Mountain and Baiyangdian lake had to impose visit ceilings.
Visits to distinctive resort towns, rural attractions and Communist revolutionary heritage sites are proving popular during the holiday.
One of China’s two “Golden Weeks,” this year’s National Day holiday has been extended by one day as the Mid-Autumn Festival fell on Wednesday.
On that day, almost 10.7 million passenger trips were made by rail, up by 155,000 or 1.5 percent year on year. Last Sunday, 15.03 million trips were made, an all-time high, according to China Railway.
Nanchang Railway Bureau added new rail services making it more convenient for people to travel from Fujian and Jiangxi provinces to Guangzhou, Shanghai, Xi’an and Nanchang.
At the entrances to Ji’nan railway station in the capital of Shandong Province, there are no longer staff checking tickets and ID cards. Passengers place their ID cards and tickets on the gate machines, and infrared cameras scan their face before allowing them into the station. Queues at the entrances moved smoothly using the new system.
THE framework for China’s state-owned enterprises is “basically complete” following five years of aggressive restructuring, the top administrator for the state assets said yesterday.
The country is trying to streamline and modernize its bloated and debt-ridden state-owned sector and create conglomerates capable of competing globally.
The reforms have involved the restructuring of SOEs through reorganizations and mergers, reductions in excess capacity and the relocation of workers, though some analysts say much more needs to be done, especially to address high debt levels.
“The intensity of the central enterprises’ reorganization has been unprecedented,” Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, said at a media briefing in Beijing.
The government has ordered a series of mergers between central government-controlled conglomerates over the five-year period, cutting them to 98 from 117 under the control of SASAC.
“We won’t use the increase or decrease in the number of conglomerates or the size of firms to influence our targets” in restructuring of SOEs, Xiao said.
“In the coming five years, we’ll focus more on boosting competitiveness and increasing quality of management of SOEs, especially in preserving and increasing value of state assets.”
China has also advanced “mixed ownership,” basically allowing non-state enterprises and some foreign investors to take stakes in state-owned firms.
SASAC said that at the end of last year, 68.9 percent of central SOEs and subsidiaries had adopted “mixed ownership.”
Nineteen central SOE groups in the power, petroleum, natural gas, railway, airlines, telecommunications sectors, and the military have been identified to carry trials in mixed ownership.
With government reform and restructuring efforts gradually paying off, centrally administered SOEs have been increasingly efficient and competitive over the last five years.
Central SOEs saw the strongest-ever growth both in revenue and profits for the January-August period, with a 15.7 percent increase in business revenue and a 17.3 percent rise in total profit, Xiao said.
“By the end of 2016, total assets of China’s central SOEs reached 50.5 trillion yuan (US$7.6 trillion), an 80 percent jump from the end of 2011,” Xiao said.
Under the government’s supply-side structural reform, central SOEs have also made much progress in excess capacity cuts and leverage control.
Xiao revealed that by the end of August, the average debt-to-asset ratio of central SOEs dropped to 66.5 percent, 0.2 percentage points lower than the beginning of this year.
He also said SASAC was working to eliminate overcapacity and shut zombie firms, with 4,977 SOE units closing last year and involving the reallocation of 307,000 workers.
“From January to August, China’s central SOEs beat government-set targets by reducing 16.14 million tons of steel capacity and 55.1 million tons of coal capacity,” Xiao said.
China launched a “rejuvenate the northeast” campaign in 2003 to provide new forms of growth for the industrial region, once the mainstay of the country’s economy.
Xiao said he has seen positive changes taking place in state-owned firms in the northeast.
China’s Cabinet said on Wednesday that more work should be done to advance the restructuring of central SOEs, especially in equipment manufacturing, coal, electricity, communications and chemical industries.
Since 2013, over 30 central SOEs have been restructured.
SHANGHAI stocks edged down yesterday as many investors took to the sidelines, awaiting third-quarter economic data and counting down to the upcoming National Day and Mid-Autumn Festival holidays.
The Shanghai Composite Index lost 0.17 percent to 3,339.64 points.
“Investors maintained a cautious stance and took a wait-and-see attitude ahead of the holiday,” Beixin Ruifeng Fund Management Co said in a note.
Wang Jun, analyst at Huang Chuang Securities, echoed by saying: “The stock market is unlikely to rise before the holiday.”
The market will be closed for the whole of next week.
Wang said the market situation will improve after the holiday as economic data are due to be released and on a recovery in short-term liquidity.
Huayuan Property Co lost 4.46 percent to 4.28 yuan (64 US cents), Beijing Dalong Weiye Real Estate Development Co fell 3.98 percent to 4.83 yuan, and Wolong Real Estate Group shed 3.26 percent to 6.52 yuan.
ZHONG An Online Property & Casualty Co, China’s first online insurer, yesterday jumped nearly 10 percent on its first trading day on the Hong Kong stock exchange, valuing the company’s capitalization at nearly HK$100 billion (US$12.8 billion).
The insurer closed at HK$65.20 per share, up from its offering price of HK$59.70. The benchmark Hang Seng Index dipped 0.8 percent.
Demand from retail investors accounted for nearly 400 times the number of shares on offer in the IPO, Zhong An said in a securities filing.
Francis Tang, chief financial officer of Zhong An, said the over-subscription and first-day trading showed the market and long-term investors have recognized the market value of the insurer.
Zhong An sold 199.3 million new shares and raised HK$11.5 billion from the IPO, which is Asia’s largest by a financial technology company.
Zhong An’s gross premium income totaled 3 billion yuan (US$451 million) in the first seven months of this year, close to the full-year premium income of 3.4 billion yuan in 2016.
UBS expects Zhong An to lose 174 million yuan this year but to reap a 704 million yuan profit next year.
Zhong An was set up in 2013 by Alibaba Chairman Jack Ma, Tencent Chairman Pony Ma, and Ping An Insurance Chairman Peter Ma to sell insurance online and develop insurance technology.
SHANGHAI-BASED QingtingFM yesterday said it seeks to raise 1 billion yuan (US$150 million) in the latest round of financing — the biggest investment in the Internet audio industry.
The investment is led by We Capital and Baidu, with other investors being CMIG, China’s Small and Medium Enterprises Development Fund and Genimous Technology Co.
The investment will be used to develop high-quality contents, brand building and artificial intelligence technology, said Zhong Wenming, QingtingFM’s president.
The AI technology is widely adopted in the digital entertainment industry, according to analysts.
In 2018, around 292 million Chinese consumers will be paying for online content, up from 98 million in 2016, according to research firm iiMedia Data.
GERMAN industrial robot maker KUKA will double the capacity of its operations in Shanghai’s Songjiang District next year to meet surging demand in China, the company said yesterday.
Its Songjiang plants will produce 20,000 robots a year by 2018, up from 10,000, said Andy Wen, CEO of KUKA Robotics China.
China accounted for about 35 percent of KUKA’s global robot sales last year, “which is already a big figure,” Wen said.
“But by 2020, we expect that China will take up over 50 percent of our robot sales as we shift more focus to this region, seeing larger potential and more robust growth compared with more mature markets such as Europe.”
KUKA will also add research centers in Songjiang next year.
THE number of millionaires in the world rose by nearly 8 percent last year to an all-time high of around 16.5 million, with a record total wealth of US$63.5 trillion, according to a report by global consultancy firm Capgemini.
The wealth of high net worth individuals — which Capgemini defines as those with investable assets of US$1 million or more, excluding the primary residence, collectibles and consumables — rose 8.2 percent on the year in 2016 and is on track to surpass US$100 trillion by 2025.
Some 1.15 million people became millionaires last year, the report said.
China, the United States, Japan and Germany boast the highest numbers and together make up for almost two-thirds of the total.
In the US, their ranks rose to 4.8 million from 4.46 million, while the number of millionaires in China rose to 1.13 million from just over 1 million.
The Asia-Pacific region, Europe and North America contributed equally to the rise in wealth, with Russia, Brazil and Canada reversing course from declines a year ago, the report showed.
Russia, helped by a rebound in its stock market, saw the number of millionaires and their wealth grow by about 20 percent.
France overtook Britain in the top five in terms of the number of millionaires, helped by a recovery in real estate, while Sweden knocked Singapore — which saw a decline in its equity markets — out of top 25.
Surveys on millionaires’ financial asset holdings show they held 31.1 percent in equities in the second quarter of 2017, compared with 24.8 percent in 2016.
Fixed income held steady at 18 percent, while cash grew to 27.3 percent from 23.5 percent.
Alternative investments, such as hedge funds, derivatives, foreign currency, commodities and private equity, fell to 9.7 percent from 15.7 percent.
The report did not go into the reasons for the reallocation, but stronger global growth, coupled with hefty liquidity after years of unprecedented stimulus by global central banks, have pushed stock markets around the world to record highs.
On the other hand, investors are wary of geopolitical risks, with tensions growing between the US and North Korea, and are uncertain about the effect the US Federal Reserve’s exit from unconventional stimulus might have on economies and markets.
Millionaires saw a 24.3 percent return on average on investment portfolios overseen by wealth managers.
A necklace suspending a 163.41-carat, D color, flawless, IIA type diamond, presented by de Grisogono, is displayed at a Christie’s preview in Hong Kong yesterday. The white diamond found last year in Angola will go to auction in Geneva on November 14, Christie’s said. “The largest stone that ever came up on the market before of this quality was 110 carats,” said Francois Curiel, Christie’s chairman for Europe and Asia.
MILLIONS of Chinese will go on holiday at home and abroad next week for the National Day and Mid-Autumn Festival, and technology is changing the way they book, plan and travel.
“Smart tourism” is based on advanced data analysis and artificial intelligence to offer users safer and easier trips.
Tourists can enjoy upgraded services from route planning to traffic monitoring, visitor information, shopping and aerial photography. Providers, including 12301 tourism platform, AutoNavi, Airbnb, Tuniu, Lonely Planet and startup Mark, have seen traffic and income surge.
“Smart tourism over new technologies like data analysis and AI will improve traveling experience, especially those tourists with customized, diversified and high-quality demands,” said Dong Zhenning, vice president of AutoNavi, the top map and navigation firm in China.
During the holiday from Sunday through October 8, domestic traffic will hit 710 million trips, which is expected to generate revenue of 590 billion yuan (US$88.6 billion), 12.2 percent up from last year, according to the China National Tourism Administration.
Chinese millennial travelers are fueling the growth of global tourism as they seek new experiences, especially “adventurous influencers, followers of fashion and the culturally curious,” according to a recent survey by Carat and Jing Travel.
During the peak National Day holiday, traffic volume is expected to be up to four times normal, especially in Chongqing, Suzhou and Dongguan, according to a study by AutoNavi and transport regulators.
Guangdong, Jiangsu, Hebei, Shandong and Sichuan are the regions with highest risks of accidents. Tourists are advised to plan routes to avoid jams and tired driving, said AutoNavi, which has more than 700 million users nationwide.
AutoNavi also partnered with the government-authorized national smart tourism platform 12301 to offer AI-featured services for tourism sites and visitors.
The platform offers tourism site operators expected visitor volume and real-time monitoring services. For visitors, they can find regulators easily through the platform when they face unregulated services and unreasonable prices, said Yao Danqian, president of 12301, which connects more than 5,000 top sites and 1,200 regional tourism regulators.
Besides domestic traveling, more than 80 percent of the people are willing or planning to travel overseas in the fourth quarter, the national tourism administration says.
In Shanghai, about 20 percent of the tourists are going to take outbound trips in October, mainly eight to 12 days. The top foreign destinations are Russia, the United States, Australia, the UK and France.
Popular Asian destinations include Thailand, Japan, the Maldives, Indonesia and Vietnam, according to Tuniu, one of top online tourism providers.
Chinese outbound numbers for parent-child travelers account for 17 percent of the total outbound traffic, double the domestic figure. Kitchens seem necessary for them. Japan, Taiwan and Hong Kong were most appealing to Chinese mainland families, especially cities such as Osaka, Tokyo and Kyoto, according to Airbnb data from January 1 to September 1.
Shopping is another focus for Chinese tourists headed overseas, who spend an average 20,000 yuan for each trip and at least 6,000 yuan for products, according to Mark, a Shanghai-based startup.
Mark is a mobile app for travelers shopping overseas and has links with 10,000 shop partners, mainly in airports and cities in Japan and Thailand. Besides offering coupons and shopping guides, its services include user-friendly shopping lists, price comparisons and real-time currency calculation.
CHINA has set a deadline of 2019 to impose tough new sales targets for electric plug-in and hybrid vehicles, slightly relaxing an earlier plan to launch the rules from next year that had left global automakers worried about being able to comply.
Carmakers will need new-energy vehicles to hit a threshold equivalent to 10 percent of annual sales by 2019, the Ministry of Industry and Information Technology said in a statement yesterday. That level would rise to 12 percent for 2020.
The targets remove an explicit 8 percent quota for 2018, but otherwise match previously announced plans.
The quotas are a key part of a drive by China, the world’s largest auto market, to develop its own NEV market, with a long-term aim to ban the production and sale of cars that use traditional fuels announced earlier this month.
However, global automotive manufacturers wrote to Chinese authorities in June, urging a softening of the proposals for all-electric battery vehicles and electric plug-in hybrids.
Under the rules, carmakers will receive credits for NEVs that can be transferred or traded. These credits will be used to calculate if firms have met the quotas.
German automaker Volkswagen, the market leader, acknowledged meeting the target so soon would not be easy. VW sold just a few hundred green cars among the 4 million vehicles it sold in China in 2016, but it plans to sell about 400,000 NEVs in the country by 2020 and 1.5 million by 2025.
Japan’s Honda Motor Co said it planned to launch an electric battery car in China next year and would “try to expand our line-up of new-energy vehicles” to meet the quotas.
China wants electric and plug-in hybrid cars to make up at least a fifth of the country’s auto sales by 2025.
THE quality gap between new domestic and international vehicles in China continued to narrow, with Chinese brands doing slightly better than their global rivals in three of eight quality categories surveyed, according to consulting firm JD Power.
JD Power said its initial quality survey this year showed the gap between Chinese and global brands on average fell to 13 problems per 100 vehicles, down from 14 last year. The number of complaints in the survey of new car buyers was down dramatically from 2000 when JD Power began its initial quality survey in China. That year Chinese brands saw new vehicle buyers on average raise 396 more issues per 100 vehicles than their global rivals.
BUSINESS registration of innovative companies and government services will be facilitated with Shanghai’s release of an official classification of emerging industries.
The new classification clarifies more than 200 previously unspecified industries, such as Big Data, artificial intelligence, 3D printing and new-energy research, the Shanghai Administration for Industry and Commerce announced yesterday.
It also lay down standards to fit new industries into an existing national industry classification and coding system to unify tax policies, statistical methods and government supportive measures citywide.
“The classification will become a standard for various government departments to serve and manage new industry companies, and allow the companies greater recognition in all stages of market entrance and business operation,” said Zhong Min, deputy director of the administration.
“The classification will be updated to suit new needs of innovative companies.”
He said Shanghai established China’s first multi-department coordination system which consists of six government departments covering economic planning, science, technology, tax and statistics.
They will hold a joint conference under the initiation of the industry and commerce administration to make timely adjustment to the new classification.
Official data showed the output of strategic new industries, including new-energy cars, new-generation information technology, energy saving and environment protection, advanced equipment manufacturing, bio-pharmaceutical, rose 6.8 percent year on year in the first half.
PRIVATELY run conglomerate CEFC China Energy has obtained preliminary state approval for its proposed US$9.1 billion investment in Russian oil major Rosneft, three sources said.
CEFC said earlier this month that it will buy a 14.16 percent stake in Rosneft from a consortium of Glencore and the Qatar Investment Authority, strengthening energy ties between China and Russia.
The nod was received just about a week after the deal was announced, the sources said.
“It’s a preliminary approval from the NDRC which means the government gave the in-principle go-ahead for the deal,” said an industry executive with direct knowledge of the government decision.
NDRC, or the National Development and Reform Commission, is China’s top economic planner.
“The preliminary approval means the government sees the strategic significance of this deal and shall lend its backing in financing.”
The government, including the State Council, China’s Cabinet, is expected to give final approval unless there are “material errors” during the process of proceeding with this transaction, said the executive and a second source briefed by CEFC on the matter.
Both NDRC and CEFC did not immediately comment.
CEFC has grown in recent years from a niche oil trader into a US$25 billion sprawling energy and financial conglomerate with a rare contract to store part of China’s state oil reserve.
CEFC has long held overseas expansion ambitions and grabbed the spotlight in the Rosneft deal at a time when larger state-run peers like Sinopec Group have shifted gears from rapid expansion to divestment.
A stake in Rosneft will allow China to boost cooperation with the world’s top oil producer.
CEFC has tapped China Development Bank and Russian lender VTB to help fund the Rosneft deal, a banking and company source said.
CDB, a Chinese policy bank, has long supported CEFC and is its biggest lender.
A merger of the rail businesses of Germany’s Siemens and France’s Alstom, billed as creating a European champion, was welcomed by investors but criticized in France as giving away control to Germany and risking job cuts.
The tie-up, set to help the European companies counter the rapid rise of China’s CRRC, represents an industrial win for French President Emmanuel Macron, who is proposing sweeping reforms for Europe including deeper trade cooperation.
While his government said yesterday that the deal would preserve “strategic interests,” others accused him of neglecting national concerns.
“It is bound to bring a restructuring and no doubt the culling of hundreds of jobs,” said Olivier Kohler, a trade union official in the eastern French town of Belfort, where Alstom makes the high-speed TGV trains that travel the length and breadth of the country.
French and German leaders have for years called for the creation of “European champions” such as Airbus to capitalize on the strengths of Europe’s single market and create the scale needed to compete with US and Asian rivals.
Yet discussions have often run into difficulties as politicians vie to protect local jobs and retain national influence over an industrial sector.
Under the rail deal announced on Tuesday, Siemens will have a small majority of the Paris-based and listed combination, which promises eventual annual cost savings of 470 million euros (US$552 million) a year, while Alstom boss Henri Poupart-Lafarge will become its chief executive.
While Joe Kaeser, CEO of Siemens, acknowledged there would be job losses, he said they would be in support functions such as human resources rather than in engineering.
“Of course there will be redundancies, that’s part of the synergies,” told a news conference.
French Finance Minister Bruno Le Maire told reporters in Paris that he hoped Europe could now go on to create a leading naval company at a Franco-Italian summit in Lyon.
That would be part of a deal between Paris and Rome over the STX France shipyards.
“What makes this deal attractive are the targeted cost synergies,” wrote Barclays analyst James Stettler, who rates Alstom “overweight” and Siemens “neutral.”
“If successful, this deal should in our view create significant value for both parties.”
Baader Helvea Equity Research analysts described the Siemens-Alstom agreement as “a strategic move that has to be seen against the backdrop of increasing international competition over the past decade.”
Siemens will control Siemens Alstom, with 50 percent of the combination plus a few symbolic shares. It will also get warrants allowing it to eventually acquire another 2 percent.
Alstom’s shareholders are set to receive two special dividends from the tie-up.
Some analysts were not convinced that squeezing costs out of the combined business would be easy, and Deutsche Bank kept a “hold” rating on Alstom shares.
“Politicians will also likely try to ensure some form of jobs protection in France and Germany ... making cost synergies difficult to extract,” Deutsche Bank analysts wrote in a note.
The Siemens and Alstom transport businesses have combined sales of 15.3 billion euros and earnings before interest and tax of 1.2 billion euros, raising questions over whether the deal could fall foul to European antitrust rules.
But Alstom’s Poupart-Lafarge said the two had done their homework, adding that he was confident of finding a solution.
“Of course this is a large deal so no surprise it will be looked quite closely by the European Commission,” he said.
A worker inspects a C Series aeroplane wing in the Bombardier factory in Belfast, Northern Ireland. Britain told US plane maker Boeing yesterday that it could lose out on British defense contracts because of its dispute with Canadian rival Bombardier which has put 4,200 jobs at risk in Northern Ireland. The US Department of Commerce on Tuesday imposed a 220 percent duty on Bombardier’s C Series jets, whose wings are made at the plant in Belfast, following a complaint by Boeing which accuses Canada of unfairly subsidizing Bombardier.
CHINA’S Cabinet yesterday decided to take a slew of measures, including tax exemptions and targeted reserve requirement ratio cuts, to encourage banks to support small businesses.
From December 1, 2017, to December 31, 2019, financial institutions will be exempt from value-added taxes on income from interests for loans to small and micro-sized firms and individually owned businesses, according to a statement released after an executive meeting of the State Council presided over by Premier Li Keqiang.
Currently the policy applies to loans to farmers only.
The maximum loan to each of the above-mentioned borrowers that is eligible for tax exemption will be raised from 100,000 yuan (US$15,000) to 1 million yuan, the statement said.
The current policy of exempting stamp taxes on loan contracts for small and micro-sized businesses, as well as VAT on such businesses with monthly sales of no more than 30,000 yuan, will be extended till 2020.
Authorities will also lower the reserve requirement ratios of commercial banks that extend a big enough proportion of their outstanding or new loans to small and micro-sized businesses, individually owned businesses and farmers, according to the statement.
The stronger support will “help innovation and entrepreneurship, foster new growth momentum, expand employment and make the economy more vigorous and inclusive,” the statement said.
It said large state-owned banks will be pushed to offer inclusive financial services at the grass roots level, while the issuance of more financial bonds will be encouraged to fund loans for small businesses.
The development of financing guarantee agencies and re-guarantee agencies should be supported, and a national financing guarantee fund should be set up as soon as possible, according to the statement.
A policy-based credit guarantee system covering provinces, cities and counties should be established within three years to support the financing of small agricultural businesses, it noted.
Measures will also be taken to make it easier for startup firms to apply for interest discounts on guaranteed loans, while Big Data and cloud computing will be better used to help small businesses secure financial services.
By the end of June, outstanding loans from financial institutions to small and micro-sized businesses were 22.6 trillion yuan, nearly double the amount at the end of 2012 and accounting for 32 percent of total loans to all businesses, the statement said.
CHINA’S Cabinet yesterday said more work should be done to advance the restructuring of centrally administered state-owned enterprises.
The country should steadily push for the restructuring of central SOEs in equipment manufacturing, coal, electricity, communications and chemical industries, according to a statement released after an executive meeting of the State Council.
Apart from asset restructuring, central SOEs can also direct their resources toward competitive companies or industries through equity cooperation, asset swaps, strategic alliances and joint development, the statement said.
It said the task of reducing excessive capacity should be strictly implemented, with more progress to be made in dealing with “zombie companies” and loss-making enterprises.
Debt-to-equity swaps will be conducted in a market-oriented and law-based manner, the statement said.
It also noted reform will be pushed to allow private capital in restructuring central SOEs.
Since 2013, 32 central SOEs have been restructured, including a merger between two of China’s top bullet-train makers and that between two major steelmakers.
The central SOEs that have completed restructuring saw their combined profit jump over 40 percent in 2016 from 2012, the statement said.
CHINA’S top economic planner yesterday said it has fined 18 chemicals producers 457 million yuan (US$69 million) for monopolistic pricing.
These companies collaborated to raise prices of polyvinyl chloride (PVC), used widely in buildings, health care and household appliances, last year, the National Development and Reform Commission found.
They were each fined 1-2 percent of their annual sales last year. The 12 million tons of PVC they produced last year accounted for three quarters of China’s total output.
From March to December last year, these companies held six meetings to exchange information on prices and sales. They then produced 13 agreements on price fixing after discussions through messaging app WeChat.
Hubei Yihua Group, one of China’s largest chemicals and fertilizer producers, and China National Salt Industry Corp Jilantai Salt Chemical Group, a state-owned salt and chemicals giant, played a leading role and organized the meetings, the NDRC said.
The illegal price increases increased burden on downstream producers who need to buy PVC as a raw material. The price increases eventually led to higher costs for consumers, the NDRC said.
The NDRC said it will keep monitoring domestic industries to ensure fair competition and allow the market to play a more decisive role.
A growing number of new listings and funds helped the yuan-denominated A-share IPO market maintain momentum in the first three quarters of this year, according to a KPMG report.
There were 346 new initial public offerings in the A-share market in the first nine months, up from 126 in the same period of 2016.
The IPOs netted 172.9 billion yuan (US$26 billion), exceeding the amount in the full year of 2016.
However, the average deal value tumbled 18 percent to 500 million yuan from 610 million yuan in the first three quarters of 2016, with no single IPO raising more than 5 billion yuan.
With an average of eight to 10 new listings every week, about 440 IPOs are expected to raise a total of 230 billion yuan on the Chinese mainland this year, the report said.
Companies in the industrial, technology, media and telecom sectors dominated the A-share IPO market in the first three quarters, contributing to more than half of the total number of IPOs and funds raised.
The report also said private education companies can become a new source of IPOs in the long term after legal barriers have been lifted.
IN four years, the China (Shanghai) Pilot Free Trade Zone has become a hub for foreign innovators, such as Adobe, which established its Shanghai branch in the area dubbed as a test ground for China’s key economic and financial reforms.
The American software giant, headquartered in San Jose, California, has moved its Shanghai office to the free trade zone as a stronghold of its east China business.
The zone, which covers about 121 square kilometers, comprises the Lujiazui financial hub, the Jianqiao manufacturing zone, the Zhangjiang high-tech base and the three bonded areas of Waigaoqiao, Yangshan and Pudong International Airport.
Adobe’s senior managing director for China Yew Hwee Ng said the zone was an ideal base for Adobe to bring the latest technology and digital experience to Chinese users as soon as possible.
The establishment of Adobe Shanghai marks another step in the company’s China strategy. Based in Shanghai and East China, Adobe says it will follow China’s national strategy and flexibly respond to the needs of the mainland market through the policies of the free trade zone as well as its first-mover advantage to provide customers with the best products and solutions to optimize their digital experience.
The Shanghai pilot free trade zone, indeed, offers multinationals easier access to the vast mainland market. About 90 percent of total foreign investment of US$4 billion that Pudong attracted in the first half has gone to the area, while altogether 8,781 foreign-funded companies have been set up there.
Officials of the Shanghai free trade zone say measures are being studied to further open accounting, construction and credit rating services to foreign capital.
As China’s first pilot free trade zone, the Shanghai FTZ was opened in 2013 as the test bed of new economic and financial policies, such as the negative list for foreign capital management, which defines sectors in which foreign entities can not invest, and the wider convertibility of the yuan and its cross border payment.
China expects Shanghai to make the zone world class, with liberalized trade and investment, no hidden or opaque rules, fair and efficient supervision, as well as welcoming business environment by 2020.
The FTZ is expected to set up a mechanism in line with the international investment and trade rules by 2020, according to a plan released by the State Council.
The next phase in the FTZ development will further relax regulations on commercial transactions and foreign investment, including a shortening of the negative list for foreign investment and the implementation of best international practice for finance, foreign exchange, investment, and entry and exit processes.
Now in its fourth year, the Shanghai FTZ is moving from its initial experimental phase into more nitty-gritty areas of economic and financial reforms.
Beijing has given the green light to the zone to pioneer wider convertibility of the yuan and its cross broader payment. Since the beginning of the year, cross border payment within the FTZ has reached 673.58 billion yuan (US$102.21 billion) to further promote the international use of the yuan, according to the Shanghai Development and Reform Commission.
Nearly 700 enterprises have used two-way cross border yuan capital pool service since China launched the cross border yuan payment in the zone three years ago.
The total revenue and expenditure involved have reached 849.77 billion yuan which effectively saved cross border transaction costs.
The next phase in the FTZ development will also include offshore tax arrangements and allocating resources to serve the Belt and Road Initiative.
Chinese President Xi Jinping urged Shanghai to turn the FTZ into a zone of openness and innovation to serve the Belt and Road Initiative and help the country’s businesses to expand overseas.
“Shanghai officials should free their minds, seek new horizons, and be an example to the nation,” said Xi.
Xi urged Shanghai, a pioneer in reform and opening up, to do more on free trade zone reforms.
The Shanghai FTZ is striving to become an investment and financing hub as well as a bridgehead for the country’s Belt and Road initiative to help domestic companies channel investment overseas.
Enterprises registered in the Shanghai FTZ have invested in 108 projects related to Belt and Road Initiative member states by the end of last month, with investment of US$4 billion.
At the same time, 52 “Belt and Road” countries have invested US$11.58 billion in 3,012 enterprises in Pudong where the FTZ is located, said Lu Fangzhou, deputy director of Pudong New Area and the administrative board of the FTZ.
The Shanghai government is banking on the zone’s success as a centerpiece of the city’s plans to turn itself into an international financial center and a global science and technology hub.
Nearly half of the 48,000 enterprises established in the zone have started paying taxes. They are likely to pay about 10 billion yuan in taxes this year.
Enterprises in the zone reported their total profit increased more than 30 percent so far this year compared with a year earlier. Around 76 percent of key enterprises are profitable.
Transportation services, terminal business, warehousing and freight forwarding all reported double digit growth while the total industrial output of process manufacturing increased 5 percent.
More companies are establishing their regional headquarters in the FTZ — three this year, bringing the total to 81.
This accounts for 13 percent of regional headquarters in the city and almost a third of those based in Pudong New Area.
More than 320 regional headquarters, Asia-Pacific business centers and business operations centers within the zone reported an 18 percent of year-on-year increase in revenue in the first half.
Leasing industry in the FTZ also maintained rapid growth. One third among the total 1,945 leasers in the zone have launched operation and leased 256 aircraft, 22 aircraft engines and 186 ships.
SHANGHAI stocks edged up yesterday, bolstered by upbeat industrial profit data released by the National Bureau of Statistics.
The Shanghai Composite Index added 0.05 percent to 3,345.27 points.
Profits at China’s industrial firms jumped 24 percent in August from a year earlier, accelerating from July’s growth.
Anyang Iron & Steel Inc surged the daily limit of 10 percent after it forecast a sevenfold jump in net profit for the first nine months. Other steelmakers also rose, with Nanjing Iron & Steel Co up 4.14 percent.
Shanxi Securities said in a note that investment sentiment was still subdued ahead of the weeklong National Day and Mid-Autumn Festival break.