Shanghai Daily Business
Updated: 19 sec ago
CHINA’S foreign exchange reserves rose for the 11th month in a row to US$3.14 trillion at the end of December, data from the central bank showed yesterday.
This marked the highest level since September 2016, according to the People’s Bank of China.
The reserves gained US$20.7 billion from a month earlier, faster than the market forecast, which estimated the reserves to stand at US$3.13 trillion.
The State Administration of Foreign Exchange attributed the continued increase to stronger non-dollar denominated currencies and higher asset prices, while cross-border capital flows and transactions remained stable.
In January, the forex reserves fell below US$3 trillion, but as the economy is on firmer footing and the yuan continues to stabilize, the stockpile has increased steadily since February.
The country’s steady economic growth and improving momentum have kept cross-border capital flows more stable and balanced, SAFE said on its website. The sound international balance of payments data supported the continued rebound in forex reserves.
Looking ahead, SAFE said given the increasing stability and resilience of the economy, as well as further reform in the financial markets, China will keep its forex reserves and international balance of payments balanced and stable in 2018.
The country’s economy grew 6.9 percent year on year in the first three quarters of 2017, above the government’s annual target of around 6.5 percent.
Yesterday’s data also showed the country has kept its December gold reserves unchanged at 59.24 million ounces from the beginning of the year, equivalent to US$76.47 billion.
NEW home transactions in 50 Chinese cities fell 18 percent year on year in 2017 amid tough government curbs on speculation, a private survey showed.
The annual figure came in after transactions of new homes shed for the 10th consecutive month in December 2017, which was down 13 percent year on year to 27.37 million square meters, according to statistics compiled by E-house China R&D Institute.
New home transactions in Beijing and Shanghai slumped 38 percent and 28 percent in December, respectively, compared with the same period in 2016.
“This has reflected a cooling trend in the market,” said Lai Qin, researcher with the institute.
China’s property market has cooled as home prices have faltered or posted slower growth in major cities amid government policies to curb speculation.
Real estate investment in China rose 7.5 percent year on year during January-November last year, down from 7.8 percent in the first 10 months, official data showed.
Lai said local governments are set to maintain stable and consistent property policies, which could lead to a further drop in home transactions in January.
HANDOUTS to Saudi Arabian citizens to compensate them for cost of living increases will cost the government about 50 billion riyals (US$13.3 billion) this year, the information minister was quoted as saying yesterday.
“The allocation of 50 billion riyals for this decree indicates the leadership’s concern for the people’s comfort and quality of living,” Minister of Culture and Information Awwad bin Saleh Alawwad told the Saudi-owned Al Sharq Al Awsat newspaper.
On Saturday, King Salman ordered a monthly payment of 1,000 riyals to state employees over the year in compensation for the rising cost of living after Riyadh hiked gasoline prices and introduced value-added tax. Pensioners and soldiers will also be given bonuses, while the government will bear the cost of VAT in some situations, such as the first purchase of a home.
Alawwad also repeated previous government statements indicating Riyadh would spend 30 billion riyals this year on the Citizens Account, a household allowance scheme designed to reduce the impact of austerity policies on low and middle-income Saudi families.
Saudi Arabia, the world’s top oil exporter, roughly doubled domestic gasoline prices last week as part of reforms aimed at diversifying its economy. A 5 percent VAT on a broad range of goods and services came into effect on the same day.
Private economists have estimated the government will raise about 40 billion riyals in 2018 through VAT. The government did not say how much money it expected to make from the gasoline price hike, but previous statements by officials have suggested it would be in the tens of billions of riyals.
CHINA’S top banking regulator on Saturday issued rules to tighten management over entrusted loans, a form of business-to-business lending that involves commercial lenders as intermediaries.
The new rules see commercial banks as intermediaries and they should neither participate in the decision-making of entrusted lending nor provide guarantees of any kind, according to the China Banking Regulatory Commission.
The entrusting parties should choose qualified borrowers independently, and they should bear the credit risk from entrusted lending.
The rules also tightened supervision on funding sources, which ask commercial banks to stay away from entrusted loans that use bank credit, funds with special purposes and other forms of borrowed capital as funding sources, as well as loans with unproven funding sources.
Meanwhile, entrusted loans should not be used in production, operation or investment in government-banned sectors, and they are also prohibited from investments such as bonds, futures, financial derivatives and asset management products.
The entrusted loan business has grown fast and played a positive role in serving the real economy, but there are “certain hidden risks” due to a lack of unified rules, the CBRC said in a statement.
Commercial banks should strictly separate entrusted loan business from their own business to enhance risk control and business management, said the CBRC.
CHINA has launched an investment fund of 30 billion yuan (US$4.6 billion) to guide the development of the service trade industry.
The government-led fund is aimed at facilitating the transformation of China’s foreign trade patterns and fostering new growth pace for the economy.
Approved by the State Council, the fund was jointly launched by the Ministry of Finance, Ministry of Commerce and China Merchants Capital Investment Co Ltd.
China will step up support for service trade businesses, build an effective cooperation mechanism and improve the use of resources, said Vice Finance Minister Hu Jinglin.
Trade in services refers to transactions in transport, tourism, telecommunications, construction, advertising, computing and accounting.
China suffers a deficit in service trade due to huge domestic demand. The service trade gap was 120.8 billion yuan in November 2017, up from 117.5 billion yuan in October, official data showed.
Ant Financial, an affiliate of Alibaba, has apologized for a checked-by-default option on Alipay’s annual bills that allowed its credit scoring system to access user data.
Alipay bills and the Annual User Footprint Report that analyzes how customers have spent their money over the past year are widely shared on China’s social media.
People tend to show off their purchasing power, especially as the new year begins, but that joy of sharing soon turned into fear and anger.
A button checked by default on the landing page meant users looking up their bills automatically agreed to use Sesame Credit, the credit scoring system of Ant Financial, allowing Sesame to collect and analyze their data and share the analysis with partner institutions.
Users accused the company of infringing their privacy. In response, Sesame Credit late on Wednesday apologized and immediately had the default option canceled. Users who have already unwittingly entered into the agreement can deselect the service in the Alipay app.
There were more than half a billion Internet users in China by the middle of 2017, and more than 90 percent use mobile payment in street stores, according to a report by China Internet Network Information Center. Many of those use Alipay.
Sesame Credit claims that more than 200 million users used Alipay to pay for over 100 public services. This has put cyber security at the top of the priority list.
According to the cyber security law, companies and online services that store user data on servers must acquire authorization from the users and make all clauses clear.
Han Zheng, a professor with Tongji University, said the incident showed how Chinese people are increasingly aware of privacy issues.
“We are more willing to share our data and compare with people in other parts of the world, and it has been very easy for companies to collect user data, but that situation is changing now.”
Businessmen and women pray for a good business to bring in the New Year at Kanda shrine in Tokyo yesterday. Over 3,500 firms were expected to hold prayers for the start of the new year at the shrine on the first two business days of the year.
China’s Dalian Wanda Group is considering a Hong Kong listing for its sports assets as part of efforts to rationalize its portfolio that could also include other sales, according to five people familiar with the situation.The conglomerate last month tapped investment banks for a potential initial public offering of its sports businesses, three of the sources said. CITIC Securities, China’s largest brokerage, is one of the banks involved, added one of them.A spokesman for CITIC Securities declined to comment.Wanda’s businesses range from real estate to football and cinemas but it has been rattled in the past year by a government-led crackdown on overseas deals and high leverage. The company is owned by Wang Jianlin, one of China’s richest men.An IPO of Wanda’s sports assets would include Infront Sports & Media AG, a Swiss sports marketing company, and World Triathlon Corp, the organizer and promoter of the Ironman race, according to three of the people.The two were acquired in 2015 for US$1.2 billion and US$650 million respectively.The share offering would also include Wanda’s smaller sports assets in China, such as cycling and basketball leagues, one of them said. The public float would not involve Wanda’s 20 percent stake in the Spanish football club Atletico Madrid, valued at 67 million euros (US$81 million) after a recent capital raise, the source said.The IPO would most likely take place in Hong Kong, but bankers have also pitched for a US listing, according to the people.Wanda is separately looking to sell Sunseeker International, a British yacht maker it bought in 2013 for US$495 million but whose financial performance it has failed to turn around, two other people said.Wanda declined to comment. The people could not be named as the plans are confidential.Wanda’s interest in property, sports and entertainment — accounting for over US$13 billion of its deals in the past five years — ran into official opposition last year when Beijing labeled overseas deals in those areas “irrational.”In addition to sports, its holdings also include the cinema chain AMC Entertainment Holdings and movie studio Legendary Entertainment.The company is also considering the merits of a pre-IPO funding round for the sports unit, according to one of the people. All plans are still at an early stage however as Wanda is seeking a chief financial officer for the sports business to lead the fundraising efforts, said another of the people.Property forms the basis of the Wanda empire — its mixed use Wanda Plaza developments are common across China.Last year, Wanda sold a portfolio of hotels and tourism assets, including 13 theme parks, for US$9 billion to Guangzhou R&F Properties and Sunac China. Five flagship overseas developments — in London, Chicago, Los Angeles, Sydney and Australia’s Gold Coast — are also for sale, said one source.
Tesla Inc delayed a production target for its new Model 3 sedan for the second time on Wednesday, disappointing investors even as it claimed “major progress,” overcoming manufacturing challenges that have hampered the vehicle’s rollout.The electric vehicle maker headed by Elon Musk said it would likely build about 2,500 Model 3s per week by the end of the first quarter, half the number it had earlier promised. Instead, Tesla said it now plans to reach its goal of 5,000 vehicles per week by the end of the second quarter.The Model 3 is critical to Tesla’s long-term success, as it is the most affordable of its cars to date and is the only one capable of transforming the niche automaker to a mass producer amid a sea of rivals entering the nascent electric vehicle market.Building the car efficiently and delivering it without delays to customers is also critical, as the money-losing company faces high cash burn. Delays increase the risk that reservation-holders will cancel orders.“The further delay to (production volume) will leave analysts and investors focused on the implications for cash as we head through the first half of the year,” Evercore analyst George Galliers said.The company burned through US$1.1 billion in capital expenditures in its third quarter and said in November that fourth-quarter capex would also be about US$1.1 billion.RBC Capital Markets analyst Joseph Spak wrote in a note that he did not believe Tesla will be required to do a capital raise.“We have them hovering about US$1 billion in cash ... They don’t have a ton of wiggle room though in our view,” Spak said.In delivering 1,550 of its new Model 3 electric vehicles in the fourth quarter, Tesla fell short of Wall Street expectations. Analysts had expected 4,100 Model 3 sedans to be delivered in the fourth quarter, according to financial data and analytics firm FactSet.The estimates for Model 3 deliveries by different brokerages varied widely. While Evercore analysts estimated 5,800 deliveries, Cowen analysts expected just 2,250.Tesla said 860 Model 3 vehicles were in transit to customers at the end of the fourth quarter.The company said it delivered a total of 29,870 vehicles in the fourth quarter, including 15,200 Model S vehicles and 13,120 Model X cars. Analysts had expected total deliveries of about 30,000.Tesla had initially predicted to reach the milestone of 5,000 vehicles per week in December, but in November deferred the target to the end of the first quarter.Tesla said on Wednesday its production rate had increased significantly despite the delays.
SOUTH Korea’s Samsung has overtaken US rival Intel as the world’s biggest maker of semi-conductors as sales in the sector boom, a study published by consultancy Gartner showed yesterday.
Samsung Electronics “gained the most market share and took the number one position from Intel — the first time Intel has been toppled since 1992,” said Gartner analyst Andrew Norwood.
The total global market for semi-conductors grew by 22 percent to US$419.7 billion in 2017, fueled by growth in smartphones and other connected devices, Gartner calculated.
Samsung’s sales jumped by 52.6 percent to US$61.2 billion, giving it a market share of 14.6 percent, the study showed.
Intel’s sales, on the other hand, grew by just 6.7 percent to US$57.7 billion, or a market share of 13.8 percent.
Booming demand for memory chips was the main factor driving growth in the semi-conductors market, Gartner said.
“Memory accounted for more than two-thirds of all semiconductor revenue growth in 2017, and became the largest semiconductor category,” said Norwood.
CHINA’S 90 major coal companies produced 2.25 billion tons of coal in the first 11 months of last year, up 7.6 percent from a year ago as the nation bids to streamline the industry’s structure, said the China National Coal Association today.
Production at the top 10 plants came to 1.35 billion tons to account for 60 percent of the total output. China Shenhua Energy Co was top by producing 403.55 million tons from January to November, followed by China National Coal Group Corp which produced 149.67 million tons and Shaanxi Coal and Chemical Industry Group’s 128.71 million tons.
China has cut the number of coal plants to 7,000 by the end of 2017 from 10,800 in 2015, coal giants are encouraged to merge to help enhance the industry’s competitiveness. Mergers and acquisitions have become the means to “help state-owned coal plants perform better,” China Business Journal said by quoting an unnamed analyst.
The merger of China Shenhua with China Guodian Corp last year created the nation’s largest power group. The Shanxi government, meanwhile, has shifted equities from 14 listed coal plants into an investment group to consolidate synergies among local coal companies.
China has constructed over 1,200 large-scale modern coal mines. Of them, 59 mines have the capacity of producing over 10 million tons per year and 47 mines are equipped with automated facilities, according to China Business Journal.
Cranes are seen in Yantian Port in Shenzhen. The port handled 25.2 million containers last year, a record high, an increase of 5.13 percent, the fastest in a decade.
NEW businesses gave a boost to China’s services activity which expanded in December by the quickest momentum in four years, a private report showed yesterday.
The Caixin China General Service PMI rose to 53.9 at the end of the year from 51.9 in November, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.
It said the growth in services activity was due to a greater volume of new business.
The PMI showed services companies posted the strongest upturn in new orders since May 2015 as around 14 percent of monitored companies noted an increase.
Services companies continued to increase their payroll numbers at the end of the year amid reports of rising business requirements.
Released on Wednesday, the Caixin manufacturing PMI rose to a four-month high of 51.5 for December from November’s 50.8 to confirm steady economic growth in 2017.
“The December readings of the Caixin PMI surveys point to improving economic sentiment,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. “Expansion in total new orders and new export business revealed that manufacturers and service providers are optimistic over the business outlook for 2018.”
Meanwhile, the official non-manufacturing PMI released last week edged up to 55 for December from 54.8 in November.
The official non-manufacturing PMI survey covers 4,000 large and small companies, while the Caixin service PMI measures over 400.
The services sector contributed to more than half of China’s gross domestic product in recent years as the country is in the midst of transforming its economy from investment-driven to consumption-driven.
The Bank of Communications wrote in a report yesterday that China’s GDP may have grown 6.8 percent in 2017, above the government target of 6.5 percent.
The bank’s economists expect GDP this year to dip to 6.7 percent, with growth of tertiary industries continuing to outpace the industrial sector.
German carmaker Mercedes-Benz has begun recalling 4,572 imported cars in China over problems with the electronic stability program, according to China’s quality watchdog.The affected vehicles are 889 imported Mercedes-Benz C-Class AMG models which were manufactured between June 11, 2014 and May 31, 2016, as well as 3,683 imported Mercedes-Benz G-Class vehicles which were made between September 2, 2015 and September 11, 2017, according to a statement from the General Administration of Quality Supervision, Inspection and Quarantine. The recall took effect from December 26 last year.The problem with the 889 affected Mercedes-Benz C-Class AMG vehicles lies in the electronic stability program which lacks the ability to recognize and control peak-torque under extreme conditions. This may cause the car to lose power and increase the risk of vehicle collision, the statement said.For 3,683 Mercedes-Benz G-class vehicles, the telecommunication system of the electronic stability program may encounter errors under some conditions. The poor telecommunication may require a driver to brake more in order to stop the vehicle. This will lengthen the distance needed to stop the vehicle and increase the risk of a traffic crash, according to the statement.The carmaker said it will upgrade the software of the electronic stability program in the affected vehicles to rectify the defects. It added that it will upgrade the software in cars which have not been sold yet.Mercedes-Benz will inform owners of the affected vehicles via registered mail. Car owners could contact the company at 400-818-1188 for information about the recall.
DIDI Chuxing said it is acquiring Brazil’s ride-hailing business, 99, marking another major step in the Chinese company’s global expansion.
Didi made a strategic investment in 99 in early 2017 and the partnership between the two companies seeks to further accelerate market growth in Latin America and give more transport choices to consumers.
“Building on the deep trust between our two teams, this new level of integration will bring to the region more convenient, value-added mobility services,” said Didi founder and CEO Cheng Wei.
“Globalization is a top strategic priority for Didi, and with enhanced investments in artificial capabilities and smart transportation solutions, we will continue to advance the transformation of the global transportation and automotive industries through diversified international operations and partnerships.”
After becoming a strategic investor in the Brazilian firm in January last year, 99 and Didi collaborated closely from technology to product innovation, market development and operational management in Brazil.
“We are confident that being part of Didi Chuxing will vastly enhance our capability to expand our services throughout Brazil to bring critical value to users, drivers and cities,” Peter Fernandez, CEO of 99, said in a statement.
Didi last month said it has raised US$4 billion in funding from domestic and overseas investors as it seeks to lift global expansion and new energy vehicles initiatives.
HSBC has launched a business desk in Poland to facilitate trade and investment flows between China and countries in Central and Eastern Europe as two-way business increases dramatically under the Belt and Road Initiative.
The bank’s new China Desk will focus, in particular, on Poland, the Czech Republic, Slovakia, Hungary and Romania, which together have attracted the bulk of China’s investment in the region.
According to research consultancy Rhodium Group, Chinese investment in these five countries increased to 4.5 billion euros (US$5.4 billion) between 2000 and 2016.
The new service in Warsaw brings the number of HSBC's China Desks to 24 globally.
Officially launched in 2012, HSBC’s China Desks now cover six continents, including 11 markets in the Asia-Pacific region, five in Europe, four in the Middle East and Africa, and four in the Americas.
These operations, covering major destinations for China’s outbound direct investments, support domestic companies and their foreign counterparts in identifying new business opportunities and accessing financial products in a range of currencies, including yuan, along the Belt and Road Initiative region.
CHINESE smartphone brands will expand overseas in 2018 because the domestic market has become saturated, research firms said yesterday.
Both leading and startup brands will have to turn to emerging overseas markets to grow their sales and market share, as Xiaomi has done in India and Transsion in Africa, they said.
By 2017, Oppo led the Asian smartphone market with a 15 percent share, followed by 13 percent for Vivo, 12 percent for Xiaomi, 12 percent for Samsung and 11 percent for Huawei, said research firm Counterpoint.
Global smartphone output hit 1.46 billion units in 2017, up 6.5 percent from a year ago. For 2018, TrendForce forecasts production at around 1.53 billion units, up just 5 percent.
A cyclist passes an advertisement in Frankfurt yesterday. Germany’s unemployment rate hit a record low of 5.5 percent in December, the lowest level since German reunification in 1990, the Federal Labour Office said. In 2017, the rate fell to 5.7 percent from 6.1 percent.
WHILE the world economy has seen a broad-based recovery in the past year, Chinese observers are wary that some “black swan” events could dampen growth prospects in 2018.
Unique, eye-catching, and hard to find, a black swan is as a metaphor to describe rare events that could cause catastrophic ramifications.
“One of the reasons behind economic strength last year was that we hardly saw any black swans,” said Zhang Ming, a researcher with the Chinese Academy of Social Sciences.
A report by the Institute of World Economics and Politics under the CASS predicted that the global economy would expand 3.5 percent in 2018 on purchasing power parity terms.
The rate is below previous estimates by international bodies including the International Monetary Fund, which predicted in its World Economic Outlook in October that the global economy would grow by 3.7 percent in 2018.
“The lower prediction reflected our concerns over issues including asset price bubbles, high debt levels and geopolitical conflicts,” said Yao Zhizhong, another researcher with CASS.
According to Zhang, there are at least six black swans that observers should keep an eye on to cushion against their impact.
“The fact that risks did not happen does not mean that they do not exist,” Zhang said.
One of the major uncertainties comes from the political realm. The long-simmering rivalry between global and regional powers in the Middle East could become even more complicated, adding pressure to fluctuations in global crude oil prices.
Elections in Italy could also lead to black swan events such as the country leaving the eurozone or defaulting on its treasury bonds, derailing recovery in Europe, according to Zhang.
While anti-globalization sentiment did not deter major economies from benefiting from trade in 2017, any change in the trade policy stance of the Trump administration could affect global growth.
The US economy has maintained mild inflation recently, but a sudden rise could speed up rates hikes and balance sheet reduction by the Federal Reserve.
Such incidents, though unlikely, could slow economic growth in the United States and have widespread spill-over effects.
Another outlier would put an end to the nine-year-long bull market in the United States. The price-earning ratio of the US stock market is reaching historic highs, and some analysts worry that a downturn in the market could be sharp and long-lasting.
“Once the US stock market takes a downturn, it could have a negative impact on asset prices in other countries, and curb consumer spending in the United States, which was the most important driver for its recent recovery,” Zhang said.
Such black swans could also have interrelated effects, causing other rare events to happen, Zhang said.
Faster-than-expected rates hikes in the United States, for example, would lead to a stronger US dollar that could possibly result in capital outflows and currency depreciation in some emerging economies, which enjoyed short-term capital inflows in 2017.
A top European Central Bank official yesterday called for governments to regulate and tax Bitcoin, labeling the cryptocurrency an object of speculation and a tool for money laundering.
“One ought to apply what the basic rule is in any other financial transaction: everyone involved should reveal their identity,” ECB governing council member Ewald Nowotny told the German daily Sueddeutsche Zeitung.
“We need a value-added tax on Bitcoin, since it’s not a currency,” said Nowotny, who is head of Austria’s central bank.
Nowotny’s comments echo those by other ECB officials, who regard the Bitcoin’s spectacular surge in value as a bubble, rather than a sign it could be a digital competitor to the euro single currency used by its 19 member nations.
Nevertheless, the “digital gold” is a concern for central bankers as it can allow money launderers to dodge around increasingly strict rules in the traditional financial system.
“It can’t be allowed that we’ve just decided to stop printing 500-euro notes to fight money laundering, that we’ve slapped strict rules on every tiny savings club, and then have to watch people blithely laundering money around the globe with Bitcoin,” Nowotny said.
Bitcoin, launched in 2009, is a virtual currency created from computer code. It and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.