Sector Report on China 06.09.2021

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Financial Authorities Declarations

  • Flash News !

-The Chongqing Municipality granted a license to Singaporean firm, ICHAM Pte Ltd, for conducting Qualified Domestic Limited Partner (QDLP) business quota of 200 Million USD. ICHAM will establish a private equity fund management firm and raise funds in China.

-The total monthly trading volume under the Bond Connect Program reached 577.6 billion Yuan mainly focusing on Chinese Government Bonds (47% of the total) and policy financial bonds (42% of the total). At the end of August, the Program count 2733 approved investors.

Overseas investors holdings of Chinese Bonds increased 75.4 Billion Yuan in July to 3.38 Trillion Yuan, according to China Central Depository & Clearing.

-Government procurement in China up 11.8% in 2020 with a total value of 3.7 trillion yuan according to data from the Ministry of Finance (MOF). This amount account for 3.6% of China’s output and 10.2% of its fiscal spending. The purchases are mainly focused on Green Industries and signed with micro, small and medium firms (75.5% of the total purchase)

-The Brazilian Government suspended beef exports to China as two cases of atypical mad cow disease was detected in two farms located in Belo Horizonte (Minas Gerais Province) and Nova Canaa (Mato Grosso Province).

  • The CSRC approved IPO !

The China Securities Regulatory Commission. (CSRC) approved IPO on the Shanghai STAR market of Hangzhou Chinastars Reflective Material Co., Ltd., Zhejiang Zhengguang Industrial Co., Ltd., Shenzhen Hongfuhan Technology Co., Ltd. and ACROBiosystems Inc. . In addition, the CSRC approved IPO on the of  Anhui Huaertai Chemical Co., Ltd. on A-Share market.

Moreover, about 1.23 billion of lock-up shares will become available for trading from Sept 6 to 10 valued at 35.95 billion yuan.

 

  • The CSRC and Fund Industry !

YI Huiman, Head of the CSRC, declared that “China’s fund industry is crucial to the country’s promotion of high-quality development in its capital market […] China’s fund industry, now managing assets topping 60 trillion yuan (about 9.27 trillion U.S. dollars), has become an important force in serving the real economy and wealth management”

He noted that Fund Industry was important in the development of Capital Market attracting medium- and long-term funds, boost market stability and enhance the quality of listed firms.

At the end of June 2021, 12.5% of A-Share Market (about 10.8 Trillion Yuan of Stocks) were held buy funds.

According to YI Huiman, the Funds contributed to old-age pension system reform as 3.6 Trillion Yuan of pension was entrusted to the funds management firms representing 50% of the total pension entrusted to investment.

The regulation and supervision will be improved by introduction of regulatory measures for private funds.

To enhance regulation, authorities will introduce rules for private funds at an appropriate time and continue to improve the fund regulation system to facilitate institutional investors, encourage long-term investment in the capital market, and protect market order as well as the legitimate rights and interests of investors”, he concluded.

  • Africa and China Trade expanded!

The Trade between Africa and China expanded 40.5% yoy to 139.1 Billion USD during January- July 2021. Chinese imports of African products up +46.3% to 59.3 Billion USD with strong increase recorded for rubber,cotton and coffee. Chinese direct investment in Africa stood at 2.07 Billion USD

The Vice-Commerce Minister, QIAN Keming, declared

“Chinese enterprises and African businesses have boosted cooperation on industrial and supply chains, construction of industrial clusters on manufacturing, agriculture, medicine and health, and exploration on emerging sectors such as clean energy, digital economy and 5G” declared The Vice-Commerce Minister, QIAN Keming.

Note: the 2d Africa-China Economic and Trade Expo held in Changsha in the Hunan Province from Sept 26 to 29.

  • A new Stock Market in Beijing !

The CSRC and the Chinese Government act the creation of the ‘’Beijing Stock Exchange’’ focused on SME to fund innovations projects.

“The planned stock exchange in Beijing will firmly adhere to the role of serving innovation-oriented small and medium-sized enterprises (SMEs) as the latest step of the country’s capital market reform” according to an official statement.

The Beijing Stock Exchange is a part of the reform of the National Equities Exchange and Quotations (NEEQ) located in Beijing. The main objective is to create a Third Stock Exchange specialized in SME to support development of these entities in term of Innovation and Development.

The pandemics highlights the needs and the important role of innovative SME in growth and unemployment stability.

The Cumulative turnover of 7299 firms listed on the National Equities Exchange and Quotations (NEEQ) (called the “new third board”), the major OTC chinese market located in Beijing, reach 101 Billion Yuan as of September 5. The NEEQ established in 2012 is dedicated to SME firms to ease financing access.

  • Some Results of major Banks and Insurance firms
Banking and Insurance Sectors H1 2021 Units
China Construction Bank
Interest Income +5.18% yoy
Fees and Commission Income +6.82% yoy
 Net Profits 154.11 Billion Yuan
— Growth +10.92% yoy
Non-Performing Loans Balance 276.98 Billion Yuan
— Growth +16.25% yoy
Non-Performing Loan Ratio 1.53%
— Growth -0.03 pp mom
China Everbright Bank
Operating Revenue 77.04 Billion Yuan
— Growth +6.8% yoy
 Net Profits 22.51 Billion Yuan
— Growth +22.2% yoy
Non-Performing Loan Ratio 1.36%
— Growth -0.02 pp mom
Provision coverage ratio 184.06% +1.35 pp yoy
Bank of China
 Net Profits 118.55 Billion Yuan
— Growth +9.96% yoy
Non-Performing Loans Balance 200.348 Billion Yuan
— Growth -6.925 Bln yoy
Non-Performing Loan Ratio 1.30%
Provision coverage ratio 184.26% +6.42 pp yoy
Agricultural Bank of China
Operating Revenue 366.3 Billion Yuan
— Growth +7.8% yoy
 Net Profits 122.8 Billion Yuan
— Growth +12.5% yoy

 

Central Bank Operations and declarations

Date Operations Maturity Amount Interest rate
August 30 Reverse Repo 7-days 50 Billion Yuan 2.2%
August 31 Reverse Repo 7-days 50 Billion Yuan 2.2%
September 2 Reverse Repo 7-days 50 Billion Yuan 2.2%
September 3 Reverse Repo 7-days 50 Billion Yuan 2.2%

 

The People’s Bank of China (PBOC) conducted its 8th Central Bank Bills Swap (CBS) operation on August 31 valued at 5 billion Yuan at 0.1% fixed rate due on November 30.

  • PBOC view on risks

The annual report of the PBOC indicated that “Overall financial risks in China have decreased and are generally controllable as regulatory measures take hold”

The report highlight that shadow banking activities was reduced considerably as P2P lenders have all been shut down, illegal fund-raising, cross-border gambling and underground banks activities were curbed due to a tighter regulation and supervision.

Government Declarations

Vice Premier HAN Zheng declared that more market-oriented advances in services sector opening up and intellectual property rights protection will be released soon.

Foreign enterprises are welcome to invest and start businesses in China” he said.

  • Government subsidized rental Housing a challenge for the next 5 years.

The Minister of Housing and urban-rural development, WANG Menghui, declared that the development of government subsidized rental housing is a main challenge of the 14th 5-years Plan to ensure housing security for people.

The country has built over 80 million sets of government-subsidized and renovation housing, improving the living conditions of more than 200 million people with difficulties […] Among the different types of government-subsidized housing, the rental housing is built to mainly address the concerns of new dwellers and young people in big cities, while shared-ownership housing is mainly designed for people who can not afford commercial housing to improve their living conditions”.

  • New measures announced to improve FTZ and relations with Hong Kong and Macao.

The State Council released a guideline to support reform and innovation measures to ease trade and investment in Free Trade Zones (FTZ) and with Hong Kong and Macao.

China will open up wider to the investments made by Hong Kong and Macao investors, innovate the development of import trade, unleash the potential of new trade models, facilitate the import of medicine products, and boost the construction of opening-up channel”, according the document.

Data published

  August 2021 Units
PMI Manufacturing sector 50.1 50 point basis
— Growth -0.3 pp mom
PMI Non Manufacturing sector 47.5 50 point basis
— Growth – 5.8 pp mom

 

Sources : Ministry of Finance, People’s Bank of China and the State Administration of Foreign Exchange, National Bureau of Statistics, Ministry of Commerce, Ministry of Finance, General Administration of Customs, State-owned Assets Supervision and Administration Commission

 

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