China’s official January manufacturing Purchasing Managers’ Index (PMI) came at 51.3, down from December’s 51.9, with non-manufacturing PMI dropping to 52.4 from 55.7 the previous month, latest data from the National Bureau of Statistics showed.
The official manufacturing PMI reading reached a three-year peak of 52.1 in November 2020.
“We think the moderation this month reflected a combination of factors including the seasonal weakness ahead of the Lunar New Year, colder-than-usual weather and disruption from the winter surge in [Covid-19] infections in a few areas,” economists at Barclays wrote in a Sunday report. “Not surprisingly, the services recovery appeared to suffer a more visible setback from the resurgence of local infections.”
The Caixin Manufacturing PMI, released on Monday morning, dropped to 51.5 in January, reaching its lowest since last June.
*
The GDP of the Guangdong province hit Rmb11tr in 2020 — the highest in China — after a year-on-year growth of 2.3%, on par with the national growth rate. The province has set a growth target of at least 6% for 2021. Jiangsu’s GDP also exceeded Rmb10tr last year.
*
Outstanding renminbi-denominated loans to the real estate sector stood at Rmb49.58tr at the end of 2020, shows data from the People’s Bank of China (PBoC). While the amount was 11.7% higher compared to 2019, the pace of growth was 3.1 percentage points slower than what was seen a year ago, the PBoC said.
China saw a rise in green loans in 2020, with Rmb11.95tr outstanding by December, showing a 20.3% increase compared to the start the year.
*
The General Office of the Chinese Communist Party and the State Council have released an ‘action plan’ for the development of the onshore market. The plan covers a variety of areas, including property rights and intellectual property rights protection, consumer rights protection, anti-monopoly and unfair competition, negative list, infrastructure development, the development of technology, and the opening up of the services industry.
In capital markets, the plan called for continued efforts to push forward a registration-based IPO system and a delisting reform, the introduction of more institutional investors such as banks’ wealth management subsidiaries and insurance asset management companies, and a lowering in the cost of financing onshore.
*
Shanghai plans to implement more opening up measures in the finance industry and make its financial market more internationalised, the municipal government said in its five-year plan. It wants to promote the cross-border use of the renminbi, including using the renminbi as the settlement currency in areas such as commodities trading and cross-border e-commerce. It also encouraged foreign investors to participate in Shanghai’s stock and bond markets.
Shanghai also aims to become a global centre for asset management and financial technology, and establish an international reinsurance centre.
*
HNA Group’s creditors have filed for a bankruptcy reorganisation of the company, according to an announcement on Friday evening.
The move is “not sudden” but “inevitable”, and came after months of negotiations since the Hainan government started the risk disposal work at the company, said head of the Communist Party committee at HNA, Gu Gang, who also leads the provincial government’s ongoing efforts to restructure the firm.
He said at a Friday internal meeting that HNA will maintain normal operations and be “rescued and reborn” after a reorganisation of its debt, equity and management. The contents of his speech were published on the company’s WeChat account on Saturday.
*
Xiaomi Corp is suing the US Department of Defense and the Department of the Treasury for their designation of the company as a ‘Communist Chinese Military Company’. The decision is “factually incorrect” and has deprived it of legal due process, the firm said in a filing in Hong Kong.
Xiaomi said it has pleaded to the courts “to declare the decision illegal and that it be reversed”, to protect the interests of its global users, partners, employees and shareholders.
*
China and Japan will expand the scope for participation and investment through the China-Japan ETF Connect scheme that was launched in June 2019, according to an update on the China Securities Regulatory Commission (CSRC) website last Friday.
Speaking at a capital markets virtual forum held between the two countries last week, Fang Xinghai, vice chairman of the CSRC, proposed to increase cooperation between Chinese and Japanese stock exchanges, as well as cross-border capital markets regulatory cooperation with a view to protect investors from cross-border financial crimes. He also encouraged Japanese investors and financial institutions to participate more in the onshore Chinese markets. He said 20 Japanese financial institutions have been granted the Qualified Foreign Institutional Investors licence.
*
The PBoC’s financial technology board held a meeting, putting its focus this year on coming up with a fintech development plan, improve the standards of fintech-related regulations and strengthen regulatory oversight of fintech innovations, according to a Saturday update.
*
The China Banking and Insurance Regulatory Commission (CBIRC) is taking feedback for draft rules for corporate governance at banks and insurance firms. The new regulation detailed unified requirements on Chinese banks and insurers with a view to build clear shareholding structures and sound organisational structures.
The rules stressed the role of Communist Party committees, particularly at privately-owned firms. Key business matters should be consulted with the committees before any decisions can be made by the board and senior management. The draft regulation also emphasises equal treatment by the board of directors of all shareholders and protection of smaller shareholders.
*
The size of China’s bank wealth management industry reached Rmb25.86tr at the end of 2020, according to a report by the Banking Wealth Management Registration and Custody Center.
*
The CSRC published guidelines for on-the-ground inspections at pre-IPO companies last Friday, with immediate effect. These include visits to the production and operation sites, reviews of the relevant financial records, and interviews with the companies’ senior management, suppliers, and third-party agencies such as accounting firms.
Companies will be randomly selected and given a notice within three working days of their selection. The firms can withdraw their IPO application within 10 working days of receiving the notice, but if they decide to apply to list again within 12 months, they will be subject to compulsory inspections.
On-the-ground inspection is a necessary step for a registration-based IPO system, and will help improve the quality of listed firms and increase information disclosure, the CSRC said.
*
The Ministry of Finance has published guidelines for the rating of bonds issued by local governments, effective from March 1.
Credit rating agencies are required to provide ratings that are “objective and fair” to local government bonds. They have to provide follow-up ratings at least once a year for as long as the bonds are outstanding, and pay attention to events that could potentially impact the local governments’ ability and willingness to repay their bonds, such as changes in the use of proceeds. The guidelines also ban the agencies from disrupting the market by waging a price war or engaging in ratings competition.
*
The National Association of Financial Market Institutional Investors (Nafmii), an interbank bond regulator, said it will further de-emphasise the role of external credit assessment in corporate issuance. This is in line with the CSRC’s initiative last August to scrap ratings requirements on corporate bonds in the exchange market.
Starting from February 1, corporate issuers no longer need to provide their credit rating report when registering with Nafmii for their bonds. The move is to let the market decide the ratings, and will help with issues such as ratings inflation and a lack of differentiation, Nafmii said last Friday.
*
The PBoC conducted Rmb5bn of central bank bill swap operations on Friday to improve liquidity in the bank perpetual bond market. The bill swaps have a three-month tenor.
*
Zhuhai Huafa Group Co, Ping An Insurance and Shenzhen Special Economic Zone Development Group Co have been selected as the strategic investors for a reorganisation of Peking University Founder Group. The revamp involves Founder and four subsidiaries. Zhuhai Huafa and Shenzhen SDG represent the local State-owned Assets Supervision and Administration Commission of their respective cities.
*
The CSRC revealed the preliminary results of an investigation into Yihua Lifestyle Technology that was launched in April 2020.
The Shanghai-listed company, a subsidiary of defaulted issuer Yihua Enterprise Group, has allegedly inflated its profits by over Rmb2bn and its bank deposits by Rmb8bn between 2016 and 2019, the CSRC said last Friday. In addition, the company allegedly failed to disclose related transactions worth Rmb30bn. The CSRC vowed harsh punishment on the related parties.