Xi’s Old Speech on China’s Monetary Tools Catches Traders’ Eyes;Tech Leads Chinese Stocks’ Rally in Hong Kong Ahead of Holidays
Dalio Says China Must Fix Debt Problems or Face ‘Lost Decade’
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Xi’s Old Speech on China’s Monetary Tools Catches Traders’ Eyes
Bloomberg
A line from a book citing President Xi Jinping's comments on China's monetary tools is getting attention from stock and bond traders. The President was cited as saying that China should increase the buying and selling of government bonds in its open-market operations. Some traders speculate that this may mean China is considering quantitative easing, but economists think the comments are just about improving market operations rather than an indication of QE. The People's Bank of China has long opposed such an aggressive stimulus policy and has pledged to keep a "normal" monetary stance for as long as possible.
Tech Leads Chinese Stocks’ Rally in Hong Kong Ahead of Holidays
Bloomberg
Chinese stocks listed in Hong Kong experienced a rally on Thursday as investors bought into heavyweight tech shares before the long weekend. The Hang Seng Tech Index rose as much as 4.4% and Meituan surged almost 9% after Moody's changed its outlook on the company's ratings to positive from stable. A broader gauge of Chinese shares listed in Hong Kong also headed for its highest close in a week. Some traders believed that the rally was due to a South China Morning Post report quoting President Xi Jinping as saying that China's central bank should increase the trading of treasury bonds in open market operations.
Dalio Says China Must Fix Debt Problems or Face ‘Lost Decade’
Bloomberg
Ray Dalio, billionaire founder of Bridgewater Associates, has warned China that it must cut its debt and ease monetary policy or face "a lost decade." Dalio agrees with Chinese President Xi Jinping's warning of a 100-year period of unprecedented change and recommends that the country take steps to manage its debt problem. He also notes that China-US tensions are causing foreign investors to diversify or leave China, which is making it difficult for China to obtain investments. To manage its debt problem, Dalio suggests that China engineer a deleveraging and an easing of monetary policy at the same time, despite the difficulties and political dangers this would entail.
China’s latest EV is a ‘connected’ car from smart appliance maker Xiaomi
Associated Press
Chinese tech company Xiaomi has entered the electric vehicle (EV) market with the launch of its SU7 sedan. The company aims to become one of the top five automakers in the world in the next 15 to 20 years. Xiaomi will integrate its EVs with its phones and home appliances, capitalising on its established range of consumer electronics. Analysts predict that China's EV market will undergo a shakeout in the coming years, with weaker startups losing out.
Bain Eyes New Backers for Multibillion-Dollar China Data-Center Firm Chindata
Bloomberg
Bain Capital is reportedly looking to bring in new investors for Chindata Group Holdings, a Chinese data center company that it took private last year for $3.2bn. Bain is said to be working with advisers to find partners for some of Chindata's data centers, with plans to sell ownership rights for the assets and charge maintenance and operation fees. Potential investors have shown preliminary interest in the assets, but no final decisions have been made. Chindata's mainland China assets account for over 90% of its revenue, and ByteDance is a key client.
China’s ‘Princess of Wahaha’ set to revive a family fortune down US$18 billion
South China Morning Post
Kelly Zong Fuli, the daughter of the late Chinese beverage tycoon Zong Qinghou, is set to take over her father's empire amid falling sales. Hangzhou Wahaha Group, the family's business, has lost ground in an increasingly competitive market, with sales dropping 35% between 2013 and 2022 to CNY51.2bn ($7.1bn), according to the All-China Federation of Industry and Commerce. Competitor Nongfu Spring has seen revenue increase by 62% over five years, and another 28% to CNY42.7bn in 2023. Kelly Zong is expected to take on the role of chair, following her father's death last month.
China Rallies Asian Nations to Oppose ‘Bullying’ in Jab at US
Bloomberg
Zhao Leji, China’s third-ranking party official, has criticised the US’s “hegemonic and bullying acts” at the annual Boao Forum. Zhao called on Asian countries to “oppose power politics and hegemonic acts and maintain the regional order that accommodates the needs and interests of all parties”. Though a veiled swipe at the US, Zhao’s comments come as China courts American business leaders to help achieve an ambitious growth target this year. Beijing is also intensifying its charm offensive to attract overseas investment as it seeks to portray China as a responsible global power.
US urges allies to ban firms from servicing key chip tools for China
South China Morning Post
The US is urging its allies to stop domestic companies from servicing certain chip-making tools for Chinese customers as part of its efforts to curb China's chip-making capabilities. The US has been engaged in a technology war with China, aiming to prevent China from developing more advanced chips that could enhance its military capabilities. The Biden administration recently imposed restrictions on shipments of American-made chip-making tools to advanced Chinese chip factories and is now seeking to persuade its allies to adopt similar measures.
China lifts heavy tariffs on Australian wine as ties improve
Yahoo US
China has announced that it will lift tariffs on Australian wine, which were imposed over three years ago during a diplomatic feud. The decision comes as a sign of improving ties between the two countries. China imposed tariffs on Australian wine in 2020, causing duties to skyrocket above 200%. This heavily impacted the Australian wine market, as China was Australia's top wine export destination. The tariffs were part of a series of sanctions imposed by China on Australian goods. The lifting of tariffs is estimated to cost the Australian economy AUD 20 billion ($13 billion).
US Says WuXi Sends Intellectual Property to China, Reuters Reports
Bloomberg
US intelligence officials have claimed that pharmaceutical company WuXi AppTec transferred a client's intellectual property to Chinese authorities without permission. The unnamed officials provided the information to senators working on a bill to restrict business with Chinese biotech firms on national security grounds. The identity of the client and the nature of the information shared were not disclosed. WuXi denied any unauthorised transfers and stated that the safety of customers' information was of utmost importance. The company has also previously denied any improper ties to the Chinese government or military.
China Central Bank Names First Female Deputy Governor Since 2015
Bloomberg
China has appointed its first female deputy chief of the central bank in nine years. Tao Ling, a longtime central banker and financial regulator, has taken up her post as deputy governor of the People's Bank of China. Tao's appointment stands out in President Xi Jinping's male-dominated administration and comes at a time when gender equality is regressing among the upper echelons of the ruling Communist Party. The appointment comes ahead of an expected visit to China next month by US Treasury Secretary Janet Yellen, who has highlighted the importance of diversity in government leadership.
China’s Property Crisis Is Rippling Through Its Biggest Banks
Bloomberg
China's largest state banks are seeing their bad loan ratios increase as the country's property downturn continues. Bank of Communications reported that its property bad loan ratio jumped to 4.99% at the end of last year from 2.8% a year earlier. Industrial & Commercial Bank of China also saw its bad loans from residential mortgages rise 9.6% to CNY27.8bn ($4.2bn), while its property non-performing loan ratio slipped to 5.37%. The results highlight the pressure on banks to maintain asset quality as the economy slows and interest rates decline.
China’s Bond Frenzy Fades Amid Worries Best Returns Are Over
Bloomberg
A rally in Chinese government bonds is set to end this month as expectations of higher debt issuance in Q2 and a weaker yuan threaten the haven buying spree. Coupon earnings from debt holdings have fallen to a 17-year low of 0.2% and bond yields are expected to come under upward pressure amid more government debt issuance. Additionally, the lack of credit demand in the real economy will trap liquidity in the interbank market, creating more demand for bonds.
Xi Jinping to China’s central bank: restart treasury-bond trade
South China Morning Post
China's central bank, the People's Bank of China (PBOC), is expected to start buying treasury bonds in open market operations for the first time in over two decades. President Xi Jinping recently instructed the PBOC to increase the trading of treasury bonds as part of efforts to enrich the monetary policy toolbox. The move is seen as a means of increasing liquidity, boosting economic activity and fostering the yield curve of Chinese treasury bonds. The purchase of bonds would also reflect China's increasing interest in utilising different monetary tools as conventional policy support options narrow.
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