China

Many of the recent debates about Chinese takeovers and investments in Europe have been conducted in the opaque language of security. Spooks in Britain and Germany openly worry about the consequences of allowing Chinese groups such as Huawei into their 5G mobile networks. A recent delegation from Berlin even visited China to explore the intriguing idea of a no-spying pact.

Read more

An economic slowdown and extremely tight credit conditions pushed corporate debt to a record high in China last year, according to experts, CNBC reported. Defaults for Chinese corporate bonds — issued in both U.S. dollars and the Chinese yuan — soared last year, according to numbers from two banks. Yuan-denominated debt rose to an “unprecedented” 119.6 billion yuan ($17.8 billion) — four times more than 2017, according to a February report by Singapore bank DBS.

Read more

Listed Chinese banks will need to raise about $260bn in fresh capital over the next three years as regulations force shadow-bank loans back on to balance sheets and global rules on systemically important groups impose extra requirements on the largest lenders, the Financial Times reported. A recent lending surge by Chinese banks in response to monetary stimulus designed to support China’s slowing economy is also adding to the banks’ capital needs, by accelerating the expansion of their balance sheets. China’s bank regulator has forcefully implemented the global Basel III rules on ban

Read more

The "grey rhino" risks in China's financial sector are rising and regulators will step up efforts to control them, a senior official at the People's Bank of China said in remarks published on Monday. Chinese policymakers have warned of potential "grey rhino" events - highly obvious yet ignored threats - as the nation faces increasing uncertainties as the economy slows amid a trade war with the United States, the International New York Times reported on a Reuters story.

Read more

As China’s $9.1tn shadow lending industry cools for the first time in a decade, private corporate defaults are on the rise, the Financial Times reported. Shadow banking, an industry of loosely regulated, high-yield lending outside the formal banking sector, has attracted the wrath of the country’s financial watchdogs in recent years. Regulators launched an aggressive campaign against the sector starting in 2017.

Read more

China’s policy makers, faced with a slowing economy and growing pressure on the banking system, have decided it’s time for the nation’s stock and bond markets to play a bigger role in funding companies, Bloomberg News reported. Less than one-quarter of China’s $2.9 trillion of financing last year was from bond and equity issuance, central bank data compiled by Bloomberg show. That’s not good enough, according to senior officials, who are looking for ways to improve businesses’ access to cash without adding too much risk to the financial system.

Read more

How far will China’s leaders go to prevent an equity bubble from forming? It’s becoming a key question for investors as mixed signals produce the wildest market in years, Bloomberg News reported. Traders are hanging on every word out of Beijing for clues on how the government may want to manage this year’s world-beating rally. The new securities regulator chairman -- who has played a leading role in stoking risk appetite -- just downplayed the significance of last week’s rating cut, calling it “very normal” even though the market’s reaction showed otherwise.

Read more

After record defaults on China’s bonds, there’s now record interest in trading the country’s distressed debt, Bloomberg News reported. An arm of the central bank that runs the biggest bond-trading platform last month conducted the third auction of distressed securities since July. This one had the biggest participation yet, spanning 43 institutions. While prices of the trades were published by the China Foreign Exchange Trade System, the counterparties’ names were kept secret to maximize deals.

Read more

Bets on beaten-down Chinese distressed bonds could pay off if the nation persists with its credit easing and there’s a sustained rally in the domestic stock market, according to an Asia-based hedge fund that manages $3.5 billion, Bloomberg News reported. Distressed dollar bonds from Chinese issuers have had their best start to a year since 2012. A strategy that includes investing in these notes “could generate out-sized returns” if an improving economy and share gains help investors recover more money from troubled debt, said Kevin Wu, a portfolio manager at Pinpoint Asset Management.

Read more