China

Dollar loans to Chinese borrowers have cratered this year, thanks to both a decline in demand and increased wariness among lenders amid escalating U.S.-China tensions, Bloomberg News reported. Syndicated dollar loan issuance to Chinese borrowers has tumbled 62% from the start of the year through May 17, to $7.3 billion, according to data compiled by Bloomberg. That’s the lowest level since 2012. “Volume is unlikely to rebound anytime soon,” said Fang Lei, a Hong Kong-based managing director of Asia Pacific debt origination and advisory at Credit Agricole SA.

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Congo Republic’s senate on Monday voted to restructure some of its debt with China, a move that the International Monetary Fund has said was necessary to unlock financial support, the finance ministry said. Negotiations over a bailout for the oil-dependant economy have dragged on since 2017, as Congolese authorities failed to convince the IMF they were doing enough to control the national debt or tackle corruption, Reuters reported.

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A Chinese display product maker has been questioned by the Shenzhen Stock Exchange on its cash usage, joining a growing list of firms whose financials are being scrutinized by the nation’s regulators, Bloomberg News reported. Beijing-based Tunghsu Optoelectronic Technology Co. was asked by the bourse to explain the rationale in paying high expenses on its debts when it reported ample cash in 2018, according to a statement on Wednesday. The company was also required to spell out the reasons for issuing convertible bonds when it reported 19.8 billion yuan ($2.9 billion) cash as of end-2018.

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China’s banking and insurance regulator has issued draft rules outlining tougher norms for risk assessment of banks, as part of Beijing’s efforts to rein in financial risks, The Wall Street Journal reported. According to the draft rules released by the China Banking and Insurance Regulatory Commission on Tuesday, banks will have to recognize not only nonperforming loans but also defaulted bonds, interbank assets and other investment as nonperforming assets.

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Beijing has called on banks to increase access to consumer finance in an effort to boost retail spending and bolster the economy. Many banks are issuing more credit cards - an extra 98 million last year - as well as marketing new types of cards and bumping up credit limits. But the surge in consumer lending has been accompanied by a rise in bad debts, with credit card delinquencies up 19 percent to 79 billion yuan ($11.7 billion) last year, 10 times the level in 2010, central bank data shows, the International New York Times reported on a Reuters story.

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One of China’s largest listed drugmakers said it overstated cash holdings by $4.4 billion, sending its shares and bonds tumbling and heightening concerns about the quality of accounting in a country that has become a fast-growing part of global investment portfolios, Bloomberg News reported. Kangmei Pharmaceutical Co., a producer of traditional Chinese medicines, disclosed what it described as an accounting “error” in an exchange filing on Tuesday, about four months after telling investors that it was being investigated by regulators.

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A delegation from a leading Chinese shipbuilding company has arrived in Croatia for talks about a possible investment in the country’s largest shipbuilder Uljanik, which is struggling to avoid bankruptcy, Reuters reported. Officials from the China Shipbuilding Industry Corporation (CSIC) met Croatia’s Prime Minister Andrej Plenkovic and his economic team on Monday and will visit Uljanik’s docks in the northern Adriatic later this week. “After the visit to the docks we will give full and serious consideration to this matter,” CSIC’s Chief Executive Hu Wenming told reporters.

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How Giants Fall in China

China likes to tout the virtues of its private sector, whose firms are the source of most new jobs and most economic growth in the country, a Bloomberg View reported. Not all private companies are created equal, however. Those perceived to have the state’s backing can grow disturbingly fast and crash to earth just as quickly. Behemoth China Minsheng Investment Group Corp. is only the latest example. The company was founded in May 2014 to act as a private-sector version of a sovereign wealth fund, one that would supposedly be better at investing than its state-run counterparts.

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China’s dollar bond market faces a fresh test after a landmark default by a private sector champion is set to trigger the first drawdown of a letter of credit for a public Asian bond, Bloomberg News reported. China Minsheng Investment Group Corp. said last week debt problems at its affiliate triggered cross-default clauses on its notes including a $300 million bond, which carries a standby letter of credit (SBLC) from China Construction Bank Corp. According to CMIG’s bond document, the SBLC may be drawn down under an event of default, which includes cross-default.

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China’s bond market is hosting a battle of wills between the country’s leadership and lower-ranking officials and corporate bosses, The Wall Street Journal reported. They are fighting over perpetual bonds, debtlike securities that lack a maturity date and technically never need to be repaid. Issuance has surged since the start of 2018, partly because state-backed companies see them as a way to hit Beijing-mandated debt-reduction targets without going through a painful restructuring or diluting government control.

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