Money managers on Wall Street and in Silicon Valley are learning once again that investing in China can be fraught, Bloomberg News reported. The Biden administration is close to completing an executive order that would curb U.S. investment in China’s tech industry, foreshadowing a further slowdown in bets on the world’s second-largest economy. Uncertainty over policy related to China has already contributed to a decrease of capital flowing into the Asian country.
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China
As China tries to turn the page on one of its worst stretches of growth since the 1970s, its economy is being weighed down by the colossal debts of its local governments, which swelled during the pandemic and are starting to come to a head, the Wall Street Journal reported. Xi Jinping’s zero-Covid campaign saddled cities with billions of dollars in unplanned expenditures for mass testing and lockdowns. The Chinese leader’s crackdown on excessive property-market leverage led to a sharp drop in land sales, depriving cities of one of their biggest revenue sources.
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China's foreign exchange regulator said on Monday that there is no change in China's policy on cross-border remittance of funds, and it will continue to promote a high-level opening-up to the world, Reuters reported. The State Administration of Foreign Exchange (SAFE) made the comments in response to Reuters questions regarding billionaire investor Mark Mobius' claims that he cannot take his money out of China due to its capital controls.
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China is willing to "constructively" participate in solving the debt problems of relevant countries under a multilateral framework, its Premier Li Keqiang said on Wednesday, Reuters reported. China, the world's largest bilateral creditor, has criticised multilateral lenders for not accepting losses, or haircuts, on loans to low-income countries while Beijing is being asked to do so on credit it has extended on its own.
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Economic activity in China expanded sharply for a second straight month, in an early sign the country may be shaking off the impact of pandemic curbs sooner than expected, the Wall Street Journal reported. An official gauge of manufacturing rose at the fastest pace in more than a decade in February, while export orders expanded for the first time in almost two years, the National Bureau of Statistics said Wednesday. Services and construction activity also expanded further, the purchasing managers index report showed.
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China’s banks and asset managers are turning to an old yet potentially risky accounting maneuver to attract buyers for their investment funds after a rout in the bond market triggered waves of redemptions last year, Bloomberg News reported. Banks including Industrial and Commercial Bank of China Ltd. and Postal Savings Bank of China Co.’s wealth management units are rushing to sell new funds that value most assets based on adjusted costs rather than current market prices, masking day-to-day volatility.
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Property developer China Evergrande Group is struggling to reach a deal with foreign bondholders, raising the possibility that a court will tell the company to wind down, the Wall Street Journal reported. Evergrande, once China’s largest property developer by sales, sold more than $20 billion of dollar bonds during a debt-fueled spending spree. The company defaulted on its foreign debt in late 2021, and has since been embroiled in a difficult negotiation with international bondholders.
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Chinese leader Xi Jinping is preparing to shake up the leadership of the country’s financial system, installing key associates to run the central bank and reviving a Communist Party body to tighten political control over financial affairs, the Wall Street Journal reported. The moves are a continuation of efforts by Mr. Xi to reshape the world’s second-largest economy. In recent years, the central bank and other financial regulators have continued to lose their already fading independent status amid Mr. Xi’s broader effort to strengthen the party’s rule.
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In the realm of global economic policy, Friday Nov. 13, 2020, was meant to be about hope — not the trigger for another pandemic-era fright. That’s when Group of 20 finance ministers announced final agreement on a blueprint for the US, China and other relatively new creditor countries like India to cooperate on debt relief for more than 70 low-income nations facing a collective $326 billion burden, and deliver it in a “timely and orderly” way, Bloomberg News reported.
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President Biden and his top officials vowed this week to introduce additional sanctions aimed at impeding Russia’s war efforts against Ukraine. But the administration’s focus is increasingly shifting to the role that China has played in supplying Russia with goods that have both civilian and military uses, the New York Times reported. As one of the world’s biggest manufacturers of products like electronics, drones and vehicle parts, China has proved to be a particularly crucial economic partner for Russia. Beijing has remained officially unaligned in the war.