China

China’s crackdown on shadow banking is taking aim at more than $1 trillion of opaque investments sold by banks as low risk and high yield, even while funds were channeled to riskier borrowers such as developers, Bloomberg News reported. Banks and wealth mangers can no longer use money invested in so-called cash management products to buy long-term debt or bonds rated below AA+, according to long-awaited rules published on Friday.

The size and type of defaults that have occurred in China in recent times indicate that the notion of “too big to fail” may no longer apply to the nation’s borrowers, according to Goldman Sachs Group Inc., Bloomberg News reported. There has been a noticeable up-tick in defaults by Chinese state-owned enterprises since late 2019 and some of the borrowers that have failed to repay debt recently such as China Fortune Land Development Co. have had large amounts of outstanding bonds, analysts including Kenneth Ho wrote in a report dated Friday.

China is using the eastern province of Zhejiang to test a series of initiatives to promote “common prosperity” as the country grapples with gaps between urban and rural development, unequal income distribution and a lack of consistency in development, The Hill reported.

China's banking and insurance regulator issued rules on Tuesday on wealth management products for cash, tightening oversight of the $1 trillion market, Reuters reported. China Banking and Insurance Regulatory Commission banned such products from investing in stocks and convertible bonds and said the leverage level of each product should not exceed 120% normally, according to a statement on the regulator's website. The regulator also asked commercial banks and wealth management companies to conduct stress tests on such products to make sure they could deal with urgent redemptions.

China's new bank loans unexpectedly rose in May from the previous month but broader credit growth continued to slow, as the central bank seeks to contain rising debt in the world's second-largest economy, Reuters reported. Top Chinese leaders have repeatedly vowed to avoid any sharp policy turns, keeping borrowing costs low and telling banks to maintain support for small firms, while being more watchful about extending credit to hot areas of the economy such as property.

Authorities in China escalated their campaign against cryptocurrencies, arresting more than 1,100 people suspected of using the digital assets to launder ill-gotten funds and ordering mines to shut down in one of its western provinces, the Wall Street Journal reported. In a swoop spanning 23 provinces, regions and cities, Chinese police on Wednesday rounded up more than 170 criminal groups that engaged in cryptocurrency trading in order to launder money obtained via telephone and online scams, the Ministry of Public Security said in a statement.

A Chinese businessman with family links to the eldest son of jailed former security czar Zhou Yongkang has been detained by police investigating the collapse of Sichuan Trust, which was taken over by the provincial government and banking regulator last year amid concerns it couldn't repay 25.3 billion yuan ($3.9 billion) of investors' money, Nikkei Asia reported.

China's May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalise COVID-hit growth, Reuters reported. Investors are increasingly worried pandemic-driven stimulus measures could supercharge global inflation and force central banks to tighten policy, potentially curbing the recovery. China's producer price index (PPI) increased 9.0%, the National Bureau of Statistics (NBS) said on Wednesday, as prices bounced back from last year's pandemic lows.

Chinese regulators have instructed major creditors of China Evergrande Group to conduct a fresh round of stress tests on their exposure to the world’s most indebted developer, Bloomberg News reported. Authorities led by the Financial Stability and Development Committee, China’s top financial regulator, recently told lenders including Industrial & Commercial Bank of China Ltd. to assess the potential hit to their capital and liquidity should Evergrande run into trouble. It’s unclear whether the results will lead to any official action.

China Evergrande Group, the country’s most indebted developer, reversed losses in Hong Kong trading after the company clarified that operations remained normal and it was compliant in dealings with a banking unit, Bloomberg News reported. The shares rose as much as 3.7% on Monday afternoon after earlier sliding 5.3%. In a statement, Evergrande said various “rumors,” including that it was resorting to widespread price discounts, were false. Chinese developers are facing a slew of measures to curtail risks in the sector, with regulators monitoring everything from bank lending to land sales.