China

Banks and financing platforms are being swept along as punters look for quick cash to bet on the world’s most volatile equity market. It’s a dangerous strategy both for already overextended households as well as lenders, one that’s drawing closer scrutiny from regulators, Bloomberg News reported. Authorities are also partly to blame. With the economy reeling from the pandemic, policy makers have pumped out liquidity and eased curbs on shadow banking to backstop small businesses and struggling families.

The former head of China's securities regulator has raised concern about banks addressing funding shortages by ramping up issues of short-term interbank debt instruments that have in the past attracted regulatory scrutiny, the International New York Times reported on a Reuters story. Xiao Gang, former chairman of the China Securities Regulatory Commission, said that against the background of a large increase in bank credit, banks faced an "arduous task" of making up for cash shortfalls for maturing old products.

China’s central bank has announced the first bankruptcy of a commercial bank in nearly two decades, authorising the liquidation of regional lender Baoshang Bank, a year after it seized control of the institution, the Financial Times reported.

China’s efforts to curb predatory lending to the country’s small and medium-sized enterprises could harm the sector rather than helping it by cutting off access to crucial finance, analysts have warned, the Financial Times reported. Multiple shadow banking lenders have told the Financial Times they would stop servicing medium to high-risk borrowers after the Supreme Court announced a plan last month to “significantly” cut the interest rate shadow banks could charge.

British Steel’s Chinese owner has had its bid to acquire a factory in France rejected by a court as concerns grow in some European capitals about companies from the Asian superpower snapping up assets, the Financial Times reported. Jingye Group, which saved the UK’s second-largest steelmaker from bankruptcy earlier this year, was attempting to wrest control of a small mill in north-east France that belonged to British Steel.

The Pacific island nation of Tonga has asked Beijing to restructure its large bilateral debt load, the government said on Thursday, as the pandemic upends the region’s tourism revenues and an onerous Chinese loan repayment schedule looms, Reuters reported. Tonga is one of the biggest Chinese debtors in the South Pacific, with its financial reliance dating back to loans taken more than a decade ago to rebuild its capital, Nuku’alofa, after riots. The small economy, largely dependent on external aid and remittances from Tongans living abroad, has since taken out additional loans.

China’s cash-strapped small lenders are expanding their pile of the riskiest kind of bank debt to shore up their capital levels, bracing against an economic slowdown and rising loan defaults, Bloomberg News reported. A total of 19 banks have sold 339.6 billion yuan ($48.5 billion) perpetual bonds, high-yielding subordinated bonds with no maturity dates, as of July 10 this year, according to data compiled by Bloomberg. Smaller lenders including Chongqing Three Gorges Bank Co., Bank of Rizhao Co., and Huarong Xiangjiang Bank Corp. accounted for more than 70% of the issuance.

China has avoided a recession, but debt problems are piling up. Output rose 3.2% year-on-year in the three months to June, following last quarter’s record contraction. Investment still looks tepid, employers are shedding jobs, and retail is anaemic, Reuters reported. That means more bad loans. Unfortunately, the country is running low on distressed debt investors. The pandemic has forced Beijing to prop up sectors, including exports and tourism, where demand has been hit hard and unemployment rising.

Chinese investors who claim to trace their lineage to a renowned fourth-century calligrapher are fighting to retain control of a 256-year-old French crystal glassmaker, following a series of defaults and a private credit deal gone wrong, the Financial Times reported. The troubles for Beijing-based Fortune Fountain Capital and its struggle to hold on to Baccarat Crystal highlight the problems Chinese investors have run into after taking on excessive leverage to buy European brands — sometimes through private credit deals at lending rates far higher than those of bank

China’s aviation industry sank further into the red, losing 34.25 billion yuan ($4.89 billion) in the second quarter, only slightly narrower than in the first quarter, underlining the colossal financial impact from the coronavirus pandemic, Reuters reported.