China

China's central bank said on Wednesday it was cutting the amount of cash that all banks must hold as reserves, releasing around 800 billion yuan ($114.91 billion) in funds to shore up the slowing economy, the International New York Times reported on a Reuters story. The People's Bank of China (PBOC) said on its website it will cut banks' reserve requirement ratio (RRR) by 50 basis points, effective Jan. 6. The move would bring the level for big banks down to 12.5%.

China state-owned Qinghai Salt Lake Potash Co, the country's largest potash producer, failed to sell its assets in a fifth round of auctions on Wednesday aimed at raising funds and avoid being delisted from the Shenzhen Stock Exchange, the International New York Times reported on a Reuters story. The debt-laden company filed for bankruptcy with the Qinghai province court in September and halted trading in its shares in November. After posting net losses in 2017 and 2018, it has said it would be delisted if it reported a net loss for third successive year.

It was a bumpy year for China’s markets, considering all the turbulence in relations with the U.S. Still, the final results really aren’t bad, Bloomberg News reported. The Shanghai Composite Index closed off its best year since 2014, boosted by a huge rally in the first few months, when the country’s major equity benchmarks entered a bull market. While the yuan was whipsawed at times by every twist and turn in the trade dispute, it’s only weakened about 1.3% the past 12 months. Sovereign bonds rose, but lagged bigger gains in government-bond markets elsewhere.

Local governments in China are selling debt to raise cash earlier than ever to help shore up a slowing economy, Bloomberg News reported. Authorities in Sichuan and Henan provinces offered a combined 87.6 billion yuan ($12.6 billion) of so-called special bonds on Thursday in the earliest such issuance since nationwide sales began in 2015. Through 2018, sales began in March after the legislature formally approved the annual budget. But China has for a second year ordered local governments to move the timetable forward to speed up spending in areas like transport and energy infrastructure.

As bond defaults become an accepted norm in China, Beijing is shifting its focus to what happens next. China’s regulators are pushing to improve the debt restructuring process, currently notoriously opaque and protracted, Bloomberg News reported. Senior officials from bodies including the central bank and securities regulator this week urged that defaults be handled more efficiently and transparently, saying action is needed to restore investor confidence.

China’s central bank moved another step toward interest-rate liberalization by asking banks to price outstanding loans with new benchmark rates that are seen as more responsive to market movements, The Wall Street Journal reported. The People’s Bank of China said Saturday that commercial banks in the country should start replacing old benchmark lending rates with the Loan Prime Rate in pricing the loans issued before Jan. 1, 2020. The move will effectively scrap the old benchmark lending rates.

The former head of a regional bank rescued by Chinese authorities this year is set to spend the rest of his life behind bars after a court convicted him of corruption and other crimes on Thursday, the Financial Times reported. Jiang Xiyun, former chairman of Hengfeng Bank, was sentenced to death with a two-year reprieve — a punishment usually commuted to life in prison after the reprieve — by a court in eastern Shandong province, where the troubled financial institution is based.

China’s policy makers will unveil a three-year action plan in early 2020 on the reform of state enterprises, with an aim to improve the performance of the sector and create world-class champions, according to state-owned newspapers, Bloomberg News reported. The plan will tighten how the performances of state firms, often referred to as SOEs, are evaluated, and also seek “new breakthroughs” in introducing more strategic private-sector investors, Hao Peng, head of the country’s state assets manager, was cited in the China Securities Journal as saying.

China has a mounting debt problem. Not just over-leveraged companies, but a rapid build-up on household balance sheets that is hitting records. You can blame youth for a borrowing binge that, if left unchecked, could be China’s next credit bubble, a Bloomberg View reported. Household debt hit levels of 57% of gross domestic product in the third quarter, according to Bloomberg Intelligence analyst Matthew Phan, more than double just 27% in 2010. Fitch Ratings said in July that it was surging at a pace roughly double nominal GDP growth.

In a related story, the Financial Times reported that corporate defaults in China surged to a record high in 2019, raising new questions over how policymakers in Beijing will manage mounting financial distress among large private and state-owned companies. Onshore corporate defaults hit Rmb130bn ($18.6bn) in the final weeks of the year, breaking the record of Rmb122bn last year, according to data compiled by Bloomberg, as economic growth fell to a three-decade low.