China has long been a nation of savers. For decades, its citizens socked away much more of their incomes than Americans do. The pool of capital that was created powered China’s economic rise, The Wall Street Journal reported. Banks used their bulging deposits to fund factories and roads. The government became a key global creditor, bankrolling infrastructure overseas and buying up more than $1 trillion in U.S. Treasury bonds. The savings also fueled tensions with other countries. Western leaders said China was discouraging spending to tilt the global economy in its favor.
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China Minsheng Investment Group will cut compensation of its top and mid-level executives from this month to support strategic restructuring, it said in an announcement, Bloomberg News reported. The Shanghai-based company that aspired to become China’s answer to JPMorgan Chase & Co. said on Tuesday it will reduce salaries for senior and mid-level management by as much as 83% to lower costs. Average cuts for senior and mid-level management will be 53% while ordinary employee pay will remain unchanged, it said.
In the bond world, a plain-vanilla default isn’t the scariest thing. What can be worse is a back-room deal to avoid or obscure one, a Bloomberg View reported. China needs to be on guard. No doubt, China’s economy is slowing. In September, industrial profits fell 5.3% from a year ago, the deepest slump since 2015. Yet China Inc.’s credit profile seems to be improving. So far, only $8.6 billion in bonds outstanding have negated on their obligations, versus $15.3 billion in 2018, data compiled by Bloomberg show.
China’s Jingye Group has fuelled hopes of a rescue deal for British Steel with plans to send a delegation to the second-biggest UK steelmaker’s main plant in Scunthorpe, the Financial Times reported. Hebei-based Jingye, which also owns hotels and a medicines business alongside its main steelmaking operations, is due to visit the Lincolnshire steelworks next week.
Norwegian Air Shuttle has sealed a long-awaited joint venture with one of China’s biggest banks in a deal designed to bolster a balance sheet strained by the low-cost carrier’s breathless pace of expansion, the Financial Times reported. The joint venture, 70 per cent owned by a subsidiary of state-controlled China Construction Bank, will be responsible for financing 27 Airbus A320neo aircraft that Norwegian expects to be delivered in 2020-23.
Chinese defaulted bonds just sold at a discount of as much as 97% in an anonymous auction. Six defaulted notes changed hands, with the cheapest selling for as little as 3 yuan in an auction organized by the China Foreign Exchange Trade System on Wednesday, Bloomberg News reported. That’s a record low for a sale of this type. One didn’t sell, according to an exchange statement on its official WeChat account. The sale is a sign of investors’ increasing tolerance of risk in China’s nascent distressed debt market amid a broader boom in onshore high yield trading.
China’s $13 trillion bond market seems calmer this year, with fewer defaults than 2018. Underneath the surface, though, is a churning current that threatens to swallow investors who aren’t careful, a Bloomberg View reported. The case of Xiwang Group Co. is one such cautionary tale. Just days ago, this distressed industrial conglomerate in the northeast province of Shandong thought it could borrow for peanuts. The company, whose business operations span corn-oil processing to steel manufacturing, tried to raise 450 million yuan ($63.5 million) at a coupon range of 7.5% to 8.5%.
Many privately held firms in Shandong, China’s third-biggest province by economic output, are struggling to repay short-term debt due to declining industry fundamentals, entangled cross guarantees and ill-managed investments, S&P Global Ratings said, Reuters reported. China’s slowing economy and enforcement of environmental protection rules have pressured the profitability and cash flow of Shandong companies in over-capacity sectors including oil refining, petrochemicals, steel, aluminium and textiles, S&P said.
China’s slipping economic momentum is sparking a shift in government priorities—away from curbing mounting debt levels and toward a renewed focus on raw growth, The Wall Street Journal reported. Gross domestic product growth fell to 6% for the third quarter of the year, hitting the bottom of Beijing’s targeted range, amid clearer signals the government wants to ramp up infrastructure spending and official support for businesses, the kinds of policies that fueled borrowing—and economic expansion—after the 2008 financial crisis.