China

International investors are too fixated on trade tension between the US and China. Instead, they would do well to take heed as Beijing continues a war against non-bank lenders and fintech companies that is tightening liquidity and spooking investors in mainland China, the Financial Times reported in a commentary. Money remains tight on the mainland even as financial stability has replaced deleveraging as the official order of the day.

One China hedge fund is adding to stocks in the nation even as a rout deepened losses in its portfolio and prompted some peers to duck for cover, Bloomberg News reported. Springs China Opportunities Fund is using the “panic selloff” to increase its holdings of “oversold and undervalued” companies, it told investors in a letter seen by Bloomberg News. The letter was sent after the fund lost an estimated 17 percent this year through July 6. The Shanghai Composite Index has dropped as much as 12 percent since the end of May, as the trade spat with the U.S.

China’s savers are rushing to pull money from peer-to-peer lending platforms, accelerating a contraction of the $195 billion industry and testing the government’s ability to maintain calm as it cracks down on risky shadow-banking activities, Bloomberg News reported. In some cases, savers are turning up at the offices of P2P operators to demand repayment, spooked by reports of defaults, sudden closures and frozen funds. At least 49 platforms have failed in the past two weeks, adding to 80 cases in June, the biggest monthly tally in two years, according to Shanghai-based Yingcan Group.

China’s development banks — the biggest lenders in the sector worldwide — are ramping up co-operation with overseas financial institutions after problems with their international investment projects, the Financial Times reported. The China Development Bank (CDB) and the Export-Import Bank of China (Ex-Im Bank) are seeking to spread the burden of funding international projects, officials and executives said.

On the surface, China’s economy is humming along smoothly. It’s the numbers behind the numbers that point to mounting challenges for the world’s other economic superpower, the International New York Times reported. The Chinese government on Monday reported that the economy grew 6.7 percent in the three months that ended in June compared with a year ago. That is pretty close to the rate that China has reported quarter after quarter over the past two and a half years. The pace puts it comfortably within its target of achieving growth of around 6.5 percent for the full year.

Rising Treasury yields, trade-war concerns and Chinese defaults have wiped out $45 billion since the start of the year in the market value of dollar notes sold by Asian and international borrowers, according to Singapore-based BondEvalue. “High net-worth investors not only saw great losses in their leveraged positions, but also faced difficulties in selling off bonds to cut their losses,” said the firm, which provides bond services to private banks, in a note released earlier this week, Bloomberg News reported.

China is letting up on its drive to keep a lid on debt growth as it faces a softening economy at home and escalating trade tensions with the U.S., The Wall Street Journal reported. Senior Chinese leaders led by President Xi Jinping have been sending unmistakable signals that the campaign to rein in financial risk isn’t the overriding priority it has been.

A record pace of defaults in China has triggered greater application of safeguards to local bonds, a silver lining for investors looking for some protection, Bloomberg News reported. The ratio of domestic bonds with a cross-default covenant, which puts a borrower in default of other debt if it fails payment on one bond, has surged to 82 percent of all company notes sold this year. That’s up from almost zero five years ago.

Airbus faces a logjam of undelivered A330 jets worth well over $1 billion for airlines affiliated to China's debt-laden HNA Group following a stand-off over late payments, according to industry sources and a Reuters examination of parked aircraft, the International New York Times reported on a Reuters story. Companies belonging to the troubled Chinese aviation-to-finance conglomerate have delayed payments for several months, leading Airbus to withdraw deliveries rather than step in to finance the aircraft itself, the sources told Reuters.

Foreign investors are zeroing in on health-care and consumer stocks and ditching some old favorites, as they sift through the spoils of a $2 trillion selloff in China’s equity market, Bloomberg News reported. Companies exposed to China’s growing middle class and resilient to external turbulence like the trade fight are popular picks for foreigners investing via trading links with Hong Kong. Liquor maker Kweichow Moutai Co., Han’s Laser Technology Industry Group Co. and Jiangsu Hengrui Medicine Co. are among those in demand, while Gree Electric Appliances Inc.