China

There's growing evidence that China is finally scaling back its epic borrowing binge. That's important for a lot of reasons, not least for reducing risk and avoiding a financial crisis, a Bloomberg View reported. The question is whether the government can sustain the pain. Regulators in Beijing are well aware of the risks that excessive leverage poses, and have tried many times over the years to crack down. Yet they routinely fail to rein in local government officials who get promoted by boosting economic growth, regardless of what systemic risks they may be incurring by binging on debt.

A tightening of leverage, coupled with soaring land costs, looks set to end the home price windfall that China's developers have enjoyed this year.Prices of new dwellings, excluding government-subsidized housing, gained in March in 62 of the 70 cities tracked by the government, compared with 56 in February, the National Bureau of Statistics said last month. On Monday, Longfor Properties Co.

A Chinese regulator announced on Friday that it had taken disciplinary measures against the Anbang Insurance Group, a financial behemoth that has tried to invest tens of billions of dollars overseas, for the improper sale of two investment products, the International New York Times reported. The moves by the China Insurance Regulatory Commission come against a backdrop of broader worries about the country’s financial system, in addition to ones about the insurance industry.

The World Bank has warned that Chinese local governments remain addicted to off-budget borrowing, despite Beijing’s efforts to impose fiscal discipline on localities and curb ballooning debt, the Financial Times reported. Runaway growth of local government debt is widely seen as a huge risk for China’s economy and financial system. Provinces, cities and counties borrowed heavily to spend on infrastructure to keep economic growth humming after the 2008 financial crisis.

Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, reported its strongest quarterly profit growth in two years as soured credit and lending margins stabilized amid an uptick in the economy, Bloomberg News reported. Net income rose 1.4 percent to 75.79 billion yuan ($11 billion) in the three months ended March 31 from 74.76 billion yuan a year earlier, the Beijing-based lender said in an exchange filing on Friday. Rival lender Agricultural Bank of China Ltd. separately reported a 1.9 percent profit increase for the period.

Investors are becoming more discerning when it comes to the origin of Chinese debt, Bloomberg News reported. China saw its worst start to a year on record for corporate defaults, with companies headquartered in two eastern provinces -- Liaoning and Shandong -- responsible for the lion’s share. Money managers are taking notice, with a run of messy, high-profile company scandals helping sour sentiment toward certain regions. Beijing’s de-leveraging drive, which has been ramped up this month and has boosted borrowing costs, is also a factor.

Executives at Kaisa Group Holdings, the first Chinese property developer to default on an overseas bond, have had a busy few weeks, the Financial Times reported. Since trading of the company’s Hong Kong-listed shares resumed on March 27 after a two-year suspension, they have belatedly issued Kaisa’s 2014 and 2015 annual reports, interim reports for 2015 and 2016, and unaudited operating figures for the first quarter of 2017. Adding to the sense that it is finally business as usual at Kaisa, the company’s shares surged 85 per cent on their first day of trading.

China's debt-stricken Chongqing Iron and Steel Company warned of the risk of bankruptcy on Tuesday, after one of its creditors submitted an application to a local court to reorganise its assets, Reuters reported. Chongqing Steel said in a notice posted to the Hong Kong Stock Exchange that the creditor, identified as Chongqing Laiquyuan Trading, told a court on Monday that the southwest China-based steelmaker's assets were not sufficient to pay off all its debts.

Rising defaults in China are unearthing hidden debt at companies across the country, Bloomberg News reported. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains.

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured, Bloomberg News reported. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. "They need to shoulder responsibility," said Lou, who’s now chairman of the country’s social security fund.