China

Global investors are returning to China’s swelling market for bad debt after several years of watching from the sidelines, the Financial Times reported. Private equity funds Lone Star and PAG over the past few months have started buying non-performing loan (NPL) portfolios in the country, according to several people familiar with the matter. The entrance of the groups marks the first time in years that foreign funds have braved China’s bad debt market without powerful local partners.
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Global investors are returning to China’s swelling market for bad debt after several years of watching from the sidelines, the Financial Times reported. Private equity funds Lone Star and PAG over the past few months have started buying non-performing loan (NPL) portfolios in the country, according to several people familiar with the matter. The entrance of the groups marks the first time in years that foreign funds have braved China’s bad debt market without powerful local partners.
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For the second day running, China data have economists scratching their heads. Tuesday came a surprise increase in foreign-exchange reserves. Wednesday, it was an unexpected trade deficit—China’s first in three years—which made the rise in Beijing’s currency hoard even harder to account for, The Wall Street Journal reported. Economists say the two don’t fit together easily. Chinese imports in February were up 45% from a year earlier in yuan terms, accelerating from January’s 25% pace, while exports increased just 4.2%.
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Bankruptcies of Chinese businesses have surged in the past two years, in a sign the state is beginning to take painful steps to trim the bloated industrial sector as it tries to rein in debt, The Wall Street Journal reported. China’s search for ways to manage its slowest growth in a quarter-century hangs over the annual National People’s Congress, which starts on Sunday. The challenge is expected to drive discussions among delegates on how to unwind the heavily indebted companies that account for much of the industry and jobs in their home regions.
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China’s banking system has surpassed that of the eurozone to become the world’s largest by assets, a sign both of the country’s increased influence in world finance and its reliance on debt to drive growth since the global financial crisis, the Financial Times reported. While China’s gross domestic product surpassed the EU’s economic bloc in 2011 at market exchange rates, its banking system did not take over the top spot until the end of 2016, Financial Times analysis shows.
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China’s central bank faces a dilemma: Whether to raise borrowing costs and potentially undermine the nascent economic recovery, or hold firm and risk spurring capital outflows as Federal Reserve policy tightening cuts into the country’s interest-rate advantage. The People’s Bank of China is trying to take the middle road, boosting money-market rates as a way of containing company leverage, while allowing bank borrowing to largely continue unchecked, Bloomberg News reported.
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A surge in bankruptcy cases in Chinese courts last year is welcome progress, the Financial Times reported. The lack of creative destruction in China has been a perennial problem, exacerbating industrial overcapacity and piling mountains of bad loans on to the banking system. But the cull of zombie companies, while positive, still falls a long way short of the thorough restructuring that China’s economy needs. The zombie hunt did not aim at the big, lossmaking state-owned enterprises.
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Bankruptcy cases surged in China last year, indicating growing economic stress as well as progress in the ruling Communist party’s efforts to use the country’s courts to deal with indebted “zombie” companies and reduce industrial overcapacity, the Financial Times reported. Chinese courts accepted 5,665 bankruptcy cases in 2016, an increase of 54 per cent from the year before, the country’s top court said on Friday. About 3,600 of those cases were resolved, with 85 per cent of the resolved cases resulting in liquidation.
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Average wages in China’s manufacturing sector have soared above those in countries such as Brazil and Mexico and are fast catching up with Greece and Portugal after a decade of breakneck growth that has seen Chinese pay packets treble, the Financial Times reported. Across China’s labour force as a whole, hourly incomes now exceed those in every major Latin American state apart from Chile, and are at around 70 per cent of the level in weaker eurozone countries, according to data from Euromonitor International, a research group.
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China’s financial regulators are working together to draft sweeping new rules for the country’s rapidly-expanding asset-management products that aim to make it clear there’s no government guarantees on such investments, according to people familiar with the matter. The draft rules would apply to products issued by banks, insurers, brokerages and other financial institutions, said the people, who asked not to be identified because the discussions are private, Bloomberg News reported. The rules would be phased in after existing products mature, and would only apply to new issues, they added.
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