China

A Chinese online finance company bilked investors out of more than $7.6 billion, spent lavishly on gifts and salaries and buried the evidence, according to local authorities who described the operation as an enormous Ponzi scheme, the International New York Times DealBook blog reported. The accusations throw a shadow over China’s online finance industry, a lucrative area for many global leaders in the sector, but one that the authorities say has also drawn a growing number of cases of fraud and flameouts.

An archaic part of China’s banking system meant to provide short-term funding to companies is coming under renewed scrutiny after at least two cases of fraud were uncovered recently, Bloomberg News reported. An alleged fraud of almost 1 billion yuan ($152 million) was discovered late last year at China Citic Bank Corp., where an employee colluded to fake documentation that companies typically use to get quick funds, people familiar with the matter said Thursday. Agricultural Bank of China Ltd.

China is ramping up efforts to halt a flood of money leaving the country in response to an economic slowdown, moves that risk undermining Beijing’s ambition to elevate the yuan’s profile on the world stage, The Wall Street Journal reported. Its latest steps involve curbing the ability of foreign companies in China to repatriate earnings, shrinking the pool of Chinese yuan available for banks in Hong Kong to make loans, and banning yuan-based funds for overseas investments, people with direct knowledge of the matter said.

Default risks for a pile of $15tn in Chinese corporate debt are rising to their highest levels since the 2008 financial crisis as sluggish demand, weak pricing and high leverage sap the dynamism of the country’s most powerful companies, the Financial Times reported. Rating agencies that assess credit risks among China’s top corporations are predicting a jump in bond repayment defaults this year as they add more companies to their watch lists for downgrades, ratings executives say.

Chinese officials readily admit that communication has not been their strong point when it comes to dealing with international investors, the Financial Times reported in a commentary. The question of how China manages the renminbi is critical for global trade and commodity prices; the market turmoil following recent changes in the currency regime was exacerbated by Beijing’s failure to explain its intentions. Policymakers have now made it explicit that they have no wish to engineer a big devaluation.

China's volatile stock markets fell more than 1 percent on Wednesday, though mounting chatter about imminent policy stimulus provided some support against the backdrop of a fresh slide in oil prices, which hit stock markets across the globe, Reuters reported. Asian and European stocks were down sharply as U.S. crude sank beneath $28 a barrel for the first time since 2003, hammering energy stocks and boosting safe havens.

Behind the numbers showing China’s continued slowdown at the end of last year lies a warning for Communist Party leaders who have been equally determined to embrace economic change and to ensure a rapid pace of growth, Bloomberg News reported. The flashing yellow light: there’s less and less power behind policy makers’ stimulus. For each $1 in credit expansion, China added the equivalent of 27 cents of gross domestic product last year, the least since 2009, according to data compiled by Bloomberg from government figures released Tuesday. As recently as 2011, each $1 generated 59 cents.

Sainty Marine Corporation started small, buying and selling a few ships in the 1980s. But Sainty Marine, a Chinese state-owned company, went on a debt-fueled binge over the last few years, opening its own shipyards and signing orders worth hundreds of millions of dollars each, the International New York Times reported. Now, heavily indebted companies like Sainty Marine are at the center of the economic troubles in China that have unsettled currency, commodity and stock markets of late.

Communist China has one of the world’s highest levels of income inequality, with the richest 1 per cent of households owning a third of the country’s wealth, a report from Peking University has found, the Financial Times reported. The poorest 25 per cent of Chinese households own just 1 per cent of the country’s total wealth, the study found. China’s Gini coefficient for income, a widely used measure of inequality, was 0.49 in 2012, according to the report. The World Bank considers a coefficient above 0.40 to represent severe income inequality.

Chinese stocks rebounded from the brink of a bear market in a late day swing as the lowest valuations in four months lured bargain hunters and a group of smaller companies pledged to support their share prices, the Irish Times reported. The Shanghai Composite Index gained 2 per cent to 3,007.65 at the close, reversing a loss of as much as 2.8 per cent and sending a gauge of volatility to the highest levels since September.