China

As China's economy slows and Beijing becomes more relaxed about letting its companies fail, a rising number of foreign bondholders risk being caught up in the country's unpredictable court system, Reuters reported. Last month, solar producer Baoding Tianwei Group became China's first ever state-owned company to default on a bond coupon payment, showing Beijing's increasing willingness to let companies go bust in a bid to reform its corporate market. Also in April, Kaisa Group became the first Chinese property developer to fail to pay a coupon on its U.S.

China’s “national team” owns at least 6 per cent of the mainland stock market as a result of the massive state-sponsored rescue effort this year to prop up share prices following the summer equity market crash, the Financial Times reported. One member of the team, China Securities Finance Corp, the main conduit for the injection of government funds, owned 742 different stocks at the end of September, up from only two at the end of June. CSF was one of a number of government rescue funds that were corralled into buying shares when stock markets went into meltdown over the summer.

China said it cracked the nation’s biggest “underground bank,” which handled 410 billion yuan ($64 billion) of illegal foreign-exchange transactions, as the authorities try to combat corruption and rein in capital outflows that have hit records this year, Bloomberg News reported. More than 370 people have been arrested or face lawsuits or other punishment in the case centered in eastern Zhejiang province, the official People’s Daily reported on Friday, citing police officials.

Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations, raising the risk of defaults and adding pressure on policy makers to keep financing costs low, Bloomberg News reported. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan ($1.2 trillion), according to Beijing-based Hua Chuang Securities Co., whose lead fixed-income analyst was top-ranked by China’s New Fortune magazine in 2012 and 2013.

Despite a sharp slowdown in economic growth and the stock market crash, consumers in China’s commercial capital have proven resilient, according to FT Confidential Research, a research service from the Financial Times. A survey of consumers across the city found they spent an average Rmb4,959 a month over the past 12 months, compared with Rmb1,737 across urban areas nationwide. They increasingly favour a quality meal and foreign goods, while nearly 70 per cent said they travelled abroad during the past 12 months. But cracks are appearing in the Shanghai consumer story.

The arrests or investigations targeting the finance industry in the aftermath of China’s summer market crash have intensified in recent weeks, creating a climate of fear among China’s finance firms and chilling their investment strategies. At least 16 people have been arrested, are being investigated or have been taken away from their job duties to assist authorities, according to statements and announcements compiled by Bloomberg News.

Capital flowed into China last month for the first time since an unexpected currency devaluation in August shook investor confidence in the economy, easing fears over financial stability following an unprecedented bout of outflows, the Financial Times reported. Capital has exited China at a record pace this year as an economic slowdown pushed Chinese gross domestic product growth to its slowest pace in six years.

Cash-strapped China Shanshui Cement has received several demands for repayments from creditors, following a default even as it had started winding up proceedings, it said in a stock exchange filing. The default was on a 2 billion yuan bond which was due on Thursday, about which the company had warned a day before. The company said that China Construction Bank had demanded repayment of a $50 million loan by Thursday failing which it would institute legal proceedings against its subsidiary China Pioneer Cement, which owed the debt.

China’s consumers are gradually picking up the baton from the traditional economic engines of manufacturing and real estate, data released on Wednesday show, as the painful rebalancing process inches ahead, the Financial Times reported. The slowdown of factory activity and construction pushed Chinese gross domestic product growth to its lowest annual pace since 2009 in the third quarter at 6.9 per cent, and the latest data suggest these sectors have not yet bottomed out.

China's factory output and investment weakened in October while retail sales growth edged up, suggesting economic growth has stabilized but has yet to revive despite repeated interest rate cuts and other stimulus, the International New York Times reported on an Associated Press story. The data reported Wednesday reflected the two-speed nature of the economy as communist leaders try to encourage growth based on consumer spending instead of trade, investment and heavy industry. Economic growth decelerated to a six-year low of 6.9 percent in the latest quarter.