China

China’s state auditor has uncovered falsified revenues and profits in the accounts of some of the country’s biggest state-owned companies, as Beijing broadens its assault on official corruption, the Financial Times reported. The National Audit Office said on Sunday that 14 state-owned groups, including well-known names such as State Grid, China Ocean Shipping Co (Cosco) and China Southern Power Grid, falsified nearly Rmb30bn ($4.8bn) in revenue and nearly Rmb20bn in profits in 2013.

At a ceremony imbued with quiet triumph at the Great Hall of the People, China’s president, Xi Jinping, hosted 56 member countries on Monday for the founding of a Chinese-led infrastructure bank for Asia, including major American allies from Asia and Europe that Washington had counseled not to join the bank, the International New York Times reported.

After more than a week of a brutal selloff in Chinese stocks, the country’s central bank on Saturday took a rare easing step, cutting both its benchmark interest rates and the amount of reserves certain banks are required to hold, The Wall Street Journal reported. In a statement, the People’s Bank of China said both steps were aimed at lowering borrowing costs and “stabilizing growth” in the world’s second-largest economy. The PBOC cut its one-year benchmark lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%.

China is to scrap bank lending caps in a bid to boost its slowing economy with an injection of credit – further liberalising the once tightly controlled sector, the Financial Times reported. On Wednesday, China’s State Council issued a draft proposal to relax the country’s long-held maximum loan-to-deposit ratio of 75 per cent. This follows April’s launch of a long-awaited deposit insurance system – a crucial step towards deregulating domestic interest rates, and promoting market-based capital allocation.

China is bailing out the nation’s heavily indebted local governments, relying on trusted methods to keep its financial system stable despite promises to allow market forces to play a greater role, The Wall Street Journal reported. Beijing is permitting provinces to issue at least 2.6 trillion yuan ($419 billion) in bonds in 2015, the first local government issuances in more than 20 years, to stave off a debt crunch. Local administrations have accumulated some 18 trillion yuan, equivalent to a third of China’s economy, in bank loans and bonds to fund risky land and property deals.

China has given its fifth-largest bank the green light to pursue a market-based reform plan as Beijing seeks to improve efficiency at state-owned companies and counteract a far-reaching economic slowdown, the Financial Times reported. But privatisation will play only a limited role in the shake-up, the latest sign that the Communist party has no intention of relinquishing control of “strategic sectors” such as finance, energy and telecommunications.

The Chinese government risks “real damage” to the economy if it does not hasten reform of China’s state-owned enterprises and overhaul a debt-fuelled growth model, Hank Paulson has warned, the Financial Times reported. For more than two decades the former US Treasury secretary and Goldman Sachs chief has worked closely with pivotal Chinese political figures such as Wang Qishan, currently head of the Chinese Communist party’s anti-graft bureau, and visits Beijing frequently.

Renhe Commercial appears to have a well-fortified business model: It builds air raid shelters across China for the government, outfitting them as underground shopping malls for use during peacetime, the International New York Times reported. But even that strategy has not been enough to protect the company from the fallout from China’s property market slump. Like many Chinese developers, Renhe is struggling with financial losses and debt, and it has been looking for other sources of income.

Rating agency Moody's warned on Wednesday that financial distress will rise among Chinese companies amid a slowing economy and a government reform agenda which is intended to allow markets to play a decisive role. But policy easing and government support would prevent corporate distress from rising so much it could cause systemic risk to onshore and offshore markets, it said. The agency also underscored the worsening covenant quality of property high yield bonds, although these agreements offered more protection than those in other regions.

The headline currency story of this year is about the negotiations between Greece and the “institutions” over whether its currency remains internationally usable . Much less noticed are the negotiations between China, which is about a hundred times larger than Greece, and the legacy financial powers over the degree to which the renminbi becomes more internationally usable. While renminbi internationalisation is a process, not an event, an announcement is being orchestrated for September.