China

Anbang Insurance Group of China is in talks to buy the large real-estate arm of the failed German lender Hypo Real Estate AG, in a potential billion-euro deal that would expand a global shopping spree by the Beijing-based firm, according to people familiar with the matter, The Wall Street Journal reported. State-owned bank Hypo Real Estate, based in Munich, has said it is working to sell its real-estate lending division, Deutsche Pfandbriefbank AG, known as PBB, through either an initial public offering or an outright sale.

Investors still wondering how Kaisa Group Holdings Ltd. doubled its debt in six months and triggered China’s first property bond default may want to read page 63 of its 2014 interim report. There, in footnote No. 15 of the Shenzhen-based company’s balance sheet, is a reference to 11 billion yuan ($1.8 billion) in advance deposits for property projects from third parties and for 1.15 billion yuan that needed to be refunded, Bloomberg News reported. At issue is whether these deposits were initially classified properly as current liabilities on Kaisa’s books.

China’s central bank is readying its most aggressive easing tool since it launched a massive stimulus plan in 2008 to counter the global financial crisis, in a bid to help one of the government’s most important economic-rescue initiatives get off the ground, The Wall Street Journal reported. Chinese leaders have singled out the ballooning debts of various levels of government as an economic threat that must be defused.

Several Chinese provincial governments have been forced to postpone bond auctions as banks balk at the low yields on offer, state media reported on Friday, highlighting the challenges of carrying out a Rmb1tn ($161bn) plan to lower financing costs for cash-strapped localities, the Financial Times reported. China’s local debt has surged since the 2008 financial crisis as regional governments borrowed to finance infrastructure projects in an effort to stimulate the economy. Economists have warned that the debt poses a risk to the banking system.

Factory activity in China contracted at its fastest pace in a year in April, an early reading of a survey showed on Thursday, suggesting that economic conditions are still deteriorating despite increasingly aggressive stimulus efforts by the Chinese central bank, the International New York Times reported. The HSBC/Markit preliminary purchasing managers’ index fell to 49.2 in April, remaining below the 50-point level, which separates growth in activity from a contraction on a monthly basis. Economists polled by Reuters had forecast a reading of 49.6, equal to March’s final figure.

The troubled Chinese property developer, Kaisa Group, defaulted on its overseas debt, a situation that could make Western investors more wary of the country’s real estate market, the International New York Times DealBook blog reported. Once a darling of global money managers, the developer, with its trail of financial problems, is now a case study for the risks of investing in China. For years, big investors plowed money into Kaisa, attracted by the tempting returns and the country’s soaring real estate market.

Chinese policy makers are dealing with a financial conundrum. Overall economic growth is slipping, which argues for looser monetary policy. But the risk is that any new money is diverted to the country’s frothy stock markets, the International New York Times reported. Against this backdrop, the central bank and securities regulator appear to be taking coordinated action. On Sunday, China’s central bank freed up roughly $200 billion for new lending, a widely expected stimulus measure devised to pump more money into the economy.

Chinese economic expansion cooled to 7 per cent in the first quarter of this year, a figure that exceeded forecasts for a decline below the crucial 7 per cent threshold, but adding to fears that the world’s second biggest economy is facing difficulties, the Irish Times reported. The latest figure was better than the forecasts by multiple institutions that first-quarter growth would fall slightly below 7 per cent due to weak investment and demand.

Just months after resigning, the former head of the embattled Chinese property developer, the Kaisa Group, returned unexpectedly to the helm, raising doubts about whether the company’s rescue by a rival will move forward, the International New York Times DealBook blog reported. The surprise comeback on Monday of the chairman and chief executive, Guo Yingcheng, is the latest twist in the Kaisa story. Once a darling of global investors, Kaisa started to stumble last fall, after the government blocked the sale of some of its properties in Shenzhen, its largest market.

Hebei Financing Investment Guarantee Group, the country’s second largest financing guarantee company has lost its ability to guarantee nearly 50 billion yuan worth of loans, signalling the spread of risk in the country’s financial system, The Australian reported. According to report from Caixin, the company is no longer in the position to guarantee loans, and scores of banks, trusts, brokers and funds are facing the prospect of a default on their loans. The company is a fully owned subsidiary of the Hebei provincial government.