China

In a situation eerily reminiscent of the perfect storm that engulfed Irish property developers at the end of the boom, fears are growing over the astronomical debt exposure of developers in China, the world’s second-largest economy, where house sales and prices are falling rapidly, the Irish Times reported. Cash-strapped Chinese developers are borrowing a record amount in the offshore loan market this year, adding to the highest debt loads since 2005.

In the latest sign of Chinese developers’ desperation to unload inventory into a weak property market, China Vanke Co is offering discounts of up to $325,000 to homebuyers who shop on Alibaba’s Taobao, an e-commerce platform, the Financial Times reported. The country’s biggest developer will give discounts that match shoppers’ spending of up to Rmb2m ($325,000) on the eBay-like service. Homes in real estate developments in Beijing, Shanghai, Guangzhou and Chongqing, among other cities, will qualify, according to an advertisement on Taobao’s website.

On desolate salt flats on the far outskirts of China’s sixth-largest city, dozens of enormous half-built skyscrapers stand as a monument to the excess and optimism of the Chinese real estate market, the Financial Times reported. As physical manifestations of China’s property bubble go, few examples can beat this effort to replicate Wall Street in a wasteland 40km outside Tianjin and 150km from the capital Beijing.

Chinese Premier Li Keqiang urged the heavily scrutinised railway sector to seek more private investment and rely less on state support as a key plank of its reform, the government website said on Sunday, the International New York Times reported. Beijing has vowed to deepen reforms of its state-owned enterprises and to open up protected industries such as finance, petroleum, power, telecoms and railways to private investors for the first time.

Bank of China Ltd. more than doubled its money set aside for bad loans as profit growth cooled to the slowest pace in five quarters on weakness in the economy, Bloomberg News reported. Provisions for potential soured debt climbed to 12.7 billion yuan ($2.1 billion) in the second quarter, up 116 percent from a year earlier, based on half-year figures released by the Beijing-based company yesterday. Net income rose 8.5 percent to 44.4 billion yuan, the earnings statement showed.

China said it will curb executive pay and perks at major state-controlled companies as part of an austerity program intended to curb government largess, The Wall Street Journal reported. The official Xinhua News Agency said Monday that President Xi Jinping called for the government to more tightly regulate executive salaries at state-owned enterprises and to make adjustment for "unreasonably high" compensation. He also called on SOEs to rein in other compensation such as spending on cars and accommodations, Xinhua said.

Government investigators in China have found the Mercedes-Benz unit of Daimler, the German automaker, in violation of antitrust price rules, the Chinese state news media reported on Monday. The announcement was the latest in a spate of inquiries over pricing and sales policies that have raised pressure on foreign corporations across China, the International New York Times reported.

China’s state-owned airlines have had a turbulent year and are warning of first-half earnings to match when they report later this month, the Financial Times reported. With the bulk of their earnings in renminbi and fuel and aircraft costs denominated in US dollars, China’s big three airlines benefited from the Chinese currency’s steady appreciation against the greenback over the past decade. But over recent weeks, Air China, China Eastern and China Southern have all issued profit warnings, citing foreign exchange losses from the renminbi’s unexpected weakening earlier this year.

China is trying to regain control of the cash flowing across its leaky borders and the effects will be felt around the world, The Wall Street Journal reported. Beijing technically bans its citizens from buying overseas properties and stocks, and limits the money they can transfer abroad to $50,000 a year. Despite these rules, wealthy Chinese have found ways to move their money across the border, making them the biggest international buyers of properties in places like the U.S. and fueling a boom in Macau's casinos.

Chinese lending unexpectedly and drastically slowed in July to the lowest level since the depths of the global financial crisis, as a weak property market appeared to drive down demand for new loans, despite recent moves to ease credit, the International New York Times reported. A broad measure of new credit was 273.1 billion renminbi, or $44.3 billion, in July, the central bank reported on its website Wednesday.