China

Chinese investment conglomerate Citic Group, whose businesses span property, mining, energy, banking and a soccer team, plans a massive restructuring that will allow it to tap more overseas capital for its sprawling empire, the Financial Times reported. Citic’s announcement follows on the heels of plans from a number of other Chinese state-owned enterprises (SOEs) – including oil giant Sinopec – to raise money from the sale of a profitable business without giving up control.

Hundreds of people rushed on Tuesday to withdraw money from branches of two small Chinese banks after rumours spread about solvency at one of them, reflecting growing anxiety among investors as regulators signal greater tolerance for credit defaults. The case highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, as Chinese grow increasingly nervous about the impact of slowing economic growth on financial institutions. Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.

Chinese steel mills were suffering a medley of woes in mid-March as sales slowed, production levels slumped and profits plunged, according to an investment bank survey published on Tuesday that foreshadows the rising risk of debt defaults in the world’s largest steel producer, the Financial Times beyondbrics blog reported.

The pace of migration of rural Chinese to cities, a dynamic hailed by Premier Li Keqiang as key to the nation’s development, is set to slow by a third in coming years, deepening economic-growth concerns, Bloomberg News reported. A government report released this month projected a 6.3 percentage-point rise in the share of people living in cities from 2013 to 2020 -- down from a 9.4-point gain the previous seven years. Nomura Holdings Inc. estimates that slower urbanization will slice as much as half a percentage point from annual gross domestic product growth over the next half decade.

A denial by China's central bank that it is involved in emergency talks to bailout a troubled property developer reinforced signals Beijing is now more willing to let banks and other investors take losses on loans, Reuters reported. Media reports said the central bank was in talks with Zhejiang Xingrun Real Estate Co, which government officials have said is on the brink of bankruptcy. That led to financial market speculation the government could bail out the company. However, the reports "did not accord with reality", the People's Bank of China said in a post on China's Twitter-like Weibo.

The looming bankruptcy of a Chinese developer owing billions of yuan to domestic banks has raised worries that a softening property market is heightening risks for the financial system, Reuters reported. But the localised focus of the firm, and the nuanced reaction of investors, shows that financial markets are not pricing in the bursting of a real-estate bubble just yet. Government officials told Reuters on Tuesday that Zhejiang Xingrun Real Estate Co, based in the coastal city of Ningbo in Zhejiang province, is on the brink of bankruptcy.

A Chinese property developer owing 3.5 billion yuan ($566.52 million) to banks and individuals is teetering at the edge of insolvency, and its owner has been detained for illegal fund-raising, domestic media reported, citing local officials, Reuters reported. Zhejiang Xingrun Real Estate Co, based in Fenghua in eastern Zhejiang province, owes 15 domestic banks 2.4 billion yuan, state-owned China News Services reported. The company illegally raised most of the remaining funds from 98 individual investors, according to the report on Monday. Private fundraising is common but illegal in China.

Last week a failure by Shanghai Chaori Solar Energy to meet interest payments on its debt became China’s first onshore corporate bond default, prompting some alarmed and alarming talk about a wave of defaults across China, Forbes reported. The phrase ‘Bear Stearns moment’ was used (by Bank of America Merrill Lynch among others), suggesting, presumably, that one default would cause investors to take flight from the entire Chinese corporate debt market and so cause a run on the whole sector, leading to a major crash.

The world’s most-profitable banks have never been so unloved by stock investors, Bloomberg News reported. China’s four-biggest lenders, which reported $126 billion of earnings in the 12 months through September, sank to the lowest valuations on record in Hong Kong trading yesterday. The MSCI China Financials Index dropped to an almost decade low versus the global industry benchmark while the market value of Industrial & Commercial Bank of China Ltd., the nation’s largest lender, fell below net assets for the first time on March 12.

China's central bank is prepared to take its strongest action since 2012 to loosen monetary policy if economic growth slows further, by cutting the amount of cash that banks must keep as reserves, sources involved in internal policy discussions say, Reuters reported. A cut would be triggered if growth slips below 7.5 percent and towards 7.0 percent, they said, and would come on top of money market operations and currency intervention via state banks that traders say has already loosened monetary conditions.