China

China will allow a batch of three to five banks funded by private investment this year to operate under a trial as part of the country’s financial reforms, according to the China Banking Regulatory Commission, Bloomberg News reported. China will guide private investment to participate in the restructuring of existing banks and explore lowering the threshold for foreign banks to enter the industry, the banking regulator said in a statement on its website yesterday. The commission will step up its support of the Shanghai free trade zone, according to the statement.

Fisker Automotive, the bankrupt maker of a plug-in hybrid sports car, asked a federal judge to approve its proposed sale to a Hong Kong tycoon rather than a Chinese suitor that Fisker alleged was to blame for its failure. A courtroom showdown is set for January 10 that will determine the future of the defunct car maker, which was launched with a controversial U.S. government loan. U.S. Bankruptcy Court Judge Kevin Gross must decide if Fisker's business will be put to open auction or sold to an affiliate of Richard Li as the company has proposed.

China's largest auto parts company made a surprise bid for Fisker Automotive just days before the bankrupt maker of the Karma plug-in hybrid sports car was to be sold to a Hong Kong tycoon, according to court documents, Reuters reported. Fisker creditors asked the U.S. Bankruptcy Court in Wilmington, Delaware, to scrap Fisker's agreed sale to a company affiliated with Richard Li and instead hold an open auction at which auto parts supplier Wanxiang America Corp plans to bid.

Chinese President Xi Jinping, named on Monday to head the committee overseeing China's economic overhaul, must quickly figure out how to keep China's burgeoning local government debt from tanking the world's second-largest economy, The Wall Street Journal reported. Shortly before the announcement of Mr. Xi's new job, China's National Audit Office said debt and guarantees issued by local governments rocketed 67% to 17.9 trillion yuan ($2.95 trillion) midyear 2013 since the last tally at the end of 2010, when it was 10.7 trillion yuan.

China’s financial system is in danger of becoming too big to bail out, The International New York Times reported. Official bank lending has more than doubled since the global financial crisis, growing nearly twice as fast as the overall economy.

The stress in China's financial system appeared to be easing today as short-term borrowing costs fell following the central bank's decision to resume using its most popular tool to inject cash into the money market, the Wall Street Journal reported today. The People's Bank of China is offering 29 billion yuan ($4.8 billion) of reverse repurchase agreements, a form of short-term lending to banks, after halting the use of the instrument for nearly three weeks, traders participating in the sale said.

A cash crunch in China pushed short-term interest rates to a new recent high today and highlighted the difficulties faced by the central bank in managing an increasingly complex and stressed financial system, the Wall Street Journal reported today. Rates rose again despite cash injections last week by the People's Bank of China, which has tried to rein in lending but is facing crosscurrents ranging from government budget tightening to quirks in bank accounting rules to distrust among banks to rising losses on loans that haven't yet been disclosed.

Bank of America has advised clients to take out default insurance against Chinese debt, warning that monetary tightening by China’s central bank risks setting off a bout of serious credit stress in 2014, The Telegraph reported. Bin Yao, the bank’s credit strategist in Asia, said Chinese bond yields have already risen to the highest in a decade as the authorities seek to rein in rampant growth of the M2 money supply and excess credit, yet markets remain “complacent” about the implications.

China Citic Bank Corp. plans to ask shareholders for permission to write off close to $900 million of nonperforming loans, an unusual move as China's bad-debt levels start to tick upward, the Wall Street Journal reported yesterday. The bank, China's seventh-largest by assets, said in statements on the Hong Kong Stock Exchange this week that it wants to more than double the amount of loans it can write off in 2013 to 5.2 billion yuan ($852 million), up from a previously planned 2 billion-yuan write-off.

Chinese company debt twice the size of Ireland’s economy will come due in 2014, spurring concern the nation is on the cusp of its first corporate bond default, Bloomberg reported. A record 2.6 trillion yuan ($427 billion) of interest and principal on securities issued by non-financial companies must be repaid next year, 19 percent more than this year and the most since China International Capital Corp. began compiling the data in 2008. Ten-year AAA corporate bond yields surged 89 basis points since Dec. 31 to 6.18 percent, touching a record 6.23 percent on Nov. 27.