China

China's new leaders sent their strongest signal yet that their top economic priority is to remake the economy so it relies more on domestic demand and less on exports and investment in capital-intensive state-owned companies, even if that reduces short-term growth, The Wall Street Journal reported.

To boost their deposit levels ahead of an expected year-end regulatory review, Chinese banks have recently accelerated their sales of high-yield investment products to customers, raising new concerns about the financial system and spurring the government to step up its oversight of the products, The Wall Street Journal reported. Since late last month, banks of all sizes have increased their competition to attract deposits from middle-class savers by offering so-called wealth-management products.

A new survey shows that the real unemployment rate in China is double the official level, and layoffs rose sharply among migrant workers in the past year, underlining a challenge for China's new leaders to maintain growth, The Wall Street Journal reported. The survey of 8,000 households shows the urban unemployment rate hit 8.05% in June, up slightly from 8% in August 2011 and nearly twice as high as the official 4.1% rate. The survey was run by Gan Li, an economics professor at South Western University of Finance and Economics in Chengdu.

China's largest maker of auto parts won a politically sensitive auction for A123 Systems Inc, a bankrupt maker of batteries for electric cars that was funded partly with U.S. government money, A123's investment banker said on Saturday, Reuters reported. Timothy Pohl of Lazard Freres said Wanxiang Group Corp's bid of about $260 million topped a joint bid from Johnson Controls Inc of Milwaukee and Japan's NEC Corp for the maker of lithium-ion batteries. Siemens AG of Germany had also qualified to bid, according to two people familiar with the auction, who asked not to be identified.

A bank raises money from its customers to make an off-the-books investment packaged by a private investment company as a loan to a pawn shop, which in turn makes loans to companies that banks aren’t willing to lend to because they’re not comfortable with the credit risk. Welcome to the wheels-within-wheels of China’s shadow banking system, the China Real Time blog reported. But the complexity being unwound by the recent default of a $22.5 million wealth management product sold by Huaxia Bank Co. to its customers doesn’t stop there.

The Crafar family farms put into receivership three years ago are now legally in the hands of their new Chinese owner, Radio New Zealand reported. The Shanghai Pengxin group had to overcome legal challenges from New Zealand farming and Maori interests but finally took possession of the 16 North Island farms on Friday. Spokesman Cedric Allan says the aim is to lift production on the 13 dairy and three dry stock farms under the management of the state owned farming enterprise LandCorp.

Banks face hidden risks from their links to China's fast-growing "shadow-finance" industry, a term for all types of credit outside formal lending channels. Shadow finance in China totals about 20 trillion yuan, according to Sanford C. Bernstein & Co., or about a third the current size of the country's bank-lending market. In 2008, such informal lending represented only 5% of total bank lending. The sector is lightly regulated and opaque, raising concerns about massive loan defaults amid a softening economy, with ancillary effects on the country's banks.

China’s placement of a North Korean- educated economist and an exemplar of debt-fueled infrastructure on its ruling body may add to challenges for Communist Party leader Xi Jinping as he seeks to deepen the nation’s development, Bloomberg reported. Zhang Dejiang, who studied economics at Kim Il Sung University in Pyongyang, and Zhang Gaoli, whose city began building a mini-Manhattan under his watch, were appointed to the paramount Politburo Standing Committee in Beijing yesterday in the most important phase of a once-a-decade power transition.

China's banks have been building up their bulwarks against bad loans, underscoring the potential risk to the financial system in the world's No. 2 economy even amid other signs that growth is picking up again, The Wall Street Journal reported. China's biggest state-run banks since last week have reported double-digit profit growth for the third quarter—with some beating estimates—and flat or declining nonperforming loans, typically of 1% or less of their portfolios.

China's new bank loans fell last month to well below market expectations, but analysts said that other forms of credit outside the system of state-dominated lenders offset the drop, meaning companies weren't short of funding. Analysts have been looking for signs the nation's big banks are opening credit taps to boost the world's second-largest economy. Gross domestic product expansion decelerated to 7.6% in the second quarter, the slowest in more than three years, kindling concern that the world is losing one of its main buffers against global recession.