China

More Chinese expect property prices to keep rising, a People's Bank of China survey found, illustrating the challenge that policy makers face in reining in the country's real-estate market, The Wall Street Journal reported. The survey of banking depositors, conducted in the third quarter and reported on the central bank's website Sunday, found that 36.6% expect property prices to rise, up from 29.4% in the previous quarter, though down from 41.5% a year earlier.

Regulators, suspecting that banks and trusts are secretly repackaging old loans and moving them off bank balance sheets, are concerned that financial institutions in China may have engaged in the same sort of financial engineering that got Western banks into trouble. On Aug. 10, government overseers acted again, ordering banks to move any off-balance-sheet loans back onto their books and to make provisions to safeguard against a rise in bad loans, according to a copy of the government order given to The New York Times by an industry expert.

China faces the threats of faltering demand for exports, rising wages and the risk of bad loans from record lending after surpassing Japan as the world’s second- biggest economy last quarter, Bloomberg reported. The boost to China’s “national pride” from the second- quarter milestone may not count for much if it fails to boost domestic consumption and reduce its reliance on exports and investment for growth, said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong.

At last some answers to a major question mark hanging over the Chinese banking sector: Just how much of its lending has gone to local government investment vehicles—and how iffy has that lending been? Because of restrictions on how much local governments can borrow from banks directly, off-balance-sheet funding has become a key means for them to obtain financing. These funds, in turn, have fueled the investment boom that lies behind China's solid economic growth since the global financial crisis, The Wall Street Journal Heard on the Street blog reported.

According to Chinese officials Monday, Chinese banks have encountered high default risks on part of loans they have lent to local governments across the country, the Global Times reported. China's commercial banks have identified it to be at least one-fifth of the 7,700-billion-yuan loan ($1,135 billion). Though these questionable loans not always go bad, the country's non-performing loan (NPL) ratio is almost certain to increase slightly by the end of the year, said an official from the China Banking Regulatory Commission (CBRC).

PCCW and its chairman's privately owned fund plan to rescue debt-laden Vivacom, Bulgaria's biggest fixed-line operator, by jointly investing €180 million ($232 million) in return for a 51 percent stake, a newspaper reported on Wednesday. PCCW executive director Alex Arena met Vivacom's senior lenders on June 22 to discuss the matter, the South China Morning Post reported, citing people with direct knowledge of the meeting. It was unclear how much of the investment would come from PCCW, the paper said.

China, the world’s largest foreign exchange holder, bought several hundred million euros of Spanish bonds last week as Asian investors returned to the eurozone peripheral market after a two-month hiatus, the Financial Times reported. China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, was allocated up to €400m ($505m) of Spanish 10-year bonds in a debt deal last Tuesday, according to people familiar with the situation.

China moved unexpectedly over the weekend to make its exchange rate more flexible, but quickly damped the idea that the move would trigger a dramatic revaluation of the yuan by saying it would make the adjustment "gradually,” The Wall Street Journal reported. The decision by the world's third-largest economy follows heavy pressure by the U.S. and other members of the Group of 20 major economies. It could eventually boost the spending power of China's own consumers, easing the strains with other nations caused by its long reliance on cheap exports.

Greece's debt-ridden economy has received unexpected endorsement from China as the two countries announced multibillion euro accords to boost cooperation in fields as diverse as shipping, tourism and telecommunications, The Guardian reported. The deals, which will see Greek olive oil being exported to China, were a welcome relief for a government smarting over Moody's move hours earlier to downgrade the nation's credit rating to junk. As investors moved in the other direction, the world's pre-eminent emerging economy embraced Greece.

Spurred on by government incentives and bargain-basement prices, the Chinese are planning to pump hundreds of millions -- perhaps billions -- of euros into Greece even as other investors run the other way, The Washington Post reported. The cornerstone of those plans is the transformation of the Mediterranean port of Piraeus into the Rotterdam of the south, creating a modern gateway linking Chinese factories with consumers across Europe and North Africa.