Communist Party hails private enterprise growth, Wall Street upbeat about Chinese property
A round-up of key economic and financial developments in China as of Friday, 7 June, 2024
Our round-up of key economic and financial developments in China as of Friday, 7 June, 2024:
Wall Street banks and hedge funds upbeat on Chinese property
The China analysts of several of America's leading financial institutions have recently released reports giving favourable assessments to efforts to drive a recovery in the property market, according to a report from Shanghai Securities Journal.
"Goldman Sachs, Morgan Stanley and Blackrock have all given a vote of confidence to the Chinese property market," said the report.
Morgan analyst Xing Ziqiang (邢自强) believes the current round of housing market adjustments is approacing completion.
"The central bank has established reloans for social housing, which can reduce property sector inventories and improve liquidity issues for developers, as well as better drive work to guarantee the delivery of homes," Xing said.
"It's also of help to reducing pre-emptive accumulation, thus spurring real estate consumption."
UBS China analyst Lin Zhenhong (林镇鸿) said social housing reloans are designed to support local state-owned enterprises in purchasing complete yet unsold commercial housing for conversion into social housing.
Song Yu (宋宇), Blackrock's chief China economist, said that property support policies had continually intensified, and that this would increase the confidence of investors and stabilise the market.
"In the near term, home loan rates have fallen, reducing costs for homebuyers, and effectively stimulating household demand. At the same time, this can increase the ability of households to consume.
"In the long term, the unveiling of real estate policies sends the positive signal to expect the continued maintenance of looser policies at the macroeconomic level."
As of 22 May, Morgan Stanley held a 4.92% stake in Hong Kong listed Vanke, increasing its holdings to 109 million shares from 98.36 million on 16 April.
On 29 May, Barclays Bank announced that it maintained its buy rating for KE Holdings, with an upgraded target price of USD$30 per share.
65 Chinese cities post 5% rise in new home purchase index
The "May National Anjuke Index Report" (5月国民安居指数报告) indicates that in May a total of 65 cities in China saw on-month gains of at least 5% in the "new home search heat index" (新房找房热度).
The index serves to measure activity on the market for new homes, as well as potential demand for houses.
First-tier cities posted an on-month rise of 7%, ahead of the national average, while second-tier cities saw a gain of 5% and third and fourth-tier cities a 3.3% rise.
Communist Party lauds increasing innovation of small and medium-sized enterprises
On 3 June, the China Small and Medium-sized Enterprise Development Expediting Centre (中国中小企业发展促进中心发布) released the "2023 SME Development Environment Assessment Report."
According to the People's Daily, the flagship newspaper of the Communist Party, the report pointed to "the effectiveness of policies to benefit enterprise and continue strengthening of SME innovation drivers."
"We should continue to improve the SME development environment, and further stabilise the trend of stabilisation and improvement in the productive operations of SMEs."
The report claims that China has recently seen the emergence of over 135,000 "special new elite SMEs" and around 12,000 "small giant" enterprises, as well as 1557 manufacturing "manufacturing champion enterprises."
NDRC wants more financial support for private enterprise
On 5 June, the National Development and Reform Commission (NDRC) called for increasing the quality and effectiveness of financial support for the high-quality development of the private economy, and assisting private enterprises to better integrate into new "development conditions."
From 3 - 4 June, the NDRC convened a meeting in the Guangdong province tech hub of Shenzhen, on the subject of "expediting private enterprise growth and strengthening and expanding medium and long-term loan provision and tech enterprise project financing."
Central government teams up with local authorities to develop new quality productive forces
The Chinese central government is working more closely with local governments to drive the growth of new emerging industries as part of efforts to cultivate "new quality productive forces" in the economy.
Shanghai Securities Journal reports that since last year, the National Development and Reform Commission (NDRC) and the Ministry for Industry and Information Technology (MIIT) has continued to send signals on vigorous development of future industries and strategic emerging industries.
Beijing, Shanghai and Zhejiang have since taken the initiative of unveiling measures to support the development of emerging industries.
"Strategic emerging industries and future industries are the main carrier of new quality productive forces," said Sheng Chaoxun (盛朝迅), chair of the strategic policy office of the China Macroeconomic Research Institute.
Senior state-owned assets official under investigation for insider trading and bribery
Luo Yulin (骆玉林), the former deputy-head of the State-owned Assets Supervision and Administration Commission (SASAC), is under investigation by the Qingdao Municipal People's Procuratorate over allegations of corruption.
Luo is accused of using his positions of authority in Qinghai province - including the offices of deputy governor and deputy-party secretary, to accept bribes and engage in insider trading.
According to the National Procuratorate, Luo "ordered people to engage in trading prior to the public release of information that could have a major impact on securities prices."
"The conditions are especially severe, and Luo will be lawfully pursued for criminal liability for accepting bribes and insider trading."
Caixin's PMI reading for May hits highest level in nearly two years
The purchasing managers' index (PMI) published by Chinese financial news outlet Caixin lifted to 51.7 in May, for a slight rise of 0.3 percentage points compared to April and its highest reading since July 2022.
The print stands in contrast to the May PMI of 49.5 published by China's National Bureau of Statistics, which marked an on-month fall of 0.9 percentage points.
Zhou Maohua (周茂华), macroeconomic researcher with Everbright Bank, said the rise in PMI reflects improvements to the outlook for small and medium-sized manufacturers, on the back of steady recovery in domestic demand.
Ultra-long treasury issuance hits 80 billion yuan, local governments vie for funds
On 31 May, the Ministry of Finance (MOF) issued 45 billion yuan in 30-year treasuries. The move brought the issuance of ultra-long treasuries to 80 billion yuan, out of 1 trillion yuan scheduled for 2024 during the period from May to November.
Local governments in key regions around China have already submitted applications for projects to be funded by the ultra-long treasury issues, including Sichuan, Shanghai, Beijing and Hunan.
Song Xiangqing (宋向清), deputy-chair of the China Commercial Economics Association, said to Securities Daily that the move would "be of benefit to driving domestic demand, increasing employment, raising household income, and spurring household consumption."
China's A-share tech corporations accelerate overseas investment
Since 1 April, at least 70 A-share firms have announced plans to invest overseas, according to a report from Shanghai Securities Journal.
These investment plans include increases in investment, equity purchases, and the establishment of subsidiaries, covering areas including Southeast Asia, South Asia, North America, Latin America and Africa.
Yu Xia (俞霞), partner from Deheng Shanghai Law Firm, said the overseas investments were led by companies in China's tech sector.
"The competitiveness of China's smart manufacturing emerging industries in the global supply chain has become more pronounced," Yu said.
"China possesses independent technology and research capability in these areas, which include automobiles, clean energy, biopharmacy, mechanical equipment and electronics."
Central SOEs forbidden from establishing or acquiring financial institutions
The State-owned Assets Supervision and Administration Commission (SASAC) has announced that all central state-owned enterprises (SOEs) are "forbidden in principle" from establishing, acquiring or obtaining new shares in any form of financial institution.
Central SOEs are also forbidden from acquiring shares or expanding shareholding in financial institutions that have sizeable risk spillovers.
Smaller regional banks cut deposit cuts to shore up profitability
Smaller banks around China have reduced their deposit rates in a bid to expand net interest margins and maintain profitability, as the central government continues to push for reductions in loan rates.
A report from Beijing Business Today indicates that smaller banks have been reducing deposit rates in Guangxi, Hubei, Henan, Shanghai, Guizhou, Harbin, Shanxi and Shenzhen, in many cases to under the 3% threshold.
"The reductions are in line with the overall trend in the banking sector, of seeking to reduce liability costs in order to stabilise net interest margins" said one analyst.
"We expect that in the next phase, commercial banks will continue to reduce deposit rates."