Last updated: 29th January, 09:00 HKT
SHADOW BANKING – ABC suspends P2P platform account linkages: Agricultural Bank of China issued a directive suspending any personal account links suspected of being related to P2P internet platform activities. So far at least four third party payment platforms have followed the directive and closed such platform linkages. In other words the move is aimed at preventing ABC customers from linking their personal bank accounts with P2P platforms. The ABC notice cited growing financial risks to customers from P2P activities, plus the negative impact on the bank’s reputation. Insiders quoted in articles believe this is part of a wider internal compliance investigation by the bank, following revelations of a 3.9 billion yuan bills fraud in one of its Beijing branches. So far no other banks have followed suit, and it’s believed this is a temporary measure by ABC until investigations are completed. 农行关闭全部涉P2P交易接口
MACRO – GDP growth by region: Data compiled from public sources by China Economic Net journalists. For underlying figures and totals, see the 2015 data wrap. According to the latest data 25 provinces/cities are now members of the RMB 1 trillion or above club, and 23 provinces posted GDP growth above 7%. Same as last year, West China leads the growth table, whilst the Northeast continues to suffer the most during China’s economic slowdown. 
EQUITIES – Reports ABC bills fraud triggered A-share outflows: A report this morning in the 21st Century Business Herald hints that yesterday’s market fall may have been triggered by the Agricultural Bank of China’s bills fraud case, reported last Friday by Caixin. Two employees at a Beijing branch have been detained by police for stealing Rmb3.8bn worth of bills of exchange, proceeds of which were invested in the stockmarket last year. Subsequent Chinese media reports indicate that during last year’s stockmarket bull run, funds raised from bank bills issued to trading firms were instead diverted to the stockmarket. See this previous post on bull run liquidity sources. Today’s media report quotes industry insiders indicating following the ABC fraud, banks are now performing audits on their bills business, causing illicit funds to exit the market. The report notes that while this may not directly result in sell offs, this news will at least damage confidence in an already fragile market. Regardless, Chinese investors are familiar with stockmarket sensitivity to local media and hot money flows, as the chart below of the Shanghai composite performance during these two days shows:-
chiecon 