Tracking shadow banking + liquidity relations in China
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Reuters – China’s shadow-bank boom keeps zombie firms alive | Considered View | Breakingviews
China’s shadow banking sector is piling up risk at the heart of the financial system and keeping deadbeat firms alive. The sums invested in so-called wealth management products surged 57 percent last year to reach $3.2 trillion. The growth alone is good reason to worry, but new data also suggests much of the cash is propping up troubled borrowers.
Bank acceptance bills, newspapers and fraud in China | FT Alphaville
This is CreditSights summarising CBRC notice #203 which is officially dated Dec 31 2015, before those alleged scams above were announced. It complained of seven risks in the bill financing game:
1). Poor internal controls, failure to check that counterparty is on the accepted name list, illegal provision of repo financing.
2). Artificial sales to remove discounted bills from the balance sheet.
3). Using bills to inflate loans, deposits and fees.
4). Banks cooperating with middlemen to issue bills without real underlying exchange of goods.
5). Using bills to borrow new funds in order to refinance maturing loans, thus distorting asset quality.
6). Use of proxies, ‘drawer agreements’, or middlemen to hide discounted bill assets.
7). Certain joint-stock and city commercial banks using agricultural FIs (such as rural commercial banks or rural credit cooperatives) as ‘channels’ to reduce on balance sheet assets.
Reuters – Exclusive: China to allow commercial banks to swap bad debt for equity stakes in firms – sources
China’s central bank is preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms, two sources with direct knowledge of the new policy told Reuters.
Caixin – Executive at Heart of Bad Loan Guarantee Scandal Said to Be Detained
(Beijing) – An executive who oversaw a troubled 50 billion yuan lending program at a loan guarantee company has been detained by Communist Party graft busters, a person with knowledge of the probe says. Li Lingcheng was taken away by investigators from the party’s graft buster, the Central Commission for Discipline Inspection, on February 17, the source said. Li was once president of Hebei Financing Investment Holding Group Co. Ltd. and later served as its party boss. The person with knowledge of the probe said that as president he oversaw a program by a subsidiary of the group called Hebei Financing Investment Guarantee to back loans extended by banks, asset management firms, trust companies, securities firms and peer-to-peer lending websites. The loans mostly went to companies in the northern province of Hebei.
PBOC’s Yi Reveals Some Non-Dollar Reserves in Transparency Bid – Bloomberg Business
Foreign exchange reserves held by the People’s Bank of China include the euro, yen, pound and developing nations’ assets, in addition to U.S. dollars, Deputy Governor Yi Gang said at a news briefing in Beijing on Sunday. He did not disclose amounts of holdings in the currencies.
PBOC Using Stealth Intervention as Reserves Decline, Daiwa Says – Bloomberg Business
The People’s Bank of China may have bought foreign currency from local banks, used the forwards market to prop up the yuan and asked the nation’s sovereign wealth fund to liquidate overseas assets, Daiwa analysts Kevin Lai and Junjie Tang wrote in a note on Tuesday. While Lai didn’t provide any direct evidence in the note, he said in an e-mailed response that his conclusions were based on a “logical deduction.”
PBOC executes Rmb30bn 7-day reverse repo, closed out previous Rmb230bn reverse repo 央行今操作3百亿7天期逆回购
PBOC has almost taken back extra Rmb1.69tn of liquidity issued in open market operations over Chinese New Year 央行已基本收回节前投放资金
PBOC Governor Zhou Xiaochuan: Need to develop self fundraising channels (e.g. bonds, equity) to reduce corporate debt/leverage 周小川：发展直接融资降杠杆
Reuters – China February new loans pull back sharply after January splurge
Chinese banks extended 726.6 billion yuan ($111.80 billion) in net new yuan loans in February, missing analyst expectations and falling from the previous month’s lending of 2.51 trillion yuan. The central bank said the broad M2 money supply measure (M2) grew at 13.3 percent from a year earlier, missing forecasts. Outstanding yuan loans grew at 14.7 percent by month-end on an annual basis.
3 month SHIBOR touches five year lows 中国3个月Shibor刷逾五年新低
CBRC chairman Shang Fulin: Need to strengthen P2P industry supervision 尚福林:将加强对P2P行业监管
Reports CBRC orders commercial banks to strictly control property credit risks 传银监会要银行严控楼市风险
China Opens Up Its Bond Market | Seeking Alpha
In another step toward liberalization, China has opened up its RMB48.37 trillion onshore bond market to foreign institutional investors. Prior to this announcement, onshore bonds were limited to institutions such as sovereign wealth funds, central banks and multilateral finance institutions such as the World Bank and the IMF. Post onshore bond market liberalization, foreign investors will no longer be limited by QFII (Qualified Foreign Institutional Investor) and RQFII (Registered Qualified Foreign Institutional Investor) quotas.
Guangdong province sets up a municipal bond risk monitoring system 广东:建立地方债风险预警机制
Rmb5tn of local government debt due to mature this year, swapping old debt for new bonds 5万亿到期地方债务可借新还旧
Since its launch in 2013, 7,110 PPP projects worth Rmb8.3tn have been signed 中国PPP大数据：投资8.3万亿
Property developer onshore bond issuance in Jan, Feb increased three-fold year on year 地产债前2月发行同比增3倍
CPPCC member calls for easing SME borrowing difficulties in China 委员：有银行贷款须给回扣
China Internet Finance Association issues new guidelines for P2P platform operations 官方制定P2P信披自律规范
Ping An total bad debts increased by almost 70% in 2015 平安银行不良贷款余额增近7成
China Said to Plan Crackdown on Loans for Home Down-Payments – Bloomberg Business
Chinese regulators plan to impose new rules to end the practice of homebuyers taking out loans to cover down-payments, as they step up scrutiny of financing risk in the property market, according to people familiar with the matter. The rules will bar lenders including developers, housing agencies, small-loan companies and peer-to-peer networks from offering loans for down-payments, said the people, who asked not to be named because the matter isn’t yet public. Regulators including the central bank and the China Banking Regulatory Commission will also ask commercial banks to scrutinize mortgage applications and reject those where down-payments come from loans offered by such institutions, the people said.
P2P funding for mortgage downpayment loans less than Rmb5bn 首付贷规模曝光:P2P不到50亿
Only 0.6% of P2P platforms partner with insurance companies P2P平台牵手保险难增信
Total number of P2P platforms declines for third straight month P2P平台数量连续三月负增长
Lufax Vice President resigns after less than a year, reflects growing pressures in China’s online finance industry 陆金所副董事长杨晓军离职
Shenzhen had 10 net loan platforms run into trouble in February 2月深圳爆出10家问题网贷平台
Marbridge Daily: Rumor: Sesame Credit Starts CB of Enterprise Credit Service
Consumer credit rating service provider Sesame Credit, a subsidiary of Alibaba Group’s (NYSE: BABA) financial services affiliate Ant Financial, recently started closed beta testing for an enterprise credit service, according to a source connected to the company.
Ant Financial (Alibaba’s micro finance services firm) value estimated at US$50bn 蚂蚁金服
Warnings of unofficial bank WMPs being sold in Shanghai 沪银行业:银行理财产品无代销
Lehman Lawyer to China Distressed Debt Holders: Expect Pain – Bloomberg Business
Investors betting on troubled Chinese companies could be waiting some time for their salvation, according to U.S. law firm Jones Day. Debts tied to battered commodities and a lack of legal protections for offshore creditors will pose significant challenges for recovery of monies owed, said Jayant W. Tambe, a New York-based partner who is representing Lehman Brothers Holdings Inc. in derivatives lawsuits after its collapse. Clients are still “not so comfortable” about emerging markets even as raw material prices rebound recently from multi-year lows, he said.
Mining firms issuing AAA bonds with rates as high as 6% 煤企AAA债发行利率高达6%
China Bad-Loan Managers Face Risks Amid Slowdown, Huarong Says – Bloomberg Business
More capital at bad-loan managers is being tied up for longer periods of time in soured debt as pricing conditions worsen amid the rising supply of such assets, Huarong Chairman Lai Xiaomin wrote in a six-point proposal to the National People’s Congress. The firms need access to more and cheaper funding channels, said Lai, whose firm is China’s largest bad-loan manager. Data from the banking regulator show that Chinese commercial banks’ nonperforming loans had risen to 1.27 trillion yuan ($195 billion) by December, the highest level since June 2006, as economic growth slowed to the weakest pace in a quarter century. Including “special-mention” loans, where future repayment is at risk but yet to become nonperforming, troubled loans had swelled to 4.2 trillion yuan, or about 5.5 percent of total advances, the data show.
China saw a dramatic increase in wage arrears protests in run up to New Year | China Labour Bulletin
Between 1 December and 8 February, CLB’s Strike Map recorded 1,050 strikes and collective protests by workers, about 90 percent of which were related to the non-payment of wages. The highest concentration of unrest was in Guangdong, Henan, Shandong and Hebei, with multiple protests by construction workers occurring in several major cities such as Zhengzhou (23 incidents) and Chengdu (21 incidents). Beijing, Guangzhou and Chongqing all had 14 construction worker protests in this period.
Inside China’s Historic $338 Billion Tech Startup Experiment – Bloomberg Business
The country’s government-backed venture funds raised about 1.5 trillion yuan ($231 billion) in 2015, tripling the amount under management in a single year to 2.2 trillion yuan, according to data compiled by the consultancy Zero2IPO Group. That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally, according to London-based consultancy Preqin Ltd.
China’s transparency challenges | Brookings Institution
Are China’s growth numbers wrong? There is a lively debate in the academic literature about the quality of key Chinese data. A case can be made that China’s National Bureau of Statistics (NBS) deserves more credit than it is commonly given. For example, while there is evidence that some official statistics are “too smooth,” this smoothness is unusual in that it includes a long period of overstated inflation and understated growth, which smacks of technical error more than political tampering. One study found that the official growth numbers were “significantly and positively correlated” with externally verifiable measures of economic activity, including import and export data from China’s trading partners, and another found they were historically only “weakly related,” but that the official numbers have been growing more accurate over time. Many researchers (including those at international agencies like the World Bank) find the official GDP data to be at least “usable and informative” [Feng, Hu, and Moffitt].