Risk Watch: China’s Local Debt ‘Iceberg’ Emits ‘Cracking Sounds’

Caijing Magazine’s 16th issue of 2018 (published on July 9) featured a cover page with a man hauling a piggy bank atop a cracking iceberg. The headline read: “The Worries of Local Debt Hanging High Overhead.” The cover page article likened China’s local government implicit debt to an iceberg, with a small portion publicly visible …

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Risk Watch: Does China Have Ammo for a Trade War?

On July 6, the United States imposed 25 percent tariffs on $34 billion worth of Chinese goods. China hit back with tariffs on a similar scale on the same day. News reports say that another $16 billion of U.S. tariffs targeting products under China’s “Made in China 2025” program would go into effect two weeks …

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Risk Watch: Can China’s New Negative List Help Defuse Trade Dispute with America?

China’s National Development and Reform Commission and the Ministry of Commerce jointly released a shortened negative list of industries where foreign industries are restricted or banned on June 28. The new list reduces the number of sectors restricted to foreigners from 63 to 48, and will go into effect on July 28. The sectors where …

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Risk Watch: China’s Industrial Profits Fell, Not Rose, Between January to May

Data published by China’s National Bureau of Statistics (NBS) indicates that industrial profits in the period of January to May 2018 rose by 16.5 percent from the previous year. Western media outlets described the industrial profits as “steady” and “solid.” We checked the NBS figures with those of the year before, and found that industrial …

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Risk Watch: Official Data Shows China’s Economy Worsened in May

According to Chinese economic data for May provided by the National Bureau of Statistics (NBS), China’s total retail sales of consumer goods, investments in national urban fixed assets, and aggregate financing to the real economy all showed downward growth trends. Also, the NBS data for total retail sales of consumer goods appears to be false. …

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Risk Watch: China’s National Property Database Aimed at Property Tax Collection, Curbing Corruption

According to state media reports on June 15, China has started to collect information in a unified nationwide property database. China’s Ministry of Natural Resources said that there are 3,001 property registration stations in 335 cities and 2,853 counties serving over 300,000 enterprises and individuals on average per day. The backdrop: In 2007, a unified …

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Risk Watch: China Central Bank MLF Injection Lowers RMB Creditworthiness

On June 6, the People’s Bank of China (PBoC) loaned 463 billion yuan ($72.43 billion) to financial institutions through its 1-year medium-term lending facility (MLF) at an interest rate of 3.3 percent. After rolling over 259.5 billion yuan of loans maturing in June, the central bank would add a net 203.5 billion yuan of liquidity. …

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Risk Watch: What Does China Energy Reserve Bond Default Signal?

On May 29, the state-owned China Energy Reserve and Chemicals Group (CERCG) announced that one of its subsidiaries was defaulting on a $350 million three-year bond that matured earlier this month. CERCG said that the missed payment also triggered $655 million in other debt securities that are due to mature in 2021 ($400 million) and …

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Risk Watch: Did China’s Industrial Profits Really Grow 15% in Early 2018?

According to data from China’s National Bureau of Statistics (NBS) released on May 27, profits from China’s industrial sector rose by 15 percent in the first four months of 2018. A comparison of the official figures from 2017 and 2018, however, reveals a different picture. The big picture: China has carried out several deleveraging measures …

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Risk Watch: China Central Bank-backed Media Signals Severe Debt Crisis

China’s Financial News published an article on May 22 titled, “‘Breach of Contract’ Force Reshaping of Bond Market Rules,” that commented on the recent cover-up of contract breaches in China. The article noted that “breaching contracts has become a trend in China’s bond markets,” and that the phenomenon is a “mandatory lesson” for businesses in …

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