828cloud

Data, Info and News of Life and Economy

Category Archives: Finance

Chart: Funds in China National Medical Insurance System

Source : Caixin

Chinese Local Govt Financing Units Seek Unorthodox Route to Raise Funds

Samuel Shen and Andrew Galbraith wrote . . . . . . . . .

Shut out of the bond market and spurned by banks, a growing number of cash-starved Chinese local government financing units are tapping a loosely regulated funding channel to directly court yield-hungry retail investors.

Over recent years China has embarked on a deleveraging campaign to reduce systemic risks after Local Government Financing Vehicles (LGFVs) accumulated trillions of dollars worth of debt since the 2008 financial crisis.

Last year, Beijing further tightened the screws on lending to LGFVs, which are investment companies that build infrastructure projects on behalf of local governments.

The squeeze has sharply driven up “direct financing” debt products by LGFVs – typically registered via loosely-regulated local asset exchanges and sold to the public via the internet with a hint of government guarantee – over the past year.

LGFVs are offering to pay yields of more than 8% – roughly triple the benchmark lending rate – revealing their desperation to raise cash and meet political mandates to support a COVID-hit economy.

One such firm is Weifang Binhai Tourism Group Co, which is selling investors 500 million yuan ($74.04 million) of debt yielding 8.5%-9.5%, to fund engineering projects and replenish cash, according to a sales pitch.

The company wouldn’t have chosen this path “if we could sell bonds at a lower cost – we are not stupid,” said Liu Yang, a manager in charge of financing for Binhai Tourism, owned by the city government of Weifang, in eastern Shandong Province.

Liu says many LGFVs are struggling, as they are unable to raise money from the bond market or through trust firms. The major hit came last year when regulators curbed bond sales by LGFVs and restricted banks from providing loans to such state firms, and “all banks were rushing to call back loans”.

Weifang Binhai is not alone. About 50 LGFV debt products are on sale via investment website Junxing Wealth, luring individual investors with indicated annual returns of 8.0-10.2%. More such private investment products are being promoted via the internet, or through social media.

There’s no official data on the total size of such products, as they are not sold through regulated financial institutions. At least 245 such debt products have been sold since last year to quench LGFVs’ funding needs, according to an estimate by Huaan Securities. An LGFV typically raises several hundred million yuan via such a debt scheme.

INNOVATIVE

“For LGFVs in economically weak regions, or owned by county-level, district-level governments, it’s tough for them to refinance through bond issuance, so they must come up with something innovative,” said Ivan Chung, associate managing director at Moody’s Investors Service.

Risk averse investors typically shun LGFVs in China’s southwestern, northwestern and northeastern provinces, as well as lower-rated bonds, Chung said.

Net bond sales by AA-rated LGFVs more than halved so far this year, according to Minsheng Securities.

But the practice of LGFVs selling private debt to the public via the internet, with a veiled promise of government guarantee, is raising eyebrows.

In a brochure promoting debt sold by Luoyang Gaoxin Industrial Group, little was mentioned about the issuers’ financial health. Instead, descriptions centred on the financial strength of the Luoyang city government, and the central Henan province, where the LGFV is based.

“This doesn’t look right. Any LGFV can issue debt, but the point is, you cannot hint that the local government is behind your back,” said Rocky Fan, economist at Guolian Securities, adding such promotion violates central government’s ban on implicit guarantees.

Such LGFV debt schemes also risk violating rules on private investment products, which must only sell to qualified investors, while limiting the number of investors to 200, said a lawyer who declined to be identified as he’s not authorised to speak to the media.

These products “appear to be illegal fundraising,” the lawyer said.

Wealth management sold through banks, trust firms and brokerages would be subject to much stringent scrutiny. A debt crisis in the property sector has already led to a years-long crackdown on illicit financing.

The Luoyang city government could not be reached for comment. China’s securities watchdog didn’t immediately reply to Reuters’ request for comment.

REASON TO EXIST

As debt-control deepens, a growing number of LGFVs will likely default on private debt in 2022, S&P Global Ratings predicts.

Bincheng Investment, an LGFV seeking to raise 100-200 million yuan from individual investors at yields of 8.2-9.0%, says borrowing from individuals makes sense.

“This new financing tool is legitimate, and meets the needs of individual investors,” said an official of Bincheng’s finance department, declining to be named.

“There are many products in the market offering much higher interest rates than those of bank lending … and there is a reason for them to exist.”


Source : Reuters

Chart: Total Return of Selected Global Financial Asset in H1 2022


See large image . . . . . .

Source : Deutsche Bank

Chart: UN Budget – Who Has Paid Their Dues?

Source : Statista

Chart: China Fiscal Revenue YoY Plunged in April and May 2022

Source : Caixin

中國2021年中央财政收入超9万亿元

记者: 申铖 . . . . . . . . .

  财政部部长刘昆21日表示,2021年,中央一般公共预算收入91470.41亿元,为预算的102.3%,比2020年增长10.5%。加上从中央预算稳定调节基金以及中央政府性基金预算、中央国有资本经营预算调入1935亿元,收入总量为93405.41亿元。

  受国务院委托,刘昆21日向十三届全国人大常委会第三十五次会议作2021年中央决算的报告。

  刘昆表示,2021年,中央一般公共预算收入增长,主要是受经济保持恢复发展、工业生产者出厂价格指数 (PPI)涨幅较高等因素拉动。

  决算报告显示,2021年,中央一般公共预算支出117202.3亿元,完成预算的98.6%,下降0.9%。加上补充中央预算稳定调节基金3613.11亿元、向中央政府性基金预算调出90亿元,支出总量为120905.41亿元。收支总量相抵,中央财政赤字27500亿元,与预算持平。

  决算报告指出,2021年,宏观政策保持连续性、稳定性、可持续性,积极的财政政策提质增效、更可持续,优化和落实减税降费政策,保持适度支出强度,增强国家重大战略任务财力保障,在促进科技创新、加快经济结构调整、调节收入分配上主动作为,促进经济运行在合理区间。

  决算报告中包括了今年财政运行分析。数据显示,今年前5个月,全国一般公共预算收入86739亿元,扣除留抵退税因素后增长2.9%,按自然口径计算下降10.1%;全国一般公共预算支出99059亿元,比上年同期增长5.9%,民生等重点领域支出得到有力保障。

  刘昆表示,当前,我国经济发展环境的复杂性、严峻性、不确定性上升。从全年来看,财政收支平衡压力较大,完成预算需要付出艰苦努力。下一步,将加快落实已经确定的政策,加大宏观政策调节力度,谋划增量政策工具,靠前安排、加快节奏、适时加力,继续做好 “六稳”“六保”工作,有效管控重点风险,保持经济运行在合理区间。


Source : 新华网


Chart: Britons Suffer Pay Cut as Inflation Outpaces Wage Growth

Source : Statista


Chart: Inflation Is the Top Financial Concern for Americans

Chinese Households Are Bracing for a Downturn by Saving More This Year

Jane Li wrote . . . . . . . . .

China’s citizens, who already have a reputation of being savvy savers, are saving even more amid uncertain economic prospects.

Chinese household savings grew by 7.86 trillion yuan ($1.2 trillion) between January and May, an increase of more than 50% from the same period last year, according to China’s central bank. In May alone, renminbi savings accounts in China added 3.04 trillion yuan, which was 475 billion yuan more than the same month last year, said the bank.

The explosion of savings in the first five months of this year was also affected by other factors: people depositing their year-end bonuses, and lockdowns in several cities hindering their ability to spend. But the fast growth of savings also reflects a smaller appetite for risk. In a telling sign, during the first five months of 2020, when the pandemic was ravaging the country, China’s household savings grew by 6 trillion yuan, lower than the amount seen this year. People are growing increasingly risk-averse, as China’s prolonged lockdowns combined with the Russian invasion of Ukraine and corresponding high oil prices feed worries about imminent recessions.

Chinese consumers are anxious about the future of their economy

“The pandemic situation in both 2020 and 2022 has led to big increases in household savings rate,” Shanwen Gao, the chief economist of Essence Securities, wrote in a note (link in Chinese) in May. “Part of this comes from an increase in unwilling savings, as the pandemic hinders consumption; the other part meanwhile comes from a rise in precautionary savings, which reflects residents’ concerns about uncertainty.” Gao thinks that the surge in savings this year, amid the new waves of covid-19, has been channeled into deposits, fixed income, and debt reduction, where citizens use savings to repay their liabilities and pre-pay mortgages. In contrast, in early 2020, people directed their savings into stock and property markets “This reflects the shaken confidence of residents in job security and future income,” Gao wrote.

Despite recovering from the pandemic relatively quickly in the past two years, China’s insistence on a zero-covid policy has damaged its economy deeply. On-and-off lockdowns in major cities including Shanghai have hindered business operations and shattered consumer confidence, while rising unemployment rates and mass layoffs in the once red-hot tech sector are also leading to more pessimism among citizens. Meanwhile, two-thirds of China’s 70 major cities saw their new home prices drop in April, compared with 38 cities in March, pointing to further danger of shrinking wealth of Chinese families, which count property as a major asset.

Naturally, without any clear deadline for zero-covid measures from the Chinese government, people are holding tight to their wallets. A rising propensity to save could mean that China’s already sluggish consumption, which saw retail sales plunge by 11% in April, will slow further for the rest of the year. Despite many cities’ recent embrace of using consumption vouchers and digital yuan subsidies to spur spending, these measures are seen by experts as far from being enough, as the hand outs only account for around 0.01% of some city’s GDP.


Source : QUARTZ

Chart: When the Fed Wants to Slow Demand by Raising the Cost of Capital, No Market Is Immune

Source : Twitter