China Economic Scan - Your daily update on the Chinese economy.
In this edition: Chinese economists see risk in holding US bonds, Chinese MOFCOM to encourage foreign investment after a 22.5% fall in FDI, China's banking regulator and Finance Ministry warned banks on making risky loans, Chinese industrial profits drop 28%, China's Agricultural Bank may still be some time away from IPO.
Top 5 headlines
Chinese economists deem huge holding of US bonds "risky," split on way out
- On the first day of U.S. treasury secretary Timothy Geithner's visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds "risky."
- Among the 23 experts polled, 17 said they believed that holding U.S. equities pose great risks to China's economy.
- However 15 of the interviewed economists said they were against the idea to quickly offload China's possession of U.S. debt as a means to strengthen the country's financial stability and decrease Beijing's vulnerability to the already ailing world economy.
China's Ministry Of Commerce To Encourage Foreign Invest
- The Chinese Ministry of Commerce said it would seek to actively encourage foreign investment in China, ahead of U.S. Treasury Secretary Timothy Geithner's official meeting with Chinese authorities next week.
- China's actual foreign direct investment fell 22.5% on year in April to $5.89 billion, bringing actual FDI in the first 4 months of this year to $27.67 billion, down 21% from a year earlier.
- There were roughly 666,000 foreign-invested companies in China as of end April, about 3% of the country's overall number of companies. These foreign-invested firms contributed to 29.7% of China's overall industrial output and 21% of the country's tax revenue in 2008.
China regulator warns banks on risky loans
- China's banking regulator and the Finance Ministry on Sunday warned banks against issuing risky loans, saying they must step up their risk management.
- Banks extended 5.17 trillion yuan ($757.2 billion) in loans in the first 4 months, exceeding the government's minimum target of 5 trillion yuan for all of 2009 and fanning fears among analysts that banks were taking undue credit risks.
- In offering loans, banks must make a careful assessment of the borrowers' needs, to ensure the company in question is not using the money for 'blind expansion', the statement said.
China Jan-Apr industrial profits drop 28 pct yr/yr
- Chinese industrial profits in the first 4 months in 22 provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, the National Bureau of Statistics (NBS) said.
- In April, 23 out of 39 sectors saw their profit growth rebound or their losses narrow, the NBS said in a statement on its website (www.stats.gov.cn).
- Petroleum refining and coking industry profits reached 26.66 billion yuan ($3.9 billion) in the first 4 months, surging 181.3% year on year. The electricity sector made a profit of 2.19 billion yuan as of the end of April, in sharp contrast with a 1.37 billion loss made in Q1.
China’s Agricultural Bank May Not List This Year, Finet Reports
- Agricultural Bank of China probably won’t list its shares this year, Finet news service reported, citing 2 bank executives it didn’t name.
- The bank plans to open branches in New York and London this year to prepare for a global commodity-trading system before seeking a public listing.
- Agricultural Bank expects to acquire licenses to start operations in the U.S. and U.K. next year.
Source: China Economic Scan
