China said on Friday that it was putting together a list of “unreliable entities” comprising foreign companies, organisations and people, according to an MoC press conference.
The spokesperson said that the list would consist of individuals, companies, and organisations that “sanction Chinese entities or stop supplying them due to non-commercial reasons”.
The list should be published “in the near future”, said the spokesperson, who did not provide in advance any listed names.
“It is not clear what will happen to the corporates and individuals listed, but one possibility is that they could face restrictions in terms of obtaining various government approvals,” Yu Song, chief China economist at Beijing Gao Hua Securities, wrote in a Saturday note.
“This marks the first material action by the Chinese government since it retaliated in a less-than-proportional manner to the latest tariff increase by the Trump administration,” Song added.
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The State Council published a white paper titled ‘China’s Position on the China-US Economic and Trade Consultations’ on Sunday.
The white paper said the US had backtracked on the negotiations three times, in March 2018, May 2018 and May this year. The white paper also said that the US government bore sole responsibility for the severe setback in trade negotiations.
“In negotiations, we used to say that ‘nothing is agreed until everything is agreed,’” Wang Shouyi, vice minister of commerce, said in a press conference following the publication of the white paper.
Song at Beijing Gao Hua wrote in a separate Monday morning note: “The perceived backtracking is now mutual with frustration shown on both sides. At least some of this is related to perception issues — both sides have been on a learning curve in terms of [interpreting] the other’s position since the dispute started.”
In other news, the Institute of Electrical and Electronics Engineers (IEEE) lifted its ban on Huawei employees conducting peer review activities for its academic publications. The institute had imposed a temporary ban on Huawei employees from providing peer reviews.
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The PBoC published a follow-up question and answer document on Baoshang Bank’s takeover on Sunday. The document said that the takeover was an individual case and the central bank has no plans to take over other banks.
The central bank also pointed out that 89% of Baoshang Bank was owned by a financial conglomerate, Tomorrow Group, and the main shareholder had borrowed illegally from the bank.
“China’s reassurance [that it is not planning any takeovers] of other banks in the near term is likely to calm down the jittery market,” Tommy Xie, head of Greater China research at OCBC Bank, wrote in a Monday note.
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In May, equity outflows from emerging markets reached $14.6bn, the worst month since the June 2013 taper tantrum, according to a Friday report by Jonathan Fortun, an economist at the Institute of International Finance.
The month also saw $9bn of debt inflows, down from $24.2bn in April.
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China invested $270bn to offshore equities and $227.9bn to bonds in 2018, according to data published on Friday by the State Administration of Foreign Exchange.
The top five locations for Chinese investments were Hong Kong, the US, the Cayman Islands, the British Virgin Islands, and the UK.
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Renminbi was the fifth most used currency in international payments in April, taking up 1.88%, although that was a 2.3% decrease in payment value from March 2019. In general, all payments currencies decreased by 1.97%.
The UK and Hong Kong are still the top two players for FX transactions in renminbi, accounting for 36.38% and 27.85% respectively in FX transactions value.
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The China Banking and Insurance Regulatory Commission has permitted Huaxia Bank to issue perpetual bonds of up to Rmb40bn ($5.8bn). The PBoC will roll out central bank bill swaps to support the issuance.