China’s GDP grew 3.2% year-on-year in the second quarter of 2020, beating consensus forecast of 2.4%. Thanks to the stronger-than-expected quarterly data, the first half GDP contraction moderated to 1.6% compared to a year ago, despite a 6.8% slump for the first quarter.
Industrial production in June increased by 4.8% year-on-year but retail sales fell 1.8%. Fixed asset investment slid 3.1% in the first half versus a year ago.
“China’s economy appears to have staged an impressive comeback since mid-March, driven by pent-up demand, a catch-up in production, a surge in medical product exports and stimulus in both China and other major economies that has supported demand for goods made in China,” wrote Nomura’s global markets research team.
*
China’s fiscal revenue dipped 10.8% year-on-year to Rmb9.62tr ($1.38tr) for the first six months of 2020, according to the Ministry of Finance (MoF). Expenditure fell 5.8% to Rmb11.64tr during the same period.
*
Yi Gang, the central bank governor, urged the International Monetary Fund (IMF) to use a new issue of special drawing rights (SDRs) to help its member countries — especially developing countries — combat the economic impact of the Covid-19 pandemic.
“A general allocation of SDRs, which are IMF units based on a basket of leading currencies, would boost all members’ foreign reserves and their purchasing power,” Yi wrote in an opinion piece for the Financial Times, published on Thursday.
“It would be a quick, practical, fair and cost-effective response to this once-in-a-century crisis,” he added. “It would especially help support those developing countries inadequately covered by current financial safety nets or currency swap arrangements.”
*
The China Banking and Insurance Regulatory Commission (CBIRC) warned against a resurgence of shadow banking activity. The regulator told banks and insurance companies to step up their efforts in containing related risks. This was after it found problems such as violation of the new asset and wealth management guidelines during inspections at the institutions.
*
The CBIRC has reportedly asked some Chinese banks to keep their net profit growth for the first half of 2020 at single digit rates and shore up loan loss provisions, according to local media.
*
Foreign direct investment (FDI) in China rose 7.1% to Rmb117bn in June, or by 3.7% to $16.72bn in dollar terms, according to the Ministry of Commerce. The FDI for the first half of the year stood at Rmb472.18bn, posting a 1.3% decrease year-on-year, or 4% in dollar terms.
Non-financial outbound investment fell 0.7% compared to a year ago, to Rmb362.14bn.
*
China said earlier this month that it will encourage local governments to use the proceeds from special purpose bonds to recapitalise small and mid-sized banks in their respective regions.
The limit has been set at about Rmb200bn and will be used to support banks in 18 regions in China, a senior CBIRC official said in a Thursday briefing.
He reckons risks are manageable at the smaller Chinese lenders and their liquidity adequate, but said the CBIRC will support certain provinces to consider restructuring some rural and city commercial banks to help mitigate part of the risks.
*
A State Council meeting on Wednesday, chaired by premier Li Keqiang, said local governments have used Rmb2.24tr of the Rmb3.75tr special purpose bond quota. The meeting urged the governments to use the bonds well, and make sure there is no mismatch between the funds and the infrastructure projects they are supposed to support.
The meeting also proposed removing the equity investment limits currently imposed on domestic insurance companies. At the moment, insurance companies invest mainly in debt investments.
The State Council would enable insurance funds to tap private equity and venture capital investments in pilot programmes.
*
The People’s Bank of China (PBoC) published the June data for the financial markets.
New bond issuance totalled Rmb4.2tr last month, with the outstanding volume of the onshore bond market reaching Rmb107.8tr by June 30. The total turnover of the interbank money market stood at Rmb91.1tr.
The average daily turnover in the interbank bond market rose 36.49% year-on-year to Rmb1.13tr, but decreased 2.09% compared to May. The number was Rmb68.85bn for the exchange bond market, which was 105.88% higher than June 2019 but 6.2% lower month-on-month.
The average daily turnover for the stock markets of Shanghai and Shenzhen jumped by 15.03% and 16.98% compared to a year ago, respectively, to Rmb287.48bn and Rmb438.67bn.
*
The MoF will issue Rmb5bn of offshore renminbi bonds in Hong Kong next week, with the auction scheduled on Thursday. The State Council has approved for the MoF to issue Rmb15bn of dim sum bonds in 2020, the ministry said in a Friday announcement.
*
The PBoC injected Rmb730bn of liquidity into the market this week, including Rmb330bn through reverse repo operations and Rmb400bn through medium-term lending facility (MLF). The one-year MLF rate was left unchanged at 2.95%.
*
Property prices rose across 70 large and medium-sized Chinese cities last month, according to the National Bureau of Statistics. New property price in Beijing, Shanghai, Guangzhou and Shenzhen were up 0.6% on average from May, with that for second-hand houses rising 1%.
*
China has officially launched the National Green Development Fund Co, which will focus on raising funds for green projects. The company, headquartered in Shanghai, has a registered capital of Rmb88.5bn. The MoF, the Ministry of Ecology and Environment and the Shanghai government jointly launched the company on Wednesday.
It will primarily invest in projects in areas such as pollution control, ecological restoration, green transportation and clean energy.
*
Four fund companies, China Asset Management, E Fund Management, Huatai-Pine Bridge Investments and ICBC Credit Suisse Asset Management, have applied to launch the Shanghai Star Market 50 ETF, according to an announcement on the CSRC website on Wednesday.
These ETFs will be benchmarked on the Shanghai Stock Exchange Star 50 Index, which is yet to be released.
*
Li Xiaojia, the chief executive of the Hong Kong Exchanges and Clearing, reportedly said at an online forum that a meaningful breakthrough for the Commodity Connect between the special administrative region and the Mainland could happen in 2021.
*
A subsidiary of Shanghai Fosun Pharmaceutical (Group) Co received approval to begin clinical trial for its Covid-19 vaccine.