US president Donald Trump tweeted on Sunday evening that he would increase the existing 10% tariff on the $200bn Chinese goods to 25%, starting from Friday, and impose an additional 25% tariff on the remaining $325bn goods “shortly”.
“The Tariffs paid to the USA have had little impact on product cost, mostly borne by China,” Trump wrote. “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
The escalation of tariffs was suspended after Chinese president Xi Jinping met with Trump in December at Buenos Aires.
The offshore renminbi weakened by more than 1% against the dollar on Monday morning.
China is considering cancelling the eleventh round of trade talks scheduled this Wednesday in Washington DC, The Wall Street Journal reported on Monday morning Hong Kong time, citing a person briefed on the matter.
The two major stock indices in China both dropped thanks to Trump’s announcement. The SSE Composite Index dropped 3% from 3078.4 on April 30 to 2984.7 on Monday morning. The SZSE Component Index also saw a 4% decline.
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In April, the first month since Chinese government and policy bank bonds joined the Bloomberg Barclays Global Aggregate Index, total traffic through the Bond Connect channel reached Rmb116.9bn ($17.3bn), a 4% increase from the month before. The daily average turnover reached Rmb5.31bn, according to the monthly report by the access scheme.
The number of registered global institutional investors for Bond Connect hit 845 by the end of the month. That figure was only 503 by the end of 2018 and 711 by the end of March.
Global investors bought a net Rmb35.6bn of Chinese bonds through the scheme in April, up from Rmb22.2bn in March. Chinese government bonds, policy bank bonds, and non-convertible debentures took up 92% of the total purchases.
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China’s State Council unveiled new rules to standardise the government investments on Sunday.
The new rules, effective from July 1, clarified the scope of projects the government can invest in and set stricter requirements in terms of the information disclosure of these projects.
“The new rules will help China strike the balance between stabilising growth via government investment and containing the financial risk,” Tommy Xie, head of Greater China research at OCBC Bank, wrote in a Monday note.
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Through window guidance, the China Banking and Insurance Regulatory Commission (CBIRC) has asked commercial banks to recognise loans overdue for more than 60 days as non-performing, Bloomberg reported on Monday.
Previously, the only guidance Chinese commercial banks had was a set of rules published in 2007. In the old rules, the CBIRC did not specify how many days a loan can remain overdue until it is classified as "non-performing". Banks have been classifying loans overdue for more than 90 days as non-performing themselves.
The 90-day threshold was only made explicit on April 30, when the CBIRC published a set of draft rules for evaluating commercial banks’ financial risk. The deadline of soliciting public opinions is May 31.