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The week in renminbi: May activity disappoints, China tells the US to stop meddling in Hong Kong protest, PBoC addresses Baoshang again

By Rebecca Feng
17 Jun 2019

In this round-up, the Mainland’s industrial production and other activity slowed in May, the Chinese foreign ministry urged the US to stop interfering with the country’s ‘internal affairs’ and the People’s Bank of China (PBoC) tried to calm the market again regarding Baoshang Bank’s bailout.

China’s industrial production growth (IP) in May slowed to 5% year-on-year from 5.4% in April, according to data published by the National Bureau of Statistics last Friday.

The slower growth was mainly led by the sluggish utility sector. The sector’s output growth slumped to 5.9% in May from 9.5% in April.

Meanwhile, retail sales growth rose to 8.6% year-on-year from 7.2% in April. Analysts contributed the rise to the special Labour Day holiday at the beginning of May and argued that the slowdown would continue.

“Today’s data, when viewed alongside the previously released official manufacturing PMI, confirm our view of a double dip and that China’s growth slowdown has been worsening,” Ting Lu, chief China economist at Nomura, pointed out in a Friday note. “With the rapid escalation of US-China trade tensions, we expect China’s growth to drop further in the coming quarters.”

Further, compared with the accumulated growth in the first four months of the year, growth in fixed asset investment and infrastructure investment for the year to May-end also slowed from 6.1% to 5.6% and from 4.4% to 4% respectively.

Tommy Xie, head of greater China research at OCBC Bank, said that the slower infrastructure investment growth was due to the funding constraints for local governments.

 “Nevertheless, given China relaxed the use of local government special bonds last week, we think it may help address the funding concerns, which may boost the infrastructure investment in the second half of 2019,” he wrote in a Monday note.


Last Friday, Geng Shuang, a spokesperson at the Chinese foreign ministry, said in a press conference that China is strongly dissatisfied and firmly opposed to the reintroduction of the “Hong Kong Human Rights and Democracy Act”. The act, if implemented, would require the US government to assess Hong Kong’s autonomy annually to decide whether to keep giving special treatment to Hong Kong.

Geng also urged the US to give up “creating chaos in Hong Kong”. He emphasised that since Hong Kong belongs to China, Hong Kong affairs are purely China’s internal affairs.


The PBoC issued another statement on Sunday late afternoon regarding Baoshang’s bailout, which has had significant effects on the market.

According to the statement, although the takeover broke Chinese investors’ belief that no bank will default in China and brought “a bit of temporary pain”, it furthered market education and corrected some institutions’ radical decision in investment and management.

As the next step, the central bank and the workgroup responsible for the takeover will facilitate a market-led reform and restructuring process for Baoshang Bank and make it a healthy and stable bank as soon as possible.


Following a scandal caused by UBS chief economist, the Swiss bank has placed Paul Donovan on leave. Further, a Chinese financial group, Haitong International, has cut all ties between its Hong Kong unit and UBS across all business divisions, according to a spokesperson from Haitong. The decision was announced last Friday.


Chinese vice premier Liu He went to Hangzhou to get a better idea of how small and medium-sized banks are serving the real economy, state-owned media Xinhua reported on Friday evening.

During his trip, Liu pointed out that the party leaders and the state council are paying attention to the developments of small and medium-sized banks. He added that the liquidity condition among these banks is stable.

By Rebecca Feng
17 Jun 2019