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China market round-up: CPI inflation steadies, August credit data within expectation, Huawei mulls first onshore bond

By Rebecca Feng
13 Sep 2019

In this round-up, China’s consumer price index (CPI) inflation remained unchanged in August, total social financing saw steady traction and Huawei Technologies is poised to issue its first onshore bond.

China’s CPI inflation remained unchanged at 2.8% year-on-year in August, according to data from the National Bureau of Statistics. Producer price index deflation worsened to negative 0.8% year-on-year from negative 0.3% in July.

Food CPI climbed by 10% year-on-year mainly thanks to surging pork price, which has jumped by almost 50% from a year earlier due to African swine fever.

“Headline CPI inflation is likely to remain high in the coming months,” Zhennan Li, a China economist at Goldman Sachs, wrote in a Tuesday note. “High-frequency data suggest year-on-year inflation in pork prices has continued to accelerate notably in early September, although year-on-year inflation in fresh fruits and vegetables has been moderating.”

In addition, the State Council issued guidelines on stabilising pork production on Tuesday.

In the short term, the officials called for using frozen pork reserves at a proper pace and beef up the production of alternatives such as poultry and mutton. In the medium-term, local governments should shift the supply of pork to the domestic market.


The People’s Bank of China (PBoC) released August credit data on Wednesday.

Total social financing (TSF) reached Rmb1.98tr ($280bn), maintaining a 10.7% year-on-year growth. However, net financing through corporate bonds and local government special purpose bonds decreased.

New renminbi loans grew to Rmb1.21tr in August from Rmb1.06tr in July. Renminbi loans to the real economy reached Rmb1.3tr — a Rmb491bn increase from July.

While August loan volumes were in line with expectations, TSF surprised with the upside, according to Yu Song, chief China economist at Beijing Gao Hua Securities.

“There were likely some administrative measures to boost broad credit growth after the below-expectations TSF and activity data in July which led to more pressures on the government to loosen,” Song wrote in a Thursday note. “The administrative pressures can change both the supply of and demand for credit as the government can direct the behaviour of both lenders and borrowers, especially those state-owned entities.”

Song estimated the September TSF to be even stronger given the State Council’s clear signal in recent weeks of loosening policy.


Huawei is planning to raise Rmb6bn by issuing two tranches of bonds in the onshore interbank market, according to filings with the National Association of Financial Market Institutional Investors (Nafmii). One tranche will be underwritten by Industrial and Commercial Bank of China and the other by China Construction Bank.

The technology giant has never issued an onshore bond before. It has, however, issued four dollar bonds and two offshore renminbi bonds in Hong Kong through subsidiaries.

In total, the company is applying for as much as Rmb30bn of quota to issue bonds in the interbank market.


Foreign corporations invested Rmb70.9bn of new money into China in August, a 3.6% year-on-year increase, the Chinese Ministry of Commerce said in a Thursday press conference. In dollar terms, the year-on-year growth was 0.3%.

By the end of August, foreign corporations had invested a total of Rmb604bn in China, a 6.9% year-on-year rise. Geographically, the eastern region and western region saw new foreign investments grow by 6.9% and 15.8%, respectively. New foreign investments into free trade zones climbed by 23.3% to Rmb86.6bn.


Tradeweb, a trading platform, reported average daily trading of $1.38bn on its Bond Connect platform in August, a record high and a 167.5% increase year-on-year, according to a monthly report.

By Rebecca Feng
13 Sep 2019