The week in review: China publishes Covid-19 white paper, May trade surplus spikes, forex reserves beat consensus
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Asia

The week in review: China publishes Covid-19 white paper, May trade surplus spikes, forex reserves beat consensus

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In this round-up, China releases a white paper detailing the country’s efforts in fighting the Covid-19 pandemic, trade surplus surges in May as imports plunge, and the Mainland’s foreign currency reserves are better than expected.

The Chinese State Council Information Office published a white paper on the country’s efforts in tackling the Covid-19 pandemic on Sunday. The 37,000-word white paper detailed the efforts and actions China had taken since the end of 2019.

China took a little more than a month to curb the spread of the virus and used approximately two months to lower the number of daily new confirmed locally transmitted cases to single digits, according to the white paper.

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Seventy-seven developing countries have been allowed to pause their debt repayments to China due to Covid-19, said the Ministry of Foreign Affairs.

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The People’s Bank of China (PBoC) injected Rmb120bn ($17bn) of liquidity into the market on Monday through seven-day reverse repurchase agreements at an interest rate of 2.2%.

The central bank also forecast a one-off medium-term lending facility (MLF) operation on or around June 15.

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China’s exports grew 1.4% year-on-year in renminbi terms in May, reaching Rmb1.46tr, while imports dropped by 12.7% to Rmb1.01tr, according to data released by the General Administration of Customs on Sunday. As a result, trade surplus increased by 60.6% to Rmb442.75bn.

In dollar terms, however, both exports and imports declined. Exports dropped by 3.3% year-on-year, while imports fell more significantly by 16.7%. This has led to a rise in trade surplus to $62.9bn — the highest since January 2016, according to UOB.

Exports to the US declined by 1.2% in May. Exports to the European Union edged down by 0.7%. Exports to the Asean region also went down by 5.7% after seeing growth for the previous two months.

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China’s foreign currency reserves reached $3.102tr in May, which was a $10.2bn increase from April, the State Administration of Foreign Exchange announced on Sunday. The consensus forecast was under Rmb3.096tr.

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The PBoC’s Credit Reference Center signed a strategic agreement with three commercial banks — Bank of Communications, China Everbright Bank and Industrial and Commercial Bank of China — last Friday. They agreed to improve China’s “account receivables funding service platform”, in a bid to increase the funding efficiency of micro, small and medium-sized enterprises. The platform was established by the central bank in 2013.

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The amount of bonds held by foreign institutions under custody in the China Central Depository & Clearing Co hit Rmb2.11tr in May. This was a 31.2% increase year-on-year and a 12.58% growth compared to the end of 2019.

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Adena Friedman, chief executive officer and president of Nasdaq, called on the US Securities and Exchange Commission to address non-transparent disclosure problems in overseas companies’ IPO on US stock exchanges. The Nasdaq had proposed new restrictions that would impose greater scrutiny of audit firms of overseas listing candidates, Friedman said at an industry conference last week. 

Charles Li, chief executive of the Hong Kong Exchanges and Clearing, said in the same conference that he is expecting more mainland companies to debut on the HKEX, as well as more secondary listings. 

US president Donald Trump published a White House memorandum on Thursday on the matter. The president called for ways to limit listings of Chinese companies that have not abided by US accounting standards.

“It is both wrong and dangerous for China to benefit from our capital markets without complying with critical protections that investors in those markets rightfully expect and deserve,” Trump said in the memo. “China’s actions to thwart our transparency laws raise significant risks for investors.”

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Chinese media Caixin reported that the country’s regulators have obtained evidence that founder and chairman of Luckin Coffee, Lu Zhengyao, was allegedly involved in the company fabricating its sales last year. It is “highly possible” that Lu will be facing criminal charges, Caixin said.

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The National Association of Financial Market Institutional Investors (Nafmii) has publicly condemned Kangmei Pharmaceutical Co and banned it from entering the interbank bond market, according to an update on the regulator’s website. The company last year admitted to falsifying its financial records.

In a Monday morning stock exchange filing, Kangmei also said it received a letter from the China Securities Regulatory Commission’s Guangdong bureau for untimely and inaccurate disclosure of information. This was after it raised the 2019 full year loss expectation from Rmb1.35bn-Rmb1.65bn to Rmb3.65bn, and then again to Rmb4.615bn.

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The Shanghai Stock Exchange established a working group of experts to improve its process on compiling indexes, the bourse said. The group will be consulted regularly on this so that market opinions can be heard and reflected in the index compilation work.

Experts come from academic institutions, research institutions, index companies, securities firms’ research departments and fund companies.

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