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ChinaChina People and Markets

The week in review: May industrial profit growth slows, Geely withdraws Star IPO plan, policy bank gets nod for onshore perp

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In this round-up, China’s industrial profit growth moderates in May, Geely Automobile Holdings will not pursue a planned listing on the Star market in Shanghai, and Beijing approves the first onshore perpetual bond from a policy lender.

China’s industrial profit growth slowed to 36.4% year-on-year in May, from 57% the previous month, data from the National Bureau of Statistics showed. The slowdown was due to rising raw material costs and highlighted the uneven growth among industries, according to a Monday note from Mizuho Bank.

Industrial profits came at Rmb830bn ($129bn) last month, taking the total for the January-May period to Rmb3.43tr, which is 83.4% higher than what was recorded a year ago.

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By the end of March, China had close to $8.88tr in overseas financial assets, with $6.74tr of liabilities, according to the State Administration of Foreign Exchange (Safe).

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China’s total foreign debt — in both local and foreign currencies — increased 5% in March compared to December 2020, to $2.53tr, the Safe said. One of the reasons for the debt growth was foreign investors’ increased exposure to onshore renminbi bonds, added the regulator.

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China recorded a current account surplus of Rmb450.3bn for the first quarter, together with a capital and financial account deficit of Rmb450.7bn.

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China’s outbound securities investment totalled $71.7bn for the first quarter of 2021, Safe data showed. Foreign investment in the onshore securities market stood at $75.2bn.

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The World Bank has approved a $430m loan to help improve China’s plastic waste management at the national and subnational levels, and reduce plastics pollution from municipal solid waste, according to a press release last week.

A separate $200m loan has been approved to support the establishment of a green and low-carbon investment fund, to drive private capital and more equity financing to green businesses and projects in selected regions of China, according to a separate World Bank release.

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The Securities Association of China plans to revise its system for evaluating securities companies’ bond underwriting businesses in the exchange market. Firms will be ranked A, B or C depending on their total scoring across seven categories, versus five previously.

One of the newly added criteria for evaluation is “maintaining market order”. Points will be deducted for firms that bid for business with underwriting fees that are below market rate.

Depending on their total scores, firms that rank among the top 30% will be assigned an A rank. The bottom 20% will be ranked C.

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Technology companies engaged in high-end equipment manufacturing, information technology, new energy, new materials, biopharmaceuticals and energy saving and environmental protection are encouraged to list on the Star board, the ChiNext board and the New Third Board, vice chairman at the China Securities Regulatory Commission, Yan Qingmin, said at a public event last Friday.

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Geely Automobile Holdings has dropped a planned IPO in Shanghai’s Star market, the Hong Kong-listed company said in a Friday evening stock exchange filing. Its H-shares closed at HK$26.05 ($3.36), down 0.2% from the previous close. Trading in Hong Kong’s markets was halted on Monday morning due to a severe weather warning.

Geely filed the IPO application with the Shanghai bourse last September to raise Rmb20bn, after first disclosing its intention to list in June. The stock exchange waved through the application within one month.

The withdrawal was made “in view of the [company’s] business decisions and strategic adjustments” and comes “after careful studies and discussion with the professional parties involved”, Geely said in the Hong Kong filing. It “will not give rise to any material adverse impact on the financial position or operation” of the Geely group, and the company plans to “actively promote” an onshore listing “when the relevant conditions are met”.

The statement comes as Geely announced that its electric vehicle joint venture, Zeekr Intelligent Technology Holding, is exploring “different external financing options”, it said in a separate filing in Hong Kong.

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The China Banking and Insurance Regulatory Commission has approved for Export-Import Bank of China to issue up to Rmb60bn in perpetual capital bonds, a first for a Chinese policy bank. 

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