Expanding position in worldwide finance  

The nation's monetary markets are developing, foreign investments continue pouring in, and wealth is streaming outward. What would it take to attain an innovative part of world lender? China, as the world's biggest saver, has a unique role to play in the worldwide monetary rebalancing toward developing markets. Today, these nation expresses 38 % of overall GDP yet represent only 7 % of global foreign investments in values and just 13 % of worldwide international lending.

Their part appears to be ready to develop in the moving post-crisis budgetary scene since the propelled economies face slow development and calming demographic patterns. As the leading man in that move, China could turn into a genuine worldwide lender and, with some change, set up the renminbi as a noteworthy universal currency.
So far, a long-closed economy— one, even with even above 3 trillion dollars in foreign capital— can't swing its entryways open overnight. China's local money related markets will need to extend and grow further, and revenues earned by companies, government and family units must be ascent if the nation is to draw in and convey more capital successfully. And equally the obstructions that keep people and organizations from capitalizing freely outside the environs of China, and strangers from capitalizing on them, will need to reduce bit by bit, and the nation must create the trust of worldwide financial specialists. Proceeded with a change in China, combined with its endless household investment funds and outsized part in world exchange, could make the nation one of the world's most prominent suppliers of capital in years to come.
Development and developing agonies in China's business sectors
As opposed to most growing economies, where loaning has been stagnant in the midst of the extensive deleveraging, bank advances in China have developed by 5.8 trillion dollars since 2007, achieving 132 % of GDP—higher than the propelled economy healthy of 123 %. Around 85 % of that Chinese loaning has been to organizations; family units represent the rest. This quick development has raised the apparition of a glory bubble and a future ascent in nonperforming advances. However, controllers have endeavored to moderate the pace in overheated territories, for example, land.
China's corporate-stock business sector is likewise evolving. Securities remarkably from nonfinancial organizations have developed by 45 % every year in the course of recent years, securities from monetary establishments by 23 %. There is adequate space for further development since China's levels of security business sector obtaining are altogether beneath those of cutting edge economies. For sure, security financing could give an option origination of capital for the nation's extending corporate segment, empowering banks to expand their loaning to families and little and fair size ventures.
Dissimilar to other numerous real value markets, China's securities exchange has not bounced back after the fiscal emergency and worldwide recession. Absolute market capitalization has reduced by 50 % since 2007, diving from 7.2 trillion dollars in 2007 to 3.6 trillion dollars in the second quarter of 2012. Financial specialists sent valuations taking off at the business sector's crest. However, fears of a lull and a more reasonable perspective of organization costs hosted their eagerness, underscoring the way that China's value markets, similar to those of other rising economies, stay focus to sharp swings.
Cross-fringe venture surges
China has challenged global patterns in cross-outskirt capital streams, which caved in 2008 and remain 60 % beneath their precrisis crest. For China, by difference, remote direct venture (FDI), cross-fringe advances and deposits, and outside portfolio reserves in values and security are 44 % more than 2007 levels (Exhibition 2). Aggregate outside speculation into China came to 477 billion dollars towards the end of 2011, surpassing the 2007 top of 331 billion dollars.
Foreign organizations, anxious to build up existence in China, represent about 66% of the inflows. Resources from the external establishment and discrete financial specialists could give another leg to development as long-standing limitations on foreign portfolio venture keep on easing. The quantity of experienced foreign institutional investors affirmed by Chinese controllers has increased since 2005 with a total of 33 drivers to a total of 207 in 2012 and will certainly still improve. Controllers likewise are giving enlisted foreign subsidies and more scope to put their property of renminbi offshore in China's local capital markets. Both actions have additional opened the way to foreign investment in those business sectors.
Notably, the country's central bank, the People's Bank of China, has gained the world's biggest stock of foreign-currency investments; in 2012, it was 3.3 trillion dollars. While most of this cash is capitalized into safe sovereign liabilities —for example, US treasuries, which represent about 1.2 trillion dollars of China's saves—the development in such ventures has impeded extensively. Rather, China is both extricating confinements on different sorts of money-related surges and moving to broaden its foreign assets. That was the driving force behind the 2007 establishment of the China Venture Organization, one of the world's biggest sovereign funds stores, with resources of 482 billion dollars. The organization's possessions incorporate shares in a considerable lot of the world's blue-chip organizations; vitality, mining, and infrastructure ventures; worldwide landed property; and a stake in Heathrow Airport, London.
Chinese institutions are likewise trading up their part in the world's finance. Foreign direct ventures by both state-claimed and private division; Chinese groups developed from just 1 billion dollars in the year 2000 to 101 billion dollars in 2011. Toward the end of 2011, Chinese groups represented 364 billion dollars of world's foreign direct ventures, with the vast majority of it secured to commodities. Nearly half of these reserves went to other developing markets—an offer higher than that for organizations in cutting-edge economies.
A lot of China's quickly expanding global loaning is attached to foreign speculation transacts including Chinese establishments (for example, financing a mine in Peru, with an erection to be embarked on by a Chinese organization). Exceptional foreign credits and loans totalled 838 billion dollars toward the end of 2011. To put this entirety in context, consider the way that the aggregate level of loans outstanding from five of the world's noteworthy mutual improvement banks is about 500 billion dollars. Subsequently from 2009, Chinese lends to America (Latin) have surpassed those of both the World Bank and the Inter-American Development Bank.
As China's monetary markets have turned out to be more vigorous and more profound, the estimation of its local financial assets—including securities, equities, and advances—tallies to about 7.4 trillion dollars, trailing Japan and USA. That is a more than ten times the increment in a range of two decades, and it does exclude Hong Kong's role in directing assets to and from China.

 

China Wealth Management Dilemma  

 

Financial market regulators commented that there are loopholes in their guidelines to regulate the wealth management space and protect lay investors. CSRC and CBRC has tried making new laws. There are still gaps in the regulatory space due to rapid growth for wealth management. The combined assets managed by banks, insurance companies, trust funds and fund managers almost exceed 90trillion yuan. There are risks surfacing as the sector grows. Regulators are starting to doubt the regulations as inadequate. There are regulatory holes need to be plugged. For instance, CBRC decided on reducing risk by asking banks to split the lending and wealth management business. Regulation was in draft but never really executed due to disagreements. There were great arguments over the split.

Stock market bear downturn went against wealth manager's investing performance. Insurance companies who had vested interest in stock markets has seen their asset value fall. Banking officials pointed at the regulators for encouraging risk taking by wealth managers. There was no good coordination between different agencies. Asset management sector is getting messier due proliferation of complicated investment package. Chinese banks controlled biggest portion of funds in 2015 and are invested via wealth management space. Trusts, securities firms, insurance companies and fund corporations were handling 16trillion, 12 trillion, 11 trillion and 9 trillion yuan respectively. Smartphones and internetas well as interest rate drops all pushed retail investors and huge financial outfits to investment in these wealth management package.
Sales proceeds from these products were ploughed into the equity markets. Asset managers are risking the funds on stock markets in Shenzhen and Shanghai. Some invested in corporate bonds and private placement. A total of about 7trillion yuan is invested into stocks, bonds as well as futures securities. 1.7trillion was invested in structured products. Bank executives were warned that borrowing spiked to cover for share market investment. Despite the share market volatility, equities are not riskiest. Private placement presents the highest risk. Banks are also funding out of balance sheet mezzanine financing, which is investing in shares of private companies via loans.
About 20% of assets from wealth management are invested into these types of financing. Good companies are targeted for the financing arrangement as it increases leverage risk. Risks have increase since the stock market crash and bubble is forming. Many see this as the only way for making profits due to low interest rate environment. Asset managers are finding it tough to find great investments. There are about 200billion excess funds with nowhere to invest except considering for share market. Moody's reported that weak share market could adversely affect bank's asset quality and profits due to weak stock lending and share market related custody services. Moody's expects more defaults on company debt as borrowers struggle on repaying their leverage. Wealth management as a whole should be revamped and risks are real.
Regulators have not been interfering with the investments. They have paid close scrutiny on funds raised from short term products in wealth management. These money are invested in long term projects which presents a mismatch. Asset management executives support more disclosure in investment products. Same rule and standardization should apply to the products similar to public funds. Retail investors ought to be protected by regulators by enhancing these measures. All regulatory bodies from China have pursued different goals and agendas and neglected on coordination. Each focused on their own segments. It is not effective due to loophole with different frameworks, especially in wealth management space. There are some who praise the innovative form of segmentation. Top policymakers have the ultimate power to pass through legislations for unification of regulations. There were examples of cooperation in the past. For instance, in 2003, CBRC as well as CSRC jointly instructed banks and asset managers to be more transparent in their pool of capital. However it still lacks results as banks tried to transfer out the capital by channeling to other companies.
Capital pool enterprise is closely linked to wealth management package for stocks and corporate bonds investment. CSRC allowed fund manager and broker to push and market wealth management package. CBRC followed suit for banks and CIRC launched similar wealth management package rules for insurance enterprises. Each regulator are doing their best on its own area of expertise. However unification is still yet to be implemented to standardize regulations in wealth management space.

 

Financial Pivot  

Chinese New Year 2018, Year of the Dog, is on Friday 16th February.

The home for trading financial activities and the venues for financial service providers, to take part in their activities is a “ Financial Centre”. The participants in this financial centers are Central Banks, Stock exchange, Financial intermediaries, etc. China's economy occupies a potent position globally in financial marketing, to meet the situation, several financial centres are strengthening their growth in the economy. The Vice president and the Chief Executive for Principal International, spoke recently with CIMB, Principal and gave an analysis stating that until 2003 China is not listed in the top twenties in World's Biggest Companies record, but that scenario was changed within a short period, and in the year 2009, five companies from China were added to the list. Fortunately, among those five companies, three companies are in the top five in the World's Biggest Companies list. This shows how tremendously China's economy is growing. The chief executive also stated that China is currently in the fifth position in the world in financial market. The chief executive with his experience expressed and highlighted that, China is following some growth models, with which it can contribute some percentage of its GDP to the growth. With this the demand for household goods increases, which results in the economic growth. He confidently stated that China will be in the leading position in its financial growth in upcoming years.

Structural Changes in growth model:
To reduce the regional disparities , growth needs to be more balanced in the economic development, where the comparison of the local and global and rising income inequalities may lead a rise in inflation. During the 2009 crisis, China remained strong with GDP growth as it is less dependent on its export markets. This made the remaining global markets to look at the Chine's growth model. The China's growth model report shows that there is a rise in the share of the investment in the government policies and a decline in private consumption. The reason for the fall in the share of GDP is high investment growth and weak employment growth ultimately resulted the labor income, further falls in national income and personal income. Both extreme levels made a fall in the share of GDP. In this situation the China took an active step by increasing the domestic consumption by generating employment opportunities and enhancing welfare, growth for its citizens and sequentially maintaining social stability. The consequences still worsened the China's economy for a short period.
Balancing the Economy by depending on Exports
China's re balancing growth at one level fell over 7% and 3% in the years 2007 and 2010 respectively. To some extent export and import played a recovery role, but only for a short period. When one compares the growth level of import and exports, the investment boom is strong and more for the export but it is lower than that of the import growth, the reason behind is China is weak in advanced country markets, this made the economy to absorb large amounts of China's imports. To adjust the economic imbalances China concentrated the foreign exchange markets to counter the growth imbalances. The statistical data says that in the year 2010, China accumulated nearly $448 billion of foreign exchange reserves. This trend continued in the 2011 first few months and it accumulated another $196 billion of foreign exchange reserves. On an average nearly $200 billion reserve accumulation was made by the economy in the next three quarter's highlights the Chinese Financial Centers and continued in the foreign exchange market.
Financial Development and Reforms
China's twelfth five-year plan gave more priority for the Financial development and reforms. In this contest China's government identified most effective financial system which can play an important role by bringing some of the changes like by increasing the production to reduce the inefficiencies in the market. China's introduced a reformed banking system and lend more small and medium sectors instead of large enterprises where there is less employment opportunities. This banking system worked wonders and there appeared a good development in the nonperforming loans, this significant change increased the assets. Secondly, China liberalized the interest rates as part in banking reforms. Currently the government imposed a ceiling on deposit rates. By analyzing all the areas if all the financial centers are regulatory and supervisory then China can lead a new global financial hub with Chinese characteristics.

 

China entrance as a global financial powerhouse  

The World Bank kept its forecast in Dec 2017 for China's 2018 and 2019 GDP growth unchanged at 6.4 per cent and 6.3 per cent.

China's membership status for European Bank for Development (EBRD) has been approved on 14 of December back in 2015. China has been a longtime stakeholder in many global development financial institutions. The EBRD has a different focus which is to spur development in private sector and promoting market economy democracy. China is stamping its mark on world finance by gaining membership status in differing global institutions. The rise of China is happening which mirrors the higher responsibility undertaken by China in global economic policy drafting especially in Eastern Europe as well as North Africa as part of EBRD operational region. G-20 and China's role to tackle the world financial crisis has helped fortify the basis for approaching China. Asian Infrastructure Bank (AIIB) and New Bank of Development (NDB) is a shining example of new outward strategy taken by China. The Silk Road Funds is also set up for the same purpose for China's ambitious plans to utilize the immense space between Europe.

The combined capital of US$150 billion from both AIIB and NDB will not have far reaching impact in terms of funding for infrastructure for emerging economies and countries. A conservative estimate puts the figure between US$ 1 to 1.5 trillion every year. Silk Road Funds, China Development Institution and CITIC will need to pump more funds, but there will be unmet needs and there are plenty of space for more initiatives. The new strategy undertaken by China will influence its behavior in other existing institutions, especially regional institutions. China is becoming frustrated for not having achieved its objectives for increasing role in global world finance and institutions, such as World Bank and IMF. ADB fell short of China's expectations. AIIB is a major roadblock and challenge to ADB.
China's engagement in these institutions is not just restricted to Asian region. For many decades China has played larger roles in Africa. Many Chinese development banks are all signing up for programs launched by Africa Development Bank. PBOC and Africa Development Bank announced a US2 billion Africa Growing Fund Together, with disbursement tenure over 10 years jointly financed by the two regions. China signed up as a member for Inter-American Bank for Development in 2008. It marks the increasing influence of Chinese ties with Caribbean and Latin America region. It has made co-investment contribution to the development bank. China started as a small insignificant shareholder, similar to EBRD, where it holds a 0.004% stake. Since 1985 from its first year of membership, China took part in eight new rounds of funding for the Africa Development Fund. China now has a 2.052% stake in the latest fund.
China semi government linked institutions and corporations are stepping a gear to engage with global financial establishment. China national wealth fund called State Administration for Foreign Exchange pumped funds into a IFC's Asset Management Company. The objective is to attract long term equity from institutions. It is the major investor in EBRD's similar instrument. Debt capital arrangement for funding is being considered.
Many things are yet to be learned as mentioned by Governor for PBOC. China has many to learn from general development to investment experience. Public and private partnerships formed rapidly around the country have been an easy method to avoid borrowing limits for local government. EBRD can offer much experience for PPP and it is a leaning ground for China. While China is still observing from the start and learning all it could, it will someday have to face the harsh truth around global financial establishment. They are heavily scrutinized by public and political pressure, and China has to navigate cautiously due to many sensitive political issues surrounding the institutions.
Some fear the uprising of Chinese financial maneuvers in the world. Despite heavy engagement and higher voting power, China will not change radically its operations for existing institutions. China can actually learn more by co-operating with global financial establishment and strive to invest better internationally and be more efficient in its capital usage locally.

 

China Economic Growth   

China's Prime Minister, Li Keqiang has been so sure about the growth of Economic of China this year will reach their target. He admitted there might be a little obstacle which will prevent their improvement. But he does believe that it is impossible with a projection that said China Economy will fail their target this year. He and his administration staff pretty confident that they will achieve 6,5 until 7 percent raise as their target. This is contrary to the fact that these years the economy of China has been weakening very fast than the expected, didn't like many years in the past, which make China easily reaching the target of Economic Growth. The numbers of 6,5 percent to 7 percent actually lower than their usual target as the second biggest economic growth rate. Usually, they reach for 10 percent growth. Mr. Li also consider the economic growth for the next five years for within the average of 6,5 percent.

This projection has made the policy maker to wiggle a little. This percentage has some little higher expectations than the experts has predicted. The Chief of Economist of China at UBS AG, which is a financial services company from Swiss, Wang Tao, has said in a Beijing seminar that this year China Economic will growth about 6,2 percent. The prime minister is pretty confident, though there's a fact that the largest economic growth for China in second place last year just reach 6,9 percent, which is the lowest rate for this 25 years.
Prime Minister Li Keqiang, on the annual legislative this year has said that it was the crucial period for China to find itself. And they have to build their powerful drivers to accelerate the development of this new economy.
According to the sources, China has increased a growth on its debt. And this is having been clarified by Prime Minister Li Keqiang. He said that the factor of which cause this to happen is the global economy and overcapacity, also a low on demand at the market, especially for steel and coal industry. They have recover slower than he expected from the global economy problem. But he said again that they already find a method to handle this situation. He proposed the best way to handle this situation is to nurture a supply side economy. This concept will let the manufacture and the services provider be more competitive, but also give its good quality.
As for the steel and coal industry problem, they made a policy to trim the factory overcapacity and cut the employee. Though so, they would not be neglected by the government. He said that they have to provide 100 billion yuan to help the employee who has been layoffs because of this policy until next two years. These funds are intended to pay their severance and to funds the retraining program. It is noted that this year will be 1,8 million employees to be layoffs around steel and coal company.
On his speech on the annual legislative also criticize about zombie enterprise, which is the unproductive industry which is kept alive by the subsidies and the loan. He said that government will handle it in an active method, but also wiser with the use of merger, debt restructure, reorganizations, and also bankruptcy liquidations. He has set 10 million jobs to be generated in urban areas, and he will hold the unemployment until below than 4,5 percent in city areas. He also places an 800 billion yuan to invest in a railway construction and 1,65 trillion yuan to build the roads. He has targeted the deficit of the budget as much as 3 percent of gross domestic product for this year, which is higher than last year for only 2,3 percent.
Changing of Economic Strategy and Timeline  

China is the worlds more populous nation, with it's capital in Beijing and population: 1.4 billion, currency: Renminbi, President: Xi Jinping. Chinese shoppers recently spent a record $25bn in Singles Day, the annual event for single people in China.
E-commerce giant Alibaba promoted the event held on 11 November and many companies offered big discounts for the 24 hour period. Singles Day is four times bigger than Cyber Monday and Black Friday, the US calendar shopping days.

Looking back on how we got here, previous China ambassador from Mexico, made a few comments and insights on the economic and political challenges facing China, drawing his expertise from Mexican history. Mexico and China have distinct differences but Mexican past economic history may give some useful template to gain a deeper understanding of China. Many analysts do not give enough coverage to Mexican history or other emerging nations' economic history.

Many people often take Japan and US as references to compare against China even as the countries have different political institutions. There are also vast different in the nations' wealth, both quantitatively and qualitatively. In accordance to IMF, US GDP per capita is 7.2 times more compared to China GDP per capita and US households income per capita is 11 times more compared to China household income per capita. Japan GDP per capita is 4.8 times more and household income per capita is 6 times more than China. Mexico GDP per capita is 1.4 times more and household income per capita is 2 times more than China.
China's strategy of rebalancing its economy is to close the differences between GDP per capita and household income per capita. There are some advancement in China's rebalancing strategy from the China consumption level. For the 1st three quarters in 2015, national income per capita for whole of China experienced a 7.7% growth. It was 0.1% higher compared to 1st half of 2015. Real GDP seems to be growing at 6.9% per year. Nominal GDP seems to be growing at 6.2%. This seems that household income per capita is growing faster than GDP, about 0.8% more. This is assuming growth in population is stagnant.
The rebalancing outcome is showing up the in the reversal of gap between household income growth and GDP growth. After many years where GDP growth far exceeds household income growth or consumption growth, reversal is important to enable consumption proportion of GDP to return to safe and healthy levels. However, the narrowing of gap is not fast enough to provide a meaningful balance when President Xi steps down at the end of his term in 2023. There are many ways to calculate household income proportion for GDP. There is no one best method. In accordance to established sources, household income as a % of GDP has hit bottom in 2011 at 41%.It is currently on the rise, which will reach 44% in 2014. Another estimate puts the share at 60% in 2011. There is definitely some discrepancy in the data.
If the household income is about 50% of GDP, the % will increase to 53% in 2023 with 8 years of GDP growth at 6.9% and household income growing at 7.7%. The level is only 3% higher and way below the modern day average. China will still be heavily reliant on foreign investment and surplus in its current account. It will take at least 25 years for household income to rise by 10% of GDP, which is the bare minimum for real rebalancing target.
It will take at least 10 to 15 years for sufficient adjustment to China's economy even the gap is closing at two times the speed. Its economy will only return to more sustainable growth with the scenario happening. Unless more radical economic policies are executed to fasten the household income growth and it consumption proportion of GDP, and unless more are being done to step up wealth transfer from state to household sector, we will not be able to see enough rebalancing for another 10 to 15 years.

 

Bohai Steel in China is at Stake  

Bohai Steel is one of the biggest steel factories in Tianjin, China. It has produced 22 million tons of steel every year, including bars and plates. This capacity let the deficit amount of the steel of the nationwide be reduced. The matter of fact, this factory was backed up by the government of Tianjin. BHS is a state-owned business group combined by four state-owned steel manufacturers. The four manufacturers are Tianjin Pipe Group corporation, Tianjin Iron & Steel Group Co., Ltd., Tianjin Tiantie Metallurgy Group Co., Ltd. And Tianjin Metallurgy Group Co., Ltd. The group is a massive production business group which specialized in sintering, iron making, steelmaking, continuous casting, steel rolling and metal productions.

Unfortunately, this factory is rumored to have serious debt problems with hundreds, and even more, of creditors, which cost as much as 192 billion yuan (equals to $28.8 billion US Dollars). The steel executives, the government, the bankers, and others related to the existence of Bohai Steel has been argued about its future. The committee has been formed by the Tianjin government to restructure Bohai Steel, but the bankers seem to have a disagreement with the plan. The bankers become very careful with the committee proposal to extend Bohai Steel loans and cut their debt interest for about 10%. Some of them are claiming to get Bohai Steel's land to be sold due to pay its debts.
The argue keep overwhelmed between the instruments. The government has been persistent to give Bohai Steel an extra chance to get up from its bankruptcy process, which make the governments considering two things; The government asks the bankers to continue to lend their money to Bohai Steel, but the interest is being paid by the government. Or, a debt for equity swap program. This last consideration is given due to the assets of Bohai Steel Factory, which has reached fabulous number (290 billion yuan, which equal to $43.5 billion US Dollar). When a global financial crisis occurred on 2008, Bohai Steel expanding their assets, following government program. The results are, this company has grown this big nowadays.
In the past years, the bankers willing to lend the money to Bohai Steel due to its wealth, rich company. They said that they thought it's going to be safe to lend them some several billion yuan. This conclusion doesn't make the creditor feel safe at all. They thought skeptically that it would be useless to restructure Bohai Steel if the government didn't make a very good management on the overall process and eliciting the transparency of the company. Bohai Steel will be ended like it was, buried in debt, said one of the executives. It has to be effective, otherwise, it's will have a problem with the implementation, said another executive. The government had this almost bankrupt Bohai Steel to cut their production by two third or, equal to 15 million tons in 2016. There is no new group news on Bohai Steel website since 2016.
A hundred bankers or the creditors included Bank of Tianjin, Bank of Beijing, Tianjin Binhai Rural Commercial Bank (Each of them has lent about 10 billion yuan to Bohai Steel), China Construction Bank, Bank of China, and Industrial Bank.
Bohai Steel isn't alone to face their debt. The several other steel company has faced the same problem, and also the coal company. The government has determined their policy for this almost collapsed company, which is to cut their employee and production until below of the market demand. They also ask the financial institution to support these local steel companies.
Bohai Steel not just buried itself in debt, but also the subsidiary company of it. One of the worst is Tianjin Iron and Steel Group Co. At first, Bohai Steel has promised 9 percent yields to their affiliates, which cost 350 million yuan, but then disappointing them and missed the payment. This investment released by Tianjin Iron and Steel. Later known that Tianjin Iron and Steel also cannot repay their debt to the bank since 2011. Tianjin Iron and Steel also operate several companies like Tianjin Tiantie Metallurgy Group Co., Tianjin Pipe Corp., and Tianjin Metallurgy Group Co. Tianjin Iron and Steel has risen its debt from 32,8 billion yuan to 60 billion yuan. They raised 3-billion-yuan loan after sold their high yielding trust to their employee, but also cannot repay them. This makes the corporation in need of help from the bankers.
Tianjin Pipe Corp., a subsidiary of Bohai Steel, which is the only one who didn't cut their production, also in a big debt problem it reached 46 billion yuan. Bohai Steel also has a loan to its trading partners, Tewoo Group. It seems not just like the steel company problem like everybody see from the outside, but also the system problem inside the corporation and their subsidiary which make it decay.
Banks Bracing for Debt-Equity Swaps Revival  

Chinese debt-for-equity swap (DES) agreements remain a focus in 2017, following kick-off last year. It will take time before DES schemes really convert bad debt into equity.

Looking back the goal of the government of China is to recover the liability for equity switches and dispersal of Yuan's trillions of money that has been in a toxic loan even before it made the banks of the country choke. There were programs that were outlined in March 25, which is called the swap program by some of the administrators in Beijing and that may reflect the success of the project between 1999-2004. It is by which the bank took the stakes in more than 580 firms in altercation for the cancelation of the four hundred five Billion Yuan comprising of the loans that has been overdue.

Premier Li Keqiang has told the National People's Congress that a new kind of swaps may restrict the leverage ratio as well as the mitigate financial system risks of the company. He even elaborated that the debt interest in government for equity swaps occurred in the 24th of March during the Boao Forum for the Asian conference of the government and business leaders in Hainan. However, there are lots of alterations that occurred in 2004. The banks of the country for instance are altering far more with bad debts than they used to. The banks had estimated roughly 2 Trillion Yuan worth of non-performing loans on the books by the end of February, that rose in around 35% worth of value from the same time in 2015.
Starting in 2004, the banks without any other choices have been dealing with bad loans thus they sell them at a lower rate to the 4 asset management firms or AMCs of the government. That made them look for investors who will be very much willing to carry all the debts and burdens that they have. However, with bad loans up surging in the current years, the AMCs have become unwilling in accepting bad debts. As Li and some other officials of the government have laid their plans and their willingness to support, there was a bank executive that relays to Caixin that he thinks that the debt equity swaps can actually help the banks. Some other bankers as well as economists say that they are reaching the plan with carefulness.
The sources have told Caixin that the March 25 meeting of the government has relayed fundamentals for the fresh programs, even as of the early part of April, a lot of details hasn't been finalized. Some of the officials that were there came from the State Council, People's Bank of China, China Banking Commission, Ministry of Finance to name some. In the middle part of March, the Chairman said that the technical information must be polished even before the new swap programs may be finalized. There is just one probable obstacle involved and that is the rule that bars the banks from holding the stakes in non-financial firms. However, this issue may also be solved through a special arrangement. The ban might also be waived.
In the debt equity swaps project, there has always been an objection and that is while it is bringing ease and comfort to some banks and firms, it brings the state an added payable. This is according to the statement of Wang Xuedong, he is the chairman of the financial company CDB, it is situated in Beijing. The money came from the taxpayers and that made the program work, he insisted. Tis brought arguments to some of the experts over the new swaps program on ideas that it may just shift accordingly in handling the non-performing loans to the banks from the firms. They are also scared of being overseen and that the rules may bring the country its weakest state. The banks must not be used to handling and dealing with the economic downturn, because they will lose if a company will fail. There must be a balance to withstand the crisis and to surpass it. however, the government can also help by imposing the rules to aid the banks in managing their debts.
Videos of Stock Analysts under Fire   

(Beijing) – Financial and investment circles in China are buzzing over the amateur videos being made by some analysts in the market in order to get the attention of investors. Lately some videos have amateur videos have surfaced on some websites and mobile apps which depict some analysts presenting their views and recommending the investors to buy some certain stocks on in the light of the strong research of their firm.

On April 7, a clip appeared online, showing a young women, who was dressed in traditional Chinese attire, talking about why the investors should buy the stocks of Shenzen-listed ZTE Corp., a company providing telecommunication equipment and services. A stock analyst from Founder Securities, Liao Lei, suggests in a two-minute video that it was worth investing in ZTE because research has shown that its income has been stronger than ever, it is also being managed by a team which is young, capable and ambitious. It also seemed from the video that it was filmed in a living room or a kitchen.
Financial workers widely shared this video on social media. It became popular because of the information being presented by the analyst which impressed the viewers. It should be kept in mind that the industry in which analysts work is marked by professionals who have shun to spotlight and most of them imitate the tone of news commentators.
Several other similar clips have also been uploaded to streaming sites, with analysts representing various brokerages firms including Haitong Securities and Essences Securities recommending stocks to the investors.
Some critics are of the view that the clips are a publicity stunt. According to a public fund manager, he did not even pay attention to what was being said by them in the videos. Moreover, he also added that everybody was doing it as it has started to become a trend and some have been doing it for fun and for them the analysis's quality does not matter.
A researcher form a securities firm said that there has been a fierce competition in some recent years and it was necessary for analysts to somehow catch the attention of investors. Some critics have also cited the article written by chief economist of Essence Securities, Gao Shanwen, which was published a few years back in which he argued that due to a surge in the marketing tricks the quality of the research of the securities' firms has been declining.
One macroeconomic analyst working for a brokerage firm, on conditions of anonymity told that some of his coworkers have turned to social media and streaming websites in order to promote their analyses. He also added that women featured in the most videos that have been quite popular.
These discussions have surfaced when the securities regulator has asked the brokerage firm to properly supervise and manage how their employees advertise their corporate research reports being published, especially on social media.
The notice which was issued by Shanghai branch of the China Securities Regulayory Commisison (CSRC) addressed the brokerages and conveyed that CSRC is concerned because research reports of some securities firm have drawn attention of the investors and made the media as well as the public to question the ethics and professionalism of the analysts and researchers of securities firms.
The regulator's note, which was also viewed by Cixin, did not indicate the reports or firms which published the. A similar notice was also issued by the Beijing office of CSRC, the employee of a security firm said.
The branch of CSRC which is Hubei, in January also criticized the securities firm Changjiang Securities over a report which according to them had a poor title, but it was not elaborated by them.
Minsheng Securities, in December bowed to the pressure being put by the regulators and reprimanded the authors who used slangs in two research reports which were widely circulated. IT said that the researchers made use of quite an inappropriate writing style and eventually caused bad social influence.
Ben Bernanke on China Policy  

Ben Bernanke was the name behind the economic decisions of George W. Bush. He was an economic adviser of the former US president in 2005. After the reign of the former president, he joined the Brookings Institute. His role is prominent, since he became the famous Fellow in Residence while playing the role of the senior adviser to the Citadel in Chicago. During the global financial crisis in 2004, he took the spotlight and drew the attention of the public. That went on until he resigned as the chairman of the US Federal Reserve in 2014. He has been managing the central bank as a government and that brought him to the hardest options. He was the one who acted on the bail out American Insurance Group, yet nobody acknowledged his efforts. He added, if they will not act, then, who will dare to do that? At age 62, he still has some ideas in mind about the monetary as well as the fiscal policies that must be polished.

He was also the man behind the Target Fiscal Policy that has been suggested to China. He implies that it can help in reducing the pressure on the monetary policy and through the years, it will be of help to the entire nation in terms of their developing consumption driven economy. In an interview headed by Caixin, he elaborated the thought and he said that a well conceptualized fiscal investment may boost the productivity in the long run while giving added demand for a short period of time. Compared to some nations, he added, china has the fiscal capability to add more investments. During the interview, there were some questions thrown to him that he answered accordingly. Some of the questions Caixin threw at him are as follows.
Caixin asked, it has been deliberated upon that the Yuan must be criticized a little bit. What can Ben say about it? He answered confidently that he doesn't believe that a big depreciation will do good for the country, it is due to the fact that it will export the deflation to the other parts of the globe and that may mean a rebound on China in a bad manner. If it is not good to anyone, why, if the depreciation is not massive? What if it is just light, is that probable? Are there still any bad effects? The hardship in managing the depreciation problem is still there. If there is a definite, continuous depreciation, then it will just boost more capital outflows, since the citizens will be making an effort to get out of the Yuan as the depreciation went on. It will be best to just have a less foreseeable trail.
What was the idea of Mr. Ben Bernanke about the Yuan internationalization in the past years, has it gained a new pace? What can he say about it? It is by far good enough. That is because it shows the truth that China is really making an effort to come up with a good financial markets with more openness, more rules and more liquid as well. In that sense, Yuan is not yet used in an international manner just the same as the dollars as well as the other monetary are, however, that is not essential at all. But in time, it will be important.
How about Mr. Ben Bernanke's point of view about the China's pushing to enhance the standing of the SDR in an international monetary system? From his perspective, he doesn't think that it is realistic at all, since the SDR will just use a primary international currency. It is not about how much for now, since it does not have any fundamental infrastructure and there are no liquid markets for the SDR assets, since there are for the assets dominating the dollars as well as the euros. He recently said it's probably fair to say that looking at the markets and the economy globally, there are some positive trends. We're seeing, for example, pretty good performance in China, we're seeing some pickup in Europe, even Japan is doing better. So the increased optimism, including the optimism in markets, is not solely due to the expectations of the new administration's policies. It's due in part to a somewhat broad-based improvement in the global economy.
Lastly, what Mr. Ben Bernanke thinks about digital virtual currencies in the next years to come? From his viewpoint, technology wise, he thinks that the technologies do offer a lot of possibilities in terms of improving the payment systems and how people will go through their daily lives with the transactions. Also he thinks that the non-government sponsored currencies such as bitcoin will have a place in the international financial system. But people will still go on in using dollars, Yuan and even euros and the technological advancement will play a vital role in making the payment system more effective and organized.
  
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