The safe-haven US dollar rose on Monday following a fresh batch of disappointing data from China reinforced fears of a global recession, while the yuan fell following the People’s Bank of China surprisingly cut interest rates. China’s industrial production, retail sales and fixed asset investment missed analysts’ estimates on Monday, as the nascent recovery from harsh lockdowns to combat the COVID-19 pandemic faltered. “Of course the bad data from China affects recession fears for the rest of the world,” said Ipek Ozkardskaya, market analyst at Swissquote. He added that this pushed the euro down once morest the dollar. The dollar also received a boost from hawkish comments from Federal Reserve policy makers, in response to early indications that US inflation may have peaked. Richmond Federal Reserve Chairman Thomas Barkin told CNBC on Friday that he would like to see inflation head toward the Fed’s 2 percent target “for some time” before stopping interest rate hikes. The onshore yuan fell to a one-week low of 6.7696 per dollar, compared to the previous close of 6.7430, following the People’s Bank of China unexpectedly cut borrowing costs on medium-term loans and a short-term liquidity instrument for the second time this year. The US dollar index once morest six rival currencies rose 0.25 percent to 105.96, consolidating its position near the middle of its range this month. Analysts will look at the minutes of the Federal Reserve’s latest meeting, due on Wednesday, for more clues regarding what policy makers are thinking, while Friday’s retail sales data will give some fresh insights into the economy’s health. The euro fell 0.24 percent to $ 1.0232, affected by the troubles facing Europe due to the war in Ukraine, the search for non-Russian energy sources and the damage to the German economy from the lack of rain.
Tag:
chinese economy
China cuts a key interest rate and withdraws some liquidity from the banking system
written by Alexandra Hartman Editor-in-Chief
Shanghai / (Archyde.com)
China’s central bank unexpectedly cut a key interest rate for the second time this year and pulled some liquidity from the banking system on Monday, in a bid to revive demand for credit to support the economy hit by the coronavirus.
Economists and analysts said they believe the Chinese authorities are keen to shore up the stagnant economy by allowing political divergence to widen with other major economies that are aggressively raising interest rates.
The People’s Bank of China (the central bank) said it decided to cut the interest rate on medium-term lending facilities of 400 billion yuan ($59.33 billion) for one year to some financial institutions by 10 basis points to 2.75 percent from 2.85 percent.
New bank lending in China fell more-than-expected in July, while credit growth broadly slowed, as a new outbreak of Covid, fears regarding jobs and a deepening property crisis worried businesses and consumers might take on more debt.
The People’s Bank of China attributed its move to “reasonably maintaining sufficient liquidity in the banking system”.
With 600 billion yuan of Multilateral Fund loans maturing, the operation resulted in a net withdrawal of 200 billion yuan of funds.
The People’s Bank of China reiterated that it will strengthen the implementation of its prudent monetary policy and maintain reasonably adequate levels of liquidity, while closely monitoring changes in domestic and external inflation, the bank said in its second quarter monetary policy report.
(dollar = 6.7425 Chinese yuan)
how Yang Huiyan, the richest woman in Asia, lost half of her fortune
written by Alexandra Hartman Editor-in-Chief
Published on : 30/07/2022 – 11:04Modified : 30/07/2022 – 11:08
Yang Huiyan, majority shareholder of Country Garden, one of China’s largest real estate groups, has seen his wealth halve in just one year. A reversal of fortune which illustrates the difficulties of a Chinese market now closely watched by the Beijing authorities. Explanations.
She is still the richest woman in Asia but with a fortune cut in half. In just one year, Yang Huiyan’s wealth has grown from $23.7 billion to $11.3 billion, according to the Bloomberg ranking of billionaires published this week. A vertiginous fall which once once more illustrates the fragility of the Chinese real estate market.
A discreet heiress, Yang Huiyan is the majority shareholder of Country Garden, a company created by her father in the early 1990s, which has become one of the most important promoters in China.
The company achieved the highest turnover in the sector last year despite a real estate crisis symbolized by the group Evergrandethe former number 1, weighed down by an abyssal slate of 300 billion dollars.
Far from being so badly off, Country Garden is however very indebted, like most Chinese real estate giants. However, since 2020, Beijing has whistled the end of recess: the conditions of access to bank credit for promoters have become much more restrictive. Objective: to avoid a collapse of the sector, potentially cataclysmic for the entire Chinese economy.
Victim of market jitters
To honor its payment deadlines and launch new investments, Country Garden has therefore chosen to put on sale, Wednesday, July 27, new shares to increase its liquidity.
“However, this sale of shares was interpreted as a sign of vulnerability in a sector in great difficulty which represents a significant weight in Chinese GDP. The financial markets are therefore very nervous”, analyzes the economist Mary-Françoise Renard, author of “China in the global economy” (ed. Blaise Pascal University Press).
As a result, Country Garden shares lost 15% of their value on the Hong Kong Stock Exchange, effectively dealing a serious blow to Yang Huiyan’s portfolio.
“The tightening of credit access conditions was necessary, but in the short and medium term it increases the difficulties of these companies, which are finding it increasingly difficult to finance themselves,” explains Mary-Françoise Renard. “A few years ago, Country Garden might have borrowed from banks without any problem.”
Cascading payment defaults
If Country Garden was able to raise funds at the cost of a fall in the value of its share, other major players are far from having such solid backs and find themselves, like Evergrande, in the inability to repay a maturing loan.
At the beginning of July, the Shimao group, which recorded a 72% drop in sales over one year in the first five months of the year, had to give up repayment of a loan worth more than one billion dollars. dollars. In May, the Sunac group found itself short of cash and announced a payment default.
For two decades, the real estate sector has benefited from the continuous rise in the standard of living of the population in a country where the purchase of a property is often a prerequisite for marriage. But this bulimia of purchases ended up drying up in the 2010s.
The uncertainties linked to the Covid-19 crisis also contributed to dampening the enthusiasm of potential buyers. Beijing’s “zero Covid” strategy “weighs on household consumption. In general, it is very costly for the whole economy”, notes Mary-Françoise Renard.
Refund Strike
Added to these difficulties is the beginning of a crisis of confidence: several hundred groups of Chinese owners who have bought apartments off plan have decided not to repay their mortgages. A way to put pressure on developers when the construction of a property is interrupted.
Despite the authorities taking control of the sector, the structural problems persist and are not regarding to disappear, believes Mary-Françoise Renard, who cites “the massive indebtedness of promoters, risky investments and above all a very poor estimate of the risks from banks and local governments.
According to some analysts, the real estate sector may even be plunged into a vicious circle which might increase consumer mistrust as Chinese growth is stalling. According to official figures published in July, the gross domestic product of the world’s second largest economy grew in the second quarter by only 0.4% over one year.
China’s internet regulator has fined Didi, the local delivery giant, $1.2 billion, accusing it of breaches of customer personal data.
The China Cyberspace Authority said in a statement that it had “conclusive evidence” that Didi has repeatedly violated Chinese law, particularly with regard to Internet security and personal data protection.
The fine to be paid by the company was set at 8.03 billion yuan (regarding 1.2 billion dollars). Through a calculation conducted by Agence France-Presse, it was found that this amount represents 4.6% of the company’s annual revenue for the year 2021. (AFP)