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China’s release of GDP data on Wednesday is triggering a fresh bout of scepticism over the accuracy of Beijing’s statistics. The key question is whether the reported GDP growth rate of 7.4 per cent in the first quarter gives a misleadingly strong impression of the real state of the world’s second largest economy?

“In our view, the 7.4% YoY growth does not reflect the full scale of the economic slowdown in 1Q14, and the actual growth is closer to 7.0-7.2% YoY,” wrote Shen Jianguang, economist at Mizuho Securities in Hong Kong. Continue reading »

Lukoil has agreed to sell its stake in several oil projects in Kazakhstan to Sinopec for $1.2bn, in the latest of a string of Chinese investments in the country’s energy sector. The Russian company – the country’s largest private-sector oil producer – said the purpose of the sale was to “optimize Lukoil’s overseas hydrocarbon asset portfolio”.

But the deal is also symbolic of China’s rapid expansion in Central Asia, part of Russia’s traditional “sphere of influence”. Continue reading »

China’s weak March trade numbers today rattled markets and raised new questions about both the extent of the economy’s slowdown and just how reliable any trade data ex Beijing is in itself these days, given the huge distortions seen last year due to over-invoicing.

But then all of that is testament to the fact that China’s monthly trade data are, for good reason, the most closely watched of their kind in the world today. Why? Standard Chartered offers a good reason in a new report, also out today: China is the first “megatrader” the world has seen since the fall of the British empire. Continue reading »

There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.

The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Continue reading »

A manufacturer of construction materials has become the first Chinese company to default on a domestic junk bond, a state-owned Chinese newspaper said on Tuesday, compounding investor concerns over which mainland issuers could be next to miss debt repayment obligations.

Xuzhou Zhongsen Tonghao, based in the prosperous but highly indebted province of Jiangsu, was unable to meet interest payments on Rmb180m (US$29m) in bonds it sold to domestic investors last year, according to the 21st Century Business Herald, a state-owned newspaper. The missed interest payment was estimated at Rmb18m, given the 10 per cent coupon on the bond, and took place last Friday. Continue reading »

Peng Liyuan, wife of Chinese President Xi Jinping, has become her country’s premier fashion icon, patriotic consumer and ambassador for China’s often maligned designers and manufacturers, who need every bit of international prestige they can get.

Bloggers and analysts follow her every skirt, shoe and handbag choice with breathless enthusiasm. But her stubborn choice of an Apple iPhone over plentiful but not particularly distinguished Chinese brands had, at least until last weekend, become a sore point with the tech savvy and social media trawling public. Continue reading »

Real estate sales in China appear to have slumped during March, compounding investor concerns that more smaller, weaker property developers may be heading for debt defaults.

Data from 42 cities monitored by China Confidential, a research service at the Financial Times, showed that sales volumes during the first 23 days of March were down 34 per cent from the same period a year earlier. Continue reading »

The thick smog that blankets many Chinese cities represents a vast commercial opportunity for emerging market suppliers of gas, a clean-burning fuel.

As pollution levels approached choking point this winter, China’s imports of liquefied natural gas (LNG) surged 38 per cent – partly because of a deepening environmental consciousness and partly because temperatures plumbed 28-year lows, analysts said. Continue reading »

Chinese steel mills were suffering a medley of woes in mid-March as sales slowed, production levels slumped and profits plunged, according to an investment bank survey published on Tuesday that foreshadows the rising risk of debt defaults in the world’s largest steel producer.

Macquarie Commodities Research, quoting a proprietary survey of Chinese steel mills and traders conducted in mid-March, found that large, medium and small steel mills were all enduring a contraction in orders compared to the same period in February, and profits had declined to historic lows. Continue reading »

By Diana Choyleva, Lombard Street Research

China’s first corporate bond default in recent history is only the first step on a difficult road of reform. Much like the removal of the floor under the bank lending rate last year, allowing the default of Chaori Solar Energy Science and Technology Co. was the easy part.

It has been dubbed China’s ‘Bear Stearns moment’ by some and its ‘Lehman moment’ by others. It is likely to be neither. Continue reading »

It’s time to forget the central bank’s encouraging words for China’s burgeoning online finance industry and get ready for tough regulation.

The People’s Bank of China last week concluded consultations with big banks on a draft policy that would put a tight cap on transactions made through online third-party payment accounts, according to various Chinese media reportsContinue reading »

Alibaba’s decision to head to the US for its blockbuster IPO – perhaps the world’s largest ever – is undoubtedly a major blow to Hong Kong’s global ambitions.

But chucking out years of hard-won progress for a single pay-day – with the risk of opening the market to myriad potential problems down the road – would have been the wrong move. Continue reading »

Investment banks slashed forecasts for China’s GDP growth on Thursday after Beijing reported the biggest slowdown in investment for more than a decade and the slowest retail sales expansion for nine years. Confidence was further undermined by news that a well-known steel mill has failed to repay loans that came due last week.

Ting Lu, China economist at Bank of America Merrill Lynch, said the bank was cutting its first quarter GDP growth forecast to 7.3 per cent from 8 per cent and the full year forecast to 7.2 per cent from 7.6 per cent previously. Nomura Securities revised down its first quarter forecast to 7.3 per cent from 7.5 per cent previously but kept its full year prediction at 7.4 per cent. UBS revised down its full year forecast to 7.5 per cent from 7.8 per cent previously. Continue reading »

A gloomy outlook for key Chinese economic data to be announced on Thursday is prompting analysts to predict that Beijing may take steps to stimulate the economy to prevent GDP growth from falling too far below its target of “about 7.5 per cent” this year.

The shifting perceptions follow a downbeat forecast from the State Information Centre, a government think tank, which projected GDP growth in the first quarter of this year may come in at “nearly 7.5 per cent”, down from 7.7 per cent in the whole of 2013. It also said fixed asset investment – a key indicator of Chinese demand for metal ores, steel, cement and other inputs – would grow at 18.6 per cent in the quarter, down 2.3 per cent year on year. Continue reading »

Analysts from Bank of America Merrill Lynch think that China will experience its “Bear Stearns moment” on Friday, when the country will probably see as its first ever bond default.

That is a bold, attention-seeking call that is also patently ridiculous. Continue reading »