China

China’s “big four” state banks are losing share in the country’s fast-growing retail banking market as customers embrace a more sophisticated array of products and swell a burgeoning fashion for digital banking, according to a survey of savers conducted by McKinsey, the consultancy.

The main beneficiary from the slide of the “big four” – the Agricultural Bank of China, the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank – have been the joint-stock commercial banks, which include institutions such as China Merchants Bank, China Everbright Bank and CITIC Bank. Read more

By Candy Ho, HSBC

For the renminbi to go truly global it needs more than just cross-border trade flows. China needs to make giant strides in the opening of its domestic capital markets to allow renminbi to flow more freely between China and the rest of the world. This will speed up the renminbi’s emergence as an investment currency and bring the ultimate convergence of onshore and offshore markets closer.

The renminbi is already convertible under the current account and the offshore market is showing strong organic growth. At the end of November last year, offshore renminbi deposits exceeded Rmb1.85tn, up from Rmb1.35tn at the end of 2013 and Rmb315m at the end of 2011. We are optimistic that these flows will continue to accelerate as the proportion of China’s total trade settled in renminbi increases. Read more

By Li Hejun, China New Energy Chamber of Commerce and Hanergy Holding Group

Almost 200 governments met in Peru this month to hammer out a first draft of a global deal to cut emissions, ahead of a new round of climate talks next year in Paris. If the world is to arrest climate change, global economies need to embrace renewable energy. Those looking for a model of how this might be done should consider a possibly surprising source: China.

It has been little noticed by the outside world, but in China a technological revolution that will result in huge gains in efficiency and new applications for renewable energy has already begun. Read more

By Gavin Bowring and Hafiz Noor Shams

Only a few hundred meters from Singapore, the sleepy fishing villages that flank the Malaysia-Singapore Second Bridge, to the west of Johor Bahru’s famous Iskandar development, feel a world away from skyscrapers and hustle.

But this is set to change. Country Garden, one of China’s largest real estate developers, has bought a huge 1,800 hectare area of land and sea, and has made progress on developing “Forest City”, a planned mega-project almost entirely built on four separate reclaimed islands.

When completed, it would be even larger than Singapore’s Sentosa Island and have a skyline reminiscent of Dubai or Shanghai’s Pudong district (see photo). Read more

In the pale sunlight of an unseasonably warm December day, Chinese Premier Li Keqiang and Serbian Prime Minister Aleksandar Vucic on Thursday cut the ribbon to open the Mihailo Pupin Bridge, spanning the Danube in west Belgrade.

Logistically, the $170m, 1.5km bridge, built by state-owned China Road and Bridge Corporation, is intended to ease traffic in and around the Serbian capital. But Li’s visit to Belgrade has a considerably greater significance – the latest steps in China’s efforts to use the Balkans as a bridge to Europe. Read more

By Aleksandar Vucic, Prime Minister of the Republic of Serbia

Serbia recently began its accession talks with the EU and is firmly dedicated to its European path. This is a blessing to a country like Serbia, since its geographic position places us at a key strategic juncture between Europe and the Orient – and this role is becoming ever more prominent.

The first character in the Chinese words for Serbia and Serbian is pronounced sai. It translates as ‘place of strategic importance’. As Chinese characters so often do, it offers a remarkably concise and meaningful description of Serbia’s relationship with China and the world more broadly. Read more

By Jukka Pihlman of Standard Chartered Bank

The Chinese currency’s path to internationalisation has been stellar so far but something may happen next year that could propel the renminbi (RMB) into the currency stratosphere.

The IMF’s Special Drawing Rights (SDR) – the IMF’s ‘virtual currency’ based on a basket of other currencies reviewed every five years – rarely warrant much excitement. But if the RMB gets included in 2015, alongside the dollar, euro, pound and yen, it could boost the Chinese currency’s fortunes overnight. Read more

By Joseph Dobbs, European Leadership Network

Russian aggression towards Ukraine this past year has seen Vladimir Putin, the Russian president, lambasted by Western leaders. China has desisted from such criticism and instead signed two major gas deals worth hundreds of billions of dollars, co-operated in establishing a new development bank, and conducted joint military exercises. For some, Russia and China’s co-operation demonstrates their potential to challenge the global order. But in reality Russia’s pivot east faces too many hurdles to represent a viable alternative to working with the West.

Russia and China have much in common. Both states are increasingly nationalistic and share a common perceived threat of Western containment. In Russia’s case this threat comes primarily from the potential expansion of the North Atlantic Treaty Organisation (Nato). China’s perception of US containment strategies derives mainly from the American military presence in East Asia. Leaders in Moscow and Beijing have both watched with unease as the West supported the Arab Spring and the so-called “colour revolutions” that rocked the likes of Georgia, Ukraine and Kyrgyzstan. Read more

By Andy Rothman, Matthews Asia

After two decades of 10 per cent GDP growth, followed by average growth of over 8 per cent, conventional wisdom is that China is on the verge of collapse. But that wisdom is based largely on many misunderstandings.

Let’s start with the consensus that China’s residential property market is about to replicate the U.S. housing crisis. But China has avoided most of the U.S. traps. For example, homeowner leverage is far lower in China than it was in the U.S. during the run-up to the crisis. By 2006, the National Association of Realtors reported that the median cash down payment for first-time homebuyers in the U.S. was only 2 per cent of the purchase price. In China, the minimum down payment is 30 per cent. Read more

Shares on the Shanghai stock exchange have climbed 22 per cent in the past month. fastFT’s Naomi Rovnick explains to Jonathan Wheatley, deputy emerging markets editor, how this is being driven by falling property prices and lower interest rates.

When the IMF announced this year that China’s economy had overtaken the US economy at purchasing power parity, there was some skepticism about the usefulness of PPP calculations and widespread amazement about the speed at which China had made this transformation.

Both themes carry over in a note on Friday from HSBC, which examines the data more closely to conclude that, even after switching variables, the size and importance of the Chinese economy cannot be denied. Read more

By Hayden Briscoe, Shamaila Khan and Jenny Zeng, AllianceBernstein

Based on insights from our team’s recent trip to China, we noted that the country is likely headed for a long economic landing. What does that mean for its infrastructure and commodity sectors? Read more

By Hayden Briscoe, Shamaila Khan and Jenny Zeng, AllianceBernstein

China’s economy isn’t headed for a hard or soft landing — instead, it’s more likely to be a long landing. That’s our perspective, based on our team’s recent visit to China to get an up-close look at the economic landscape.

The country’s economy clearly faces another few years of uncertainty and negative headlines, but we think the risks will be contained as long as the government sticks to its reform agenda. On our China trip, we assessed conditions in important cyclical sectors such as banking, basic industries and property. Read more

By Gabriel Sterne and Alessandro Theiss, Oxford Economics

If there was a financial crisis in China, the government could take a big hit, transferring a huge chunk of bad debts onto its balance sheet. But this remedy would have a big impact on the domestic and global economy.

Overall debt (public, private and financial) has skyrocketed in recent years, rising from 176 per cent of GDP in 2007, to 258 per cent of GDP by mid-2014. The debt binge may be fuelling a time bomb in the property market. Read more

The US travel industry is rolling out the red carpet to attract a most sought-after commodity – the Chinese tourist.

Some 114m Chinese are expected to travel abroad this year, according to the China National Tourism Administration, making it by far the world’s largest source of outbound tourists and one that is expected to continue growing as the country’s middle class expands. Read more

By Jonathan Fenby, Trusted Sources

Far from fading away, the anti-corruption campaign launched two years ago by China’s leader, Xi Jinping, is widening and has all the appearance of being seen by Xi and his colleagues as a regular instrument of governance.

It has, of course, involved getting rid of high-profile politicians such as the former security chief, Zhou Yongkang, and the maverick Bo Xilai, along with their associates. But, in keeping with Xi’s declared aim of going for both “flies” and “tigers”, it is also seen by the leadership as a means of cutting lower-level bad apples out of Communist Party.

What is intriguing is the question of whether Xi and his principal enforcer, Discipline Commission chief Wang Qishan, see it as a means of making the state sector more efficient. Read more

Zhou Xiaochan, China's central bank governorClearly, China’s interest rate cut on Friday was motivated by a desire to manage a flagging growth story. But the announcement also revealed a few sub-plots, which together may say more about Beijing’s mindset than the dominant narrative.

The first point, several analysts said, is that Beijing’s monetary easing may well have further to run, following the decision by the People’s Bank of China (PBoC) to cut its benchmark lending rate by 0.4 percentage points to 5.6 per cent, while cutting its deposit rate by 0.25 per cent to 2.75 per cent. Read more

In spite of Mikhail Gorbachev’s warning this month that the world is on the brink of a new Cold War, it is Asia that we should be worrying about, says former Australian Prime Minister Kevin Rudd. The region is home to seven flashpoints which, if they erupt, could end the greatest economic growth story of the 21st century.

“We face this remarkable set of circumstances where global growth will be driven from Asia,” Rudd told beyondbrics in a recent interview in Dubai.“But Asia from a political perspective is a potentially unstable region. So the world [should have] a deep interest in not just the future growth trajectory, but also the political and security circumstances which underpin that equation.” Read more

By Xiao Qi, China Confidential

China’s shadow finance sector has become a global concern. The International Monetary Fund (IMF) and World Bank have both warned about the risks associated with the rapid build-up of assets within such an opaque sector, while central bankers now regularly reference Chinese shadow finance as a key potential risk to global economic stability.

But while concern over the lurking horrors in China’s financial shadows remains justified, regulatory actions mean that the systemic risks that they pose are finally starting to ebb. This is happening in spite of the fact that the overall scale of the shadow system is continuing to expand. Read more

By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group

“There is no difference between reform and anti-corruption: both must be implemented within the framework of law”.

So said Chinese leader Xi Jinping, and with the end of a high level Communist Party meeting last month, the significance of Xi’s “Rule of Law” campaign has become crystal clear. It is a key tool in his attempt to restructure the framework of Party political power and decision-making via the four new Party central leading groups which he chairs. Read more