The day's top China business headlines
1. Chinese car sales take biggest hit in seven years
China’s auto sales contracted for the third consecutive month in September, the Wall Street Journalreports, as the world’s largest auto market skids towards its first annual decline in decades.
Year-on-year sales dropped 11.6% to 2.39 million vehicles last month, according to the state-backed China Association of Automobile Manufacturers.
Passenger cars fared particularly poorly, with sales 12% down y/y to 2.06 million, adding to a Q3 decline of 7.6%. Economic headaches such as trade tensions with the US and a gloomier macro outlook are weighing on consumers’ car-buying behaviour, say analysts.
“We underestimated the impact” of the slowdown, said the association’s assistant secretary-general Xu Haidong, who believes that previous estimates for 3% growth in 2018 are out of reach.
The drop off is considerably larger than in the past two months. Auto sales lost 3.8% in August and 4% in July, eroding gains made from a strong first half.
2. Official guidelines of London-Shanghai stock link released
China’s securities watchdog has published the first round of rules for the Shanghai-London Stock Connect, Caixinreports, as the three-year preparation enters its final stages.
The program, which hopes to be rolled out by the end of the year, will offer investors a reduced-friction gateway to securities listed in the other city, by means of trading China depositary receipts (CDRs).
The guidelines place a lower limit on the market cap of UK-firms participating in the scheme at Rmb 20 billion ($2.89 billion), based on their share’s average closing price over the last quarter. They will also be required to issue at least Rmb 500 million worth of CDRs in Shanghai.
Also stated was a $3 million minimum of equity holdings for institutional investors looking to trade on the Connect.
The project is gathering steam as China’s two mainland stock markets fight an intensifying rout. On Thursday the Shanghai Composite fell 5.2%, marking the worst single-day drop in two years. As a result, Beijing is stepping up efforts to make its markets more appealing to foreign capital.
ECONOMICS & TRADE
3. China exports resist tariff pressure but imports weaken
Demand for Chinese exports accelerated in September despite the challenge posed by Donald Trump’s tariff measures, but a weaker domestic outlook weighed on import figures.
Export growth picked up to 14.5% year-on-year last month from 9.8% in August, according to official figures. This beat the market consensus of 8.2%, which had factored in a contractionary effect of levies. Exports to the US also accelerated, albeit at a lower rate than the rest of the world.
Import growth continued to cool, however, dropping to 14.3% y/y from 19.9%, falling under an average market forecast of 15.0%. This was likely due to a combination of slowing of commodity price increases and shaky demand.
ECONOMICS & POLICY
4. Monetary flexibility still at China’s disposal during trade war, says Yi
The governor of the People’s Bank of China Yi Gang has said there remain opportunities for tweaking interest rates and the reserve requirement ratio (RRR), Reutersreports, as the country’s economic headwinds begin to swirl faster.
The bubbling trade war with Washington has presented China with “tremendous uncertainties” to which it was searching for a “constructive solution”, Yi said at the IMF and World Bank talks in Bali.
“We still have plenty of monetary policy instruments in terms of interest rate policy, in terms of RRR. We have plenty of room for adjustment, just in case we need it,” said Yi.
Yi added that China will meet and perhaps slightly exceed its annual growth target of 6.5% this year, and that inflation levels were not a cause for a concern.
LAW & REGULATION
5. New rules let Chinese firms use more funds for M&A
Chinese listed companies will have more freedom to complete mergers and acquisitions under new guidelines issued last week, reports Caixin, a move seen as a bid to rev up activity in the country’s markets.
According to the China Securities Regulatory Commission, listed companies will be able to use up to 50% of funds raised publicly for acquisition purposes, hopefully granting a boost to operating capital or facilitating loans for further spending.
No more than 25% of the acquisition’s value should come from funds raised in this way, the CSRC added.
This practice was previously restricted in order to deter firms from undertaking speculative deals. Following a ruling made in 2016, companies had to raise capital specifically for an acquisition in order for the transaction to be funded.
Earlier this month the CSRC introduced a new fast-track scheme, speeding up the approval process for small-scale M&A deals. The regulator estimates that around 90% of M&A deals no longer require regulatory approvals.
Trump returns to tariff threats against China[Bloomberg]
Speaking on the American interview program “60 minutes”, the US president gave warnings of further tariffs and punishments for China if no deal is reached regarding the country’s trade practices.
Alibaba merges its two food delivery arms [TechNode]
The tech giant has announced that Ele.me and Koubei will be fused into the Alibaba Local Services Company.
Investor recoil threatens China’s tech startups, say analysts [Nikkei]
Up and coming Chinese tech firms will find it harder to attract investment given the ongoing market rout, with even giants like Tencent caught up in the chaos.
Team China diplomats “confused” over who speaks for Trump on trade [CNBC]
Conflicting voices within the administration are creating confusion among Chinese and other international diplomats, said Beijing’s ambassador to the United States.
China has stabilised credit growth despite economic threats, says Yi [China Daily]
The central bank governor said in Bali last week that Beijing’s active deleveraging push over the past 12 months has tempered growth in the macro-leveraging level.
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