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Monday November 20, 2017

GERMANY’S Daimler AG plans to invest 5 billion yuan (US$755 million) in China, jointly with its Chinese joint venture partner, for capacity to produce electric cars and the batteries that power them — part of an effort to help its China operations comply with the country’s green car production and sales quotas.

Hubertus Troska, head of Daimler’s China operations, told reporters that the investment was part of Daimler’s previously announced 10-billion-euros (US$11.8 billion) global green car initiative.

Troska, speaking to reporters on the sidelines of the Guangzhou auto show, said Daimler which operates Mercedes-Benz and Smart brands in China, and its partner BAIC Motor Corp. plan to make the investment to local-ize production of electric vehicles (EV) in China.

The investment will also go toward producing EV battery packs using locally produced battery cells.

“If there’s one country in the world (that could) grow demand for electric cars, that’s China because no other coun-

tries have so many big cities,” Troska told reporters.

Though offi cial purchase incen-tives for battery electric cars are being phased out over the next few years, “there is a strong incen-tive (for Chinese consumers) to go for electrics,” Troska said.

That is in part because of the Chinese Government’s commit-ment to build suffi cient charging infrastructure, Troska said.

Daimler said Friday the com-pany and BAIC aim to produce locally in China battery-powered electric vehicles under the EQ brand by 2019. (SD-Agencies)

Daimler to invest $755m in electric car production

Govt. tightens rules on asset management sectorTHE central bank issued sweep-ing guidelines Friday to tighten rules on asset management business, the latest step by the government to fend off systemic risks in the country’s growing shadow banking sector.

The guidelines unifi ed rules covering asset management products issued by banks, trust fi rms, insurance asset manage-ment companies, securities fi rms, funds and futures com-panies, the People’s Bank of China said in a joint statement with the banking, insurance, securities and foreign exchange regulators.

At the end of 2016, the collec-tive outstanding volume of their asset management business was 102 trillion yuan (US$15.38 tril-

lion), including 29 trillion yuan of bank wealth management products and 17.5 trillion yuan in trust products, according to the central bank.

The new rules aim to close loopholes that allow regulatory arbitrage, reduce leverage levels to curb asset price bubbles and rein in shadow banking activity.

The new rules will set leverage limits for asset management prod-ucts. They will cap the total assets to net assets ratio at 140 percent for open mutual funds and 200 percent for private funds.

Investors will be prohibited from pledging their shares in asset management products as collateral to obtain fi nancing, a practice that would increase leverage.

The central bank also said fi nancial institutions must break the practice of providing inves-tors with implicit guarantees against investment losses.

Financial institutions will also be forbidden from creating a “cap-ital pool” to manage funds raised through asset management prod-ucts. The practice allows banks to roll over the products constantly. The investment losses will be implicitly covered by the new product issuance.

The draft guidelines are the latest and most comprehensive set of rules proposed by fi nancial regulators to fend off shadow banking risks that could spread across different asset classes.

“Clearly this is a critical turn-ing point of the fi nancial regula-

tions,” said Zhou Hao, an analyst at Commerzbank. “Over the past few years, while the fi nancial risks were rising, the overall regulations were actually behind the curve.”

Central bank Governor Zhou Xiaochuan has warned that China’s fi nancial system is becoming increasingly vulner-able due to high leverage and accumulating “hidden, complex, sudden, contagious and hazard-ous” latent risks.

Financial institutions will not be allowed to use asset man-agement products to invest in commercial banks’ credit assets or provide “channel service” for other institutions to bypass regulations, according to the statement.

Also, fi nancial institutions will be required to provision 10 percent of their management fee income from asset management products as risk reserves.

Non-fi nancial institutions will be prohibited from issuing or selling asset management products. And highly-indebted companies will not be allowed to invest in such products.

The transition period for the new regulations lasts until June 30, 2019, the statement said.

“The new requirements will push asset management busi-ness to go back to its essence and prevent risks to transfer cross-sector and cross-mar-kets,” said Dong Ximiao, a senior researcher at Renmin University of China. (SD-Agencies)

STATED-OWNED enterprises (SOEs) in China need to end their dependence on overseas resources and acquire a “leading role” in global markets if they are to earn the description of “world class,” the head of the country’s State asset regulator said.

Xiao Yaqing, chairman of China’s State-owned Asset Supervision and Administra-tion Commission (SASAC), said in remarks published Friday that SOEs must fi rst acquire “lead-ing positions in the allocation of global resources” in order to meet ambitions.

Xiao told the People’s Daily that a number of government-owned enterprises “remain dependent on overseas resources.”

“If this situation doesn’t change, it is hard to say that they have become world-class enterprises,” he said.

While SOEs have boosted global market share in recent years, they still lag international counterparts when it comes to “adding value,” promoting inno-vation and developing brands, he added.

“World-class enterprises are those that have a leading role and an international say in the development of their global sectors,” he added. “You cannot just say ‘world class’ yourself. The industry must recognize it. The market must recognize it.”

China launched its latest round of SOE reforms in 2015 in a bid to reduce debts, shut down “zombie” enterprises and make more effi cient use of State capital and resources.

Though the performance of China’s SOEs has improved this year, Xiao said the tough restructuring process had to continue.

“As soon as they emerge from the quagmire, even a brief pause in reform could see old problems re-emerge and new problems appear, and competitors could catch up or widen the gap fur-ther,” he said. (SD-Agencies)

SOEs urged to earn ‘world class’ tag

Customers look at a model of a new residential compound at a showroom of Longfor Properties Co. in Hangzhou, Zhejiang Prov-ince, in this fi le photo. Prices of new homes in China rose at a slightly faster pace in October. SD-Agencies

THE central bank said late Friday that it will maintain a prudent and neutral monetary policy and keep liquidity condi-tions stable, as it seeks to fend off systemic risks in the world’s second-largest economy.

The People’s Bank of China will also keep the yuan stable while increasing the currency’s two-way fl exibility, it said in its third-quarter monetary policy implementation report.

The central bank aims to maintain an appropriate monetary environment for the country’s supply-side reforms and higher-quality economic growth, it said.

The central bank will improve its “twin pillar” framework by combining its monetary policy with macro-prudential assess-ment (MPA), while using mul-tiple monetary policy tools to manage liquidity.

“We will comprehensively use price and quantitative tools to strengthen fi ne-tuning in a preemptive way to keep liquidity in the banking system basically stable,” the central bank said.

The weighted average lend-ing rate for non-fi nancial fi rms, a key indicator refl ecting corpo-rate funding costs, edged up 9 basis points in the third quarter of the year to 5.76 percent, fol-lowing a rise of 14 basis points in the second.

Borrowing costs in China have risen this year as regulators seek to squeeze out speculative lend-ing and a further rise in debt levels.

Offi cials also stressed the importance of macro-pruden-tial measures.

“A monetary policy frame-work is fl awed if the CPI is the only anchor,” the report said. “Even when the CPI is relatively stable, asset prices and fi nancial markets can fl uctuate wildly.”

The central bank will continue to use reverse repos with various maturities to maintain liquidity in the banking system “basically stable.” (SD-Agencies)

Central bank to keep prudent, neutral policy

PRICES of new homes in China rose at a slightly faster pace in October after gains had held steady the previous month, as prices remained resilient in the face of falling sales and a tighter liquidity environment.

China’s housing market has seen a near two-year boom, giving the economy a major boost but stirring worries of a property bubble.

Average new home prices rose 0.3 percent month on month in October, compared with a 0.2-percent gain in September, according to media calculations from National Bureau of Statis-tics (NBS) data out Saturday.

The number of cities sur-veyed that recorded monthly increases in prices increased in October, indicating broad-ening strength in markets nationwide.

The majority of the 70 cities surveyed by the NBS still reported a monthly price increase for new homes. Fifty reported higher prices in Octo-ber from 44 in September.

New home prices rose 5.4 percent year on year in Octo-ber, down from September’s 6.3 percent increase.

While monthly price rises peaked in September 2016 at 2.1 percent nationwide, they have

softened only slowly, regaining momentum as buyers shrugged off each new measures to curb speculation.

Prices for new private homes in top-tier cities fell 0.1 percent in October, narrowing from a 0.2-percent decline in Sep-tember, the NBS said in a note accompanying the data.

In Shenzhen, prices fell 0.1 percent after being fl at in Sep-tember. They fell 3.3 percent from a year earlier.

Property prices in tier-3 cities rose 0.3 percent from a 0.2-per-cent increase in September, the NBS said in the note.

(SD-Agencies)

Home price growth picks up in October