1.Communist China’s Imports Surged Nearly 40% in May
Based on data released by Communist China’s General Administration of Customs on June 7th, in May, exports were 1.72 trillion yuan, a year-on-year increase of 18.1%. In contrast, imports were 1.42 trillion yuan, a year-on-year increase of 39.5%. As a result, the trade surplus decreased 32.1% year-on-year and the total amount was 296 billion yuan.
Imports increased dramatically in May due to the exchange rate of yuan against the U.S. dollar and the rising international commodity prices. In the first five months, 472 million tons of iron ore, an increase of 6%, was imported with an average price of 1032.8 yuan per ton, an increase of 62.7%. The imported crude oil was 221 million tons, and the average price was 2809.2 yuan per ton, up 9.1%. In addition, 38.234 million tons of soybeans, an increase of 12.8%, were imported with the average price of 3290.7 yuan per ton, up 18.7%.
The decline in export growth is likely to be caused by the rising raw material prices, which reduces the profitability of small companies and their willingness to accept orders. Another reason may be related to the increase in international shipping cost and container shortage.
2.Huawei Unit Invests in Lithography
Hubble Technology Investments, Huawei’s wholly owned venture capital arm, recently invested 82 million yuan ($12.8 million) to become the seventh-largest stakeholder of Beijing Keyi Hongyuan Optoelectronics Technology Co., Ltd. (hereinafter referred to as “Keyi Hongyuan”), which focuses on light source systems of lithography machines. Keyi Hongyuan is controlled by the Institute of Microelectronics of the Chinese Academy of Sciences holding 26.6% of the shares. Industry analysts believe that Hubble’s investment in Keyi Hongyuan signals its preparation for the research and development activities related to lithography machines.
However, given the complex process of lithography machine manufacturing and the ecosystem it requires, the return from Huawei’s investment is questionable. Wu Hanming, an Academician of the Chinese Academy of Engineering, pointed out that an EUV lithography machine is made up of 100,000 parts from more than 5,000 global suppliers. Coordinating such a complex ecosystem is the key to lithography machine manufacturing. An anonymous industry analyst expressed a similar view to Caijing.com. In his opinion, the challenge Huawei is facing is how to achieve self-sufficiency in domestic lithography machine manufacturing while ensuring the performance and profit given the global crackdown on Huawei.
3. Communist China’s May Forex Reserves Reached $3.22 Trillion
On June 7, the latest data released by the State Administration of Foreign Exchange showed that as of the end of May, Communist China’s foreign exchange reserves were $3221.8 billion, an increase of $23.6 billion or 0.74% from a month ago. In May, the export value in US dollars increased by 27.9% year-on-year and the trade surplus was $45.54 billion. As of the end of April 2021, the amount of Communist China’s foreign exchange reserves increased 0.89% from March and reached $318.2 billion.
Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said a number of factors such as the ongoing pandemic and vaccine progress, major countries’ monetary policies and inflation expectations, and macroeconomic environment all contributed to such an increase in the foreign exchange reserves.
4.Processing of Financial Holding License Applications Began
Communist China’s central bank issued notices on June 4th that it started processing financial holding company license applications from Citic Corp Ltd., a unit of state-owned Citic Group Corp., and China Everbright Group Ltd. These two companies are among the first to apply for the license since the central bank set new rules last September to tighten the oversight of nonfinancial conglomerates. The purpose of these rules is to better regulate financial giants and reduce nonfinancial companies’ reckless offering of financial services. Together with Ping An Insurance Group Co. of China Ltd., Citic Group and Everbright were designated under a trial program in 2002 to be pilot financial holding companies.
5.Naixue’s Tea Passed Hong Kong’s Listing Hearing
Founded in 2015, Nayuki, which is also known as Naixue’s Tea in Chinese, one of the biggest bubble tea chains in Communist China, passed the listing hearing of the Hong Kong Stock Exchange on Sunday. Nayuki’s tea is expected to be listed on the Hong Kong Stock Exchange in June 2021.
In the first five months of this year, Nayuki’s tea opened 65 new stores, with a total of 556 stores. From 2018 to 2020, Nayuki’s revenue was 1.087 billion, 2.502 billion, and 3.057 billion. However, its net losses were 69.73 million, 39.68 million, and 203 million. Its losses in 2020 surged more than 4 times year-on-year due to the closure of some stores during the pandemic, according to Nayuki’s statement in the prospectus. The data shows that the net profit margins in 2018 and 2019 were -5.2% and -0.5%, respectively, and in 2020, the net profit margins are 0.5%.
6.Foreign Buying of Chinese Bonds Increased by 61 Billion Yuan in May
Based on the latest data from the Shanghai Clearing House and China Central Depository & Clearing Co (CCDC), in May the value of bonds held by foreign institutions at the Shanghai Clearing House and through CCDC increased by 20.2 billion yuan and 41.3 billion yuan respectively. In addition, foreign holdings of Chinese government bonds increased by only 25.8 billion yuan, compared to the increase of 51.7 billion yuan in April. According to Reuters, the proportion of total yuan-denominated Chinese bonds held by foreign institutions rose slightly to 3.47% in May. By the end of May, foreign institutions held about 3.677 trillion yuan in bonds on the interbank bond market.
7.Didi Chuxing Dropped HK and Heads to US for IPO
According to informed sources today, Didi Chuxing, a ride-hailing giant in Communist China, has dropped its Hong Kong initial public offering (IPO) plan and chose to go public in New York as soon as the third quarter and no later than the end of this year.
It was said that the company’s senior management had planned to go public in Hong Kong given the increasing pressure it might face in the U.S. However, the maximum of the estimated valuation in the Hong Kong market is around $80 billion, much lower than its own valuation of no less than $100 billion. Ultimately, Didi’s management decided to go public in New York instead.
8.Opportunities for Communist China’s Domestic Chip Industry?
A recent study by Goldman Sachs shows that as many as 169 industries such as automobiles, air-conditioner manufacturing, and concrete production in the world have been affected to some extent by the global chip shortage. According to a deputy general manager in Communist China, the price of a chip made in Germany was 3.5 yuan last year. It has gone up to 16.5 yuan, almost five times the price from a year ago.
Communist China’s domestic chip industry has received much attention and many people touted that “the opportunity of the domestic chip industry is here”. However, some industry experts are less optimistic. They believe that it will take time for the industry to catch up. “It relies on the joint efforts of all parties to resolve the situation.” Said Ma Yuan, director and researcher of the SME Research Office of the Enterprise Research Institute of the Development Research Center of the State Council, said. Li Ke, Deputy General Manager of CCID Consulting, said that under the rapid development of the chip industry and the international tech blockade of the Chinese chip sector, it is challenging for the domestic industry to catch up and get ahead within a short time.
By【G Translators – Financial Team】