6/16/2021 Financial News: Chinese Hog Farmers’ Crisis, First On-Chain Digital Yuan Wage Payment In Communist China

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1.Chinese Hog Farmers’ Crisis

The data from the National Bureau of Statistics released on June 15 show that, in early June, the price of live hogs has dropped to 15.8 yuan/kg, 11.2% lower than the previous month. The data from the Ministry of Agriculture and Rural Affairs indicate, in early June, the national average pork price was 24.31 yuan/kg, a drop of more than 85% from early February; the price of live hogs fell to about 16 yuan/kg, only half of that price in the same period last year. According to an industry expert, the price of live hogs will likely continue to fall, negatively affecting the profitability of hog producers. The situation is worsened by the fact that some hog producers are expanding their operations. More importantly, the cost of feed has increased. In mid-to-late May, soybean price in Communist China ranged from 4880 to 4900 yuan/ton, an increase of 620 yuan per ton.

In July 2020, the profit of live hogs was about 20 yuan per kilogram. However, a farmer from Henan Province told the China Business Daily that the hogs now are getting overweight, but the market price is so low that selling it means losing money. He would lose about 1,000 yuan when selling a hog that weighs 150 kg. A source in Muyuan Foods, a Chinese company specializing in the breeding and distribution of hogs, said that the price of live hogs is on a downward trend that may last till 2022 or 2023.

2.First On-Chain Digital Yuan Wage Payment in Communist China

On June 12, the official website of Xiong’an New District announced that it took the lead in realizing the application of “blockchain + digital yuan” by the Blockchain Fund Payment Platform in Xiong’an New Area to pay wages in the form of digital yuan to the workers of the spring afforestation project. Xion’an New District is a district about 60 miles southwest of Beijing serving as a testing ground for new economic ideas.

This move is the nation’s first “on-chain” payment for individuals’ wages. 80% of the key projects in the Xiongan New Area have been paid through the chain, and the cumulative payment amount has exceeded 10 billion yuan. 40,000 migrant workers have received their wages from more than 1,200 companies.

This is not the first time wages are paid in the form of digital yuan. In January of this year, JD.com piloted digital yuan salary payments with some employees based in Shanghai, Shenzhen, Chengdu, Changsha, and Xi’an. In addition, recently, the Hainan Branch of the Industrial and Commercial Bank of China provided its first digital yuan salary payment service for a local government agency and a logistics company.

3.Communist China’s Central Bank Issues CNY200 Billion MLF

According to the official website of Communist China’s Central Bank, on June 15, a total of 200 billion yuan (about $31.22 billion) was injected into the market via medium-term lending facility (MLF). The one-year funds have an interest volume of 2.95%. The central bank also injected another 10-billion-yuan worth of seven-day reverse repos into the banking system on the same day. According to the central bank, the purpose of these moves is to maintain a reasonable and sufficient liquidity in the banking system.

Wind data shows that a total of 50 billion yuan of reverse repurchase and 200 billion yuan of MLF are expiring this week (June 15-June 18). Among them, 20 billion yuan of reverse repurchase expires on Tuesday, and 10 billion yuan of reverse repurchase expired every day from Wednesday to Friday. On Tuesday, another 200 billion yuan of medium-term lending facility (MLF) is due. The fresh fund injection via the liquidity tool offsets the same amount of such MLF loans due on the same day.

4.Used Electronics Trading Platform AiHuiShou Aims for $243 Million IPO

On June 11, AiHuiShou International updated its prospectus showing that the company intends to raise up to $243 million from an IPO of its 16.233 million American Depositary Shares (ADSs) at a proposed price range of $13-$15 per ADS. Together with the 2.435 million over-allotted shares, it can raise up to $280 million in total. Management says it will use the net proceeds from the IPO to improve its technology capabilities, increase service offering diversification, expand the store network, and for general corporate purposes. AiHuiShou plans to be officially listed on the New York Stock Exchange on June 18.

AiHuiShou is an Internet-based platform for people and businesses to post their used electronic products for sale. Despite the company’s over 10 years of history, it has been unprofitable, and the cash flow has been tight. The company’s planned IPO may a certain extent reflects its urgent need for cash flow.

As of September 2020, AiHuiShou had gone through a total of seven rounds of financing. From 2018 to the first quarter of 2021, the company’s revenue was 3.3 billion yuan, 3.7 billion yuan, 4.2 billion yuan, and 1.3 billion yuan respectively. From 2018 to 2020, the company had a net loss of 210 million yuan, 700 million yuan, and 470 million yuan respectively. The company had a net loss of 90 million yuan in the first quarter of 2021, an improvement from the 120-million-yuan loss in the same period last year. AiHuiShou’s loss is mainly due to its high operating expenses associated with merchandise costs, fulfillment expenses, platform operation, store and warehouse operations, etc.

5.China Three Gorges Corp. to Become a Strategic Investor of Beijing Enterprises

On June 15, Beijing Enterprises Holdings Ltd. (hereinafter referred to as “Beijing Enterprises”) announced that Beijing Enterprises Group Company Ltd. (hereinafter referred to as “BEGCL”), the controlling shareholder of Beijing Enterprises, reached an initial agreement with China Three Gorges Corporation to include it as a strategic investor of BEGCL. According to the announcement, the equity cooperation between the two entities will not have a significant impact on the business operations of Beijing Enterprises. The purpose of this equity cooperation is to better implement the national development strategy of the Yangtze River economic region and the high-quality green development of the capital.

Founded in 2005, Beijing Enterprises is a wholly state-owned company in the public utility sector providing urban gas, urban water and solid waste treatment. According to the company’s press release, from April to May this year, China Three Gorges Corporation continuously increased its holdings of Beijing Enterprises Water Group, the flagship of Beijing Enterprises in the water service market, raising its stake to 15.85%.

6.Real Estate Financing Shrank More Than Expected

From January to May this year, domestic and foreign bond financing of real estate companies totaled about 462.4 billion yuan, a year-on-year decrease of 18%, reaching the lowest level in nearly three years. Institutional data indicates that the total financing these companies received in May was 133.142 billion yuan, a year-over-year decrease of 15.94% and 20.13% lower than the previous month. 52 domestic and overseas bonds were issued in May, totaling about 64.7 billion yuan, a decrease of 30.9% from the previous month and a year-on-year increase of 4.9%. In particular, the amount of domestic bonds issued by real estate companies plummeted in May, less than half of the amount in April. Since May, the financing scale of real estate companies has continued to shrink.

Some rating agencies pointed out that in the current market, real estate companies are facing risks in liquidity and refinancing. Those real estate companies without multiple financing channels may often have to face debt crisis.

7.Means of Production Prices Rise in Communist China

(Xinhua) – According to the data released by the National Bureau of Statistics on June 15, compared with late May, half of the capital goods monitored by the government had a higher price in early June. Of the 50 major goods monitored by the government, such as gasoline, coal, fertilizer, and some chemicals, 25 had a higher price, 22 saw a price drop, and 3 maintained the same price.

Hog prices continues to fall, down 11.2% in early June compared with late May. The price was 15.8 yuan/kg. The current price of rebar is 5108.1 yuan/ton, an increase of 1% from the previous period. The current price of urea (small particles) is 2674.2 yuan/ton, an increase of 219.9 yuan/ton or 9% over the previous period. The price of glyphosate is 8.8% higher than the previous period. The price readings are based on a survey of nearly 2,000 wholesalers and distributors in more than 300 markets in 31 provincial regions.

8.Alibaba Health-Backed LinkDoc Files for U.S. IPO

LinkDoc Technology, a Chinese healthcare data provider backed by Alibaba Health Information Technology Ltd., filed for an IPO with the SEC on Monday, aiming to raise about $500 million. Morgan Stanley, BofA Securities, and CICC are the joint bookrunners for the offering. The proceeds from the IPO will be used to strengthen research and development capabilities and for investment and acquisitions. LinkDoc’s other investors include China Broadband Capital and Ally Bridge Group.

In the first quarter of this year, LinkDoc’s revenue was approximately 223 million yuan, a 41% year-on-year increase. Its net loss was approximately 138 million yuan, 116% higher than a year ago. Established in 2014 and based in Beijing, LinkDoc Technology is an oncology-focused big data solution provider. It has been reported that the company has successfully developed the nation’s largest data-driven and AI-enabled healthcare technology platform, which uses cancer patient data in prevision medicine and personalized care.

By【G Translators- Financial Team】
Author: Kate

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