9/20/21-9/26/21 Weekly Reports: The Truth Of Economy In China

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1.HNA’s Chen Feng and Tan Xiangdong Suspected of Criminal Offenses, Taken Compulsory Measures

HNA Group announced on September 24 that the public security authorities of Hainan Province notified Chen Feng, chairman of the group, and Tan Xiangdong, chief executive officer, that they “have been taken into compulsory measures by the law due to suspected criminal offenses.” Gu Gang, head of the joint working group of HNA Group of Hainan Province and secretary of the party committee, met in the evening of the 24th to emphasize that the bankruptcy restructuring work has entered the final stage of the sprint, “all units should reflect deeply on the painful lessons of HNA’s 28 years of development, to deeply understand that the rebirth of HNA is the opportunity given by the party and the state, to feel the party’s grace, listen to the party’s words, follow the party. “

Due to the inability to pay off its debts, HNA Group declared bankruptcy in January this year. On March 13, the Hainan Provincial High Court ruled to substantially merge and reorganize 321 companies, including HNA, after registering claims exposed the insolvency of nearly four hundred billion yuan. On September 18, Gu Gang announced that after the reorganization, HNA would be split into aviation, airport, finance, commercial and other segments, led by a new shareholder of the beneficial owner and that the old shareholder team and the CNA Foundation’s interests in HNA Group and its member companies would all be zeroed out. In addition, founder Chen Feng’s equity is also being zeroed out.

2.The SFC Will Work with Public Security to Police the Market, Claiming to Have Seized Several Market Manipulation Cases

In a regular press conference held on Thursday, SFC spokesperson Gao Li introduced the recent investigation of several significant market manipulation cases by the SFC in conjunction with the public security authorities. The people involved are suspected of manipulating the stock prices of listed companies such as Nanling Minbao, Jinchuang Group, and Haozhi Electromechanical. As a result, significant progress has been made in the case. According to reports, in manipulating “Nanling Minbang” stock price, “Ye” in the knowledge of Liu Mouye and others to manage the situation, actively provide relevant help and advice, and create favorable conditions for using the market, and to make illegal profits. Shanghai Securities News reporter learned from appropriate channels, the case involved in “Ye Mou” is the same Ye Fei who broke the news that “a listed company and the plate side conspired to carry out market value management, sitting on the bankruptcy” and other situations.

Recently, the SFC and the public security organs rely on the joint investigation mechanism of clues, combined with the exchange monitoring found that the joint investigation of several cases of vicious market manipulation was launched by the law and will be the focus of the SFC’s particular enforcement action in 2021 cases, concentrated deployment of forces to strengthen law enforcement collaboration and speed up the case breakthrough. Significant progress has been made in the cases of suspected manipulation of stock prices of Nanling Minbao, Jinchuang Group, and Haozhi Electromechanical by relevant persons. As identified by the SFC, from August to December 2020, Liu Mou Ye’s group controlled dozens of securities accounts by way of stock allocation and entrusted finance and allegedly manipulated Nanling Minbang stocks using concentrated capital advantage, the shareholding advantage of continuous trading, etc., and made illegal profits of tens of millions of yuan. Furthermore, ye, knowing that Liu Mouye and others manipulated the stock price of Nanling Minbang, actively provided relevant assistance and advice to create favorable conditions for market manipulation and make illegal profits.

Since 2019, Liu Moulong’s group and Yan Mou’s group are suspected of manipulating the stock prices of Imchuang Group and Haozhi Electromechanical through continuous trading and pairwise reversal, respectively, involving vast amounts of money. The investigation also found that individual institutional practitioners suspected of using their positions to transfer benefits with manipulation gangs.

Comment: If the reform is not practical, the business will be plundered, and the CCP is familiar with this.

3.The Chinese Communist Party Further Regulates Virtual Coins, Qualifying Them as Illegal Financial Activities and the “Mining” Elimination Industry

On September 24, the People’s Bank of China and the other ten departments issued a notice on further prevention and disposal of the risk of speculation in virtual currency trading. The statement said that virtual currency trading speculation activities have recently risen, disrupting the economic and financial order, breeding gambling, illegal fund-raising, fraud, pyramid schemes, money laundering, and other illegal criminal activities, seriously endangering people’s property security. The person in charge of the People’s Bank said that to establish a normalized working mechanism, always maintain a high pressure on virtual currency trading speculation activities to combat the situation, the People’s Bank and other departments combined with the new risk situation, based on the summary of the previous work experience, the drafting of the notice.

“China’s regulatory policy on virtual currencies is clear and consistent.” The notice re-emphasizes that virtual currencies with characteristics such as being issued by non-monetary authorities, using cryptography, distributed accounts, or similar technology, and existing in digital forms, such as bitcoin, ethereum, and other so-called stable coins, do not have the same legal status as legal tender and cannot be circulated in the market as currency, said the person above in charge. The notice proposes that financial institutions and non-bank payment institutions shall not provide services such as account opening, fund transfer and clearing and settlement for virtual currency-related business activities; Internet enterprises shall not provide network business premises, commercial display, marketing and publicity, paid diversion, and other services for virtual currency-related business activities.

At the same time, to effectively prevent and dispose of the risks and hidden dangers caused by the blind and disorderly development of virtual currency “mining” activities, promote energy conservation and emission reduction, and help achieve the carbon peak and carbon-neutral goals as scheduled, the National Development and Reform Commission and other departments issued the “Notice on Regulating Virtual Currency “Mining” Activities. The notice on the regulation of virtual currency “mining” activities. The notice shows that according to the general idea of “strict monitoring, strict risk prevention, strict prohibition of incremental volume, proper handling of the stock,” strengthen the supervision of the entire industry chain of virtual currency “mining” activities upstream and downstream, strictly prohibit new virtual currency “mining. The company has also been working on several projects, such as the “Stable Coin” project, the “Stable Coin” project, and the “Stable Coin” project.

4.CSRC Regulates the Integrity of Intermediaries Shall Not “Round Up” Regulatory Auditors

The CSRC has drafted “Opinions on Strengthening the Integrity of Intermediaries’ Investment Banking Supervision under the Registration System (Draft for Comments)” and sent it to the public for comments on September 24 to protect the registration reform. The deadline for feedback is October 24, 2021. There are 17 articles in the Opinions, which put forward comprehensive requirements on organizational leadership, internal control, financial management, and incentive system to prevent the risk of integrity and practice. The “Opinions” stressed that intermediaries and their practitioners in the process of investment banking should not abet, instruct, assist others in interfering improperly to influence the review, shall not be in the project declaration, inspection, registration process through the transfer of benefits, bribery and other ways to “round up” supervision and review personnel, shall not use the CSRC system In or out of service personnel and their close relatives and other relations or identity to obtain improper benefits.

For improper shareholding, “Opinions” requires relevant intermediaries in the investment banking project shareholder penetration and other matters verification, focusing on the CSRC system staff offensive shareholding behavior for strict review, strictly prohibit surprise shareholding, “shadow shareholders,” illegal holding, and other illegal and irregular “wealth creation “behavior. At the same time, the Opinions require intermediaries to strengthen the management of insider information and undisclosed information, establish and improve the management system for the registration of information lovers, improve the information isolation wall mechanism, and effectively prevent the use of insider information and undisclosed information to engage in all kinds of illegal and unlawful behavior.

5.The First Half of September, the Shanghai Pig Grain Ratio Again into the First Warning Area

In the first half of September, the city’s “vegetable basket” price index was 134.9 points, up 0.2% from the previous year. In early September, the city’s meat, poultry, eggs, and fish and shrimp price index 130.7 points and 144.9 points, up 0.1% and down 0.1%, respectively, compared with the same period last year, down 25.1% and up 13.4%. Pork: this decade, the wholesale price of live pigs, pork price of 7.47 yuan and 8.63 yuan, down 4.8% and 3.1%, down 60.7% and 60.3%, a year-on-year decline to a new high. At the end of the month, the city’s hog to grain ratio fell to 4.9:1, again entering the first level warning area (which it had run in for a short time in late June this year). Since June this year, pig farming has continued to lose money, with the average head loss always between 200-500 yuan. The retail price of pork was relatively stable, at RMB20.76 this decade, flat YoY and down 40.1% YoY, continuing to remain at a low level for two years. At present, despite the general loss of pig breeding enterprises, the national stockpile has exceeded the relatively high level in 2017, pig slaughter always maintains a high level, the market oversupply situation is difficult to change in the short term, pork prices will continue to shock down.

6.More than a Dozen Provinces Are Forced to Limit Power as Coal Prices Soar

The Communist Party’s Development and Reform Commission (NDRC) said Friday (September 24) that it would address the power shortage that has been intensifying since June and has hit many industries in many places. Still, with coal prices soaring, power plants losing money as they generate more electricity, and annual emissions reduction targets hard to reach, it is interesting to see how the NDRC will tackle the power shortage problem. In particular, the NDRC mentioned that China’s fertilizer industry, which is a significant user of gas, has been hit very hard by the power restrictions and ordered China’s primary energy companies to honor the power supply contracts signed with fertilizer manufacturers fully.

But the fertilizer industry is not the only one that the restrictions have hit. At least 15 listed companies that produce aluminum products, chemicals, and raw materials such as furniture or household goods have issued notices saying the restrictions have hit their production. In addition, several A-share listed companies have made intensive announcements about power restrictions and production suspensions since recently. Sources from the 21st Century Business Herald said that the power cuts are sweeping through at least ten provinces, including Jiangsu, Zhejiang, Shandong, Guangdong, Guangxi, and Yunnan.

The announcement issued by Xidan, which produces functional shading materials, said that due to the tight power supply, Zhejiang Province has recently implemented power load reduction for key energy-using enterprises under its jurisdiction, so the company was also forced to suspend production temporarily. Nanjing Chemical Fiber said in its announcement that its wholly-owned subsidiary, Jiangsu Golden Antelope Cellulose Fiber Co., Ltd., has temporarily suspended production since September 22 due to the tight power supply in Jiangsu Province expected to resume production in early October.

7.Evergrande Misses Interest Payment Deadline on U.S. Dollar Bonds, Panic Rises

Evergrande Group moved a step closer to potential default investors feared Friday. The real estate developer’s interest payment deadline expired without any announcement, sending panic through the market over its vast debt. Evergrande has $305 billion in debt and is short of cash. Investors fear the company’s collapse could pose a systemic risk to China’s financial system that would spill over to global markets. Evergrande has missed an $83.5 million bond interest payment deadline without making an announcement, and bondholders have received neither payment nor news from the company, Reuters said, citing two people familiar with the matter.

The company is now entering a 30-day grace period for interest payments and is in an unpredictable position—failure to make payments when due would constitute a default on the debt. Reuters quoted Howe Chung Wan, head of Asian fixed income at Singapore-based Principal Global Investors, as saying, “The silence at this point is frightening because no one wants to take huge risks at this stage.” China’s central bank injected cash into the banking system again on Friday in what was seen as a sign of support for the market. But authorities have been silent on Evergrande’s plight, and China’s official media have not provided any clues on the bailout package.

8.Canadian Judge Ends Extradition Proceedings, Releases Huawei Treasurer Meng Wanzhou

Today, a Canadian judge ended extradition proceedings against Huawei Treasurer Meng Wanzhou, ordering that her bail conditions are lifted, and she is released, ending nearly three years of legal battles. AFP reported that Meng had reached a deferred prosecution agreement with U.S. prosecutors to avoid felony fraud charges before Heather Holmes, deputy chief justice of the Supreme Court of Canada in British Columbia, made the decision.

9.Genting Nova and Providence Canada Agree to Advance mRNA Vaccine Development in Emerging Asian Markets

Genting SinYao, a Chinese biopharmaceutical company, announced Monday that it has entered into a comprehensive agreement with Canadian vaccine developer Providence Therapeutics to advance mRNA vaccines and medicines, including the New Crown vaccine, in emerging markets in Asia. The first agreement is for Genting Sunplus to license Providence’s mRNA New Crown vaccine candidate in Greater China, Southeast Asia, Pakistan, and other emerging markets in Asia; the second agreement is for a broad strategic partnership to develop mRNA products globally using Providence’s mRNA technology platform.

The announcement stated that the initial upfront payment for the New Crown vaccine license agreement is US$50 million, which will be paid in cash by Genting Sin Yew. In Greater China and Singapore, New Crown Vaccine will produce a profit-sharing up to US$100 million. Once the total profit-sharing reaches US$100 million, Genting Sunplus will pay a mid to high single-digit percentage of royalties on sales of New Crown Vaccine, and up to mid to high decile percentage of royalties in areas of Genting Sunplus’ interest outside of Greater China and Singapore. For the co-product agreement, the initial upfront payment alone will be US$50 million, with future milestone payments of up to US$300 million based on the achievement of specific technology transfer, manufacturing, pre-clinical, development, and commercialization milestones, to be paid by Genting Sunplus with the issuance of new shares.

10. A-Shares Plunged Wildly Without Warning on Friday

On September 24, a significant change occurred in the A-share market: under the circumstances that the index did not plunge, the number of down stocks reached 63, while the number of up stores was only 51, a pattern is rarely seen in the recent past. After the chemical plate plunge brush, coal, cement, steel, and another cyclical solid plate joined the kill ranks. In the news, in addition to the double limit dual control policy, there is another rumor circulating among the public: a lobbyist active in the region of the fund’s vicious speculation commodity was investigated. Under the influence of this rumor, the previous surge in commodity futures across the board killed, which also exacerbated the decline in related stocks.

By【G Translators- Financial Team】
Translator: Totoro

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