10/26/2021 Financial News in China: Real Estate Developer Modern Land Defaults on Bond; Decline In The Savings Rate Of Residents

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1. Real Estate Developer Modern Land Defaults on Bond; Property Shares Drop

Modern Land has missed a bond payment, the latest Chinese property developer to do so, adding to worries about the wider impact of the debt crisis at behemoth China Evergrande Group, and dragging on shares in the sector. Communist China’s state planner was set to meet property firms carrying large dollar-denominated debts on Tuesday to take stock of their total issuance volume and repayment capability, amid mounting concern about liquidity.

Modern Land (China) Co Ltd said in a filing that it had not repaid principal and interest on its 12.85% senior notes that matured on Monday due to “unexpected liquidity issues”. Ratings agency Fitch earlier this month cut Modern Land’s rating to “C” from “B” over the consent solicitation to change bond terms, saying it considered the move a distressed debt exchange. Developers are defaulting “one by one”, said an investor with exposure to Chinese high-yield debt, who asked not to be identified as he is not authorised to speak to media.

2. What signal will the central bank’s reverse repurchase increase by investing 700 billion yuan in 5 days?

26th morning, the People’s Bank of China announced that in order to hedge the tax season peak, government bond issuance contributions, the influence of such factors as maintenance month liquidity smooth, market-based interest rate bidding carried out 200 billion yuan reverse repurchase operation, term 7 days, the winning interest rate is 2.20%. Today 10 billion yuan reverse repo expires in a single day to achieve net has invested 190 billion billion yuan.

As for the reasons for the increase in reverse repurchase, the central bank said that it is to hedge the impact of factors such as tax peak and government bond issuance contributions, and maintain stable liquidity at the end of the month. There is a market view that the supply pressure on local debt will continue in the short term. CITIC Securities research report said, as October 26th many places has released October of issuance plan under which the October New increase the local special debt and debt totalling approximately 360 billion yuan, taking into account the part of the local government bond issuance plan has not been disclosed, statistics are not comprehensive, inter alia, the partial distribution province such as Anhui yet published and distributed to plan, it is expected that the final local debt net financing scale of 450 billion yuan.

3. Chinese porcelain shares’ opening violently pulled close to 6 percent, and the end dived and the limit dropped and the turnover rate was as high as 61 percent.

October 26th just listed near the second new Chinese porcelain shares (001216,SZ) morning a small fall in 1.52%, and then immediately violence closer 6% to rise 4.35%. But the good times don’t last long, shares have fallen again down, less than half an hour plummet 7%, it is estimated that the early chasing trends purchases of investors have gas to despair and stomp their feet. The close by, Chinese porcelain shares fell 9.97% limit, turnover rate was up to 61.56%, the turnover of 0.737 billion yuan, up-to-date market value is 4.478 billion yuan. It is worth mentioning that on October 22, the stock opened a word limit for the first time. The unit October 26th listed day of trading schedule rose 44%, then lian huo 2 receive trading.

4. What is the impact of real estate tax on Communist China

Communist China’s real estate tax has finally been unveiled. According to Xinhua News Agency, the State Council will carry out pilot work on real estate tax reform in some areas. In response to Communist China’s trial of real estate tax, foreign media analysis believes that this move can effectively combat real estate speculation, increase the supply of second-hand housing, and stabilize housing prices. Reuters reported that the Standing Committee of the National People’s Congress of China authorized the State Council to carry out pilot real estate tax reform in some areas on the 2 3rd, and the State Council will determine the pilot areas in accordance with the principle of active and prudent. This pilot is to actively and steadily promote the legislation and reform of real estate tax, guide the rational consumption of housing and the economical and intensive use of land resources, and promote the stable and healthy development of the real estate market. According to the report, this is a word difference from the real estate tax piloted in Shanghai and Chongqing ten years ago, but the meaning is very different. According to a report released by Xinhua News Agency, the real estate tax in the pilot area is subject to various types of real estate such as residential and non-residential use, excluding rural homesteads and their upper houses owned by law.

5. The first revision of the Anti-Monopoly Law: The amount of penalties increased significantly, and individuals may also be fined for monopoly

On October 19, entrusted by the State Council, Zhang Gong, director of the General Administration of Market Supervision, explained at the meeting. He mentioned that the revision of the anti-monopoly law adheres to both regulation and development, and further improves the anti-monopoly related system and increases the punishment for monopoly behavior in response to the outstanding problems in the implementation of the anti-monopoly law, to strengthen anti-monopoly and prevent the disorderly expansion of capital to provide a clearer legal basis and stronger institutional guarantees.

In response to the anti-monopoly issue in the platform field, the draft adds a principled clause in the general provisions-Article 10 stipulates that operators shall not abuse data and algorithms, technology, capital advantages, and platform rules to exclude or restrict competition. At the same time, the draft intends to add emphasis after Article 22 clarifies that monopoly enterprises shall not implement abuses such as “refusal to trade”: “Operators with a dominant market position use data and algorithms, where technology and platform rules set up obstacles and impose unreasonable restrictions on other operators, it is an act of abusing the dominant market position as stipulated in the preceding paragraph.”

6. The stock price of Shanghai Rural Commercial Bank hit a new low again, breaking the net in 3 days of listing and breaking the issue in 4 days!

October 26 hu nong firm re-listed are at their lowest since, over the course of the turnover of only 0.114 billion yuan. Since the listing, the cumulative plunge over 32%. The downturn has caused great dissatisfaction among investors. Some people posted in the stock bar: “delist early, no money!” This year A-SHARE listed 4 banks only Bank of Chongqing decline than hu nong firm greater reached-41.17%. But the bank of Chongqing was listed as early as 2 months, if only the initial listing of 41 trading days, the decline of Chongqing bank is only 25%; Qilu Bank decline of 13.86%; ruifeng Bank’s decline was only 2.82%.

7. The impact of the decline in the savings rate of residents on the economy

From 2010 to 2019, the national savings rate dropped from 50.9% to 44.4%. Among them, the household savings rate dropped from 42.1% to 34.8%, and will further decline in the future. The main factors affecting the decline in the household savings rate are as follows: First, changes in the macroeconomic structure. Second, the population is aging. The rapid increase in the elderly population and the rapid decline in the working-age population have become the main factors driving the increase in the dependency ratio.

The main problem facing Communist China is that with the aggravation of aging and the decline of the savings rate, the unsound and unsustainable pension system is more prominent. Communist China relies too much on the first pillar, while the development of the second and third pillars faces many difficulties, and many provinces and cities cannot cover their pensions. Some studies predict that around 2036, the cumulative balance will be exhausted, and the scale of financial subsidies will become larger and larger, making it difficult to make up for the pension gap.

8. The bottom line of the implementation of electricity price reform on the 10th

The left-hand “orderly liberalization” of the policy side (feed-in tariffs and electricity prices) and the right-hand “strengthening supervision” (market transaction order), the market-oriented electricity price reform of “can rise and fall” makes the power supply more secure.

According to the “Securities Daily” reporter incomplete combing, the new round of electricity price reform launched on the 10th (as of press time), more than 10 provinces have taken active actions, and the market-oriented reform of on-grid electricity price for coal-fired power generation is being carried out in an orderly manner. Among them, the electricity market transaction prices in Shandong, Jiangsu, Guizhou, Anhui and other places are more than 19% higher than the benchmark electricity price; 5 southern provinces and Gansu, Shanxi, Jiangxi, ningxia and other places have accelerated the realization of coal-fired electricity market-oriented transactions.

By【G Translators – Financial Team】
Author: Tracy

Disclaimer: This article only represents the author’s view. Gnews is not responsible for any legal risks.

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