China
Beijing Goes on the Hunt for Hidden Lending
2010 was a tough year for China’s financial regulators. While on the face of it banks sharply reduced their lending, in line with Beijing’s decision to call an end to economic stimulus spending, the reality was banks lent just as much as the year before but hid a lot of it off-balance-sheet. Though the China Banking Regulatory Commission has been trying to bring wayward lending back onto the books, the genie is out of the bottle. And in a country where new loan data is one of the key determinants of monetary policy, that’s a real problem. Now moves are being made to do something about it. In an essay posted on its Web site Thursday, the People’s Bank of China proposed a radical overhaul of how monetary policy wonks look at the economy. “New yuan loan data no longer actually reflects the extent of financing in the real economy,” said the essay ( in Chinese ), authored by Sheng Songcheng, director of the PBOC’s Survey and Statistics Department. Sheng proposes a new formula that includes more than just loan data. “That will help avoid overly focusing on the size of loans and needing to play whack-a-mole, where one problem pops up while you’re dealing with another, such as banks using off-balance sheet lending to avoid credit limits,” Sheng wrote. While banks formally lent 7.95 trillion yuan, or roughly $1.2 trillion, in loans last year, according to the essay, the use of entrustment loans (where-by banks match-make lenders and borrowers and take a fee for their pains) and bank acceptance bills (a type of bank guarantee) meant off-balance-sheet lending inflated banks’ credit creation by a further 3.47 trillion yuan. An Fitch Ratings report issued in December estimated “credit leakage” from the banking sector at more than 3 trillion yuan . The new formula to calculate what the PBOC has termed “social financing” adds yuan loans to foreign currency loans, entrustment loans, trust loans, bank acceptance bills, corporate bonds, funds raised by share sales of non-financial companies, insurance payouts, insurance companies’ investment properties and “others,” and leaves open the option of including private equity and hedge funds in the future as those sectors mature. According to the essay, focusing on new loan data once made sense in an economy where the banks were by and large the only source of financing, but the development of China’s capital markets over the last nine years now means at the end of last year loans accounted for less than 60% of all financing. Despite the fairly holistic attempt to paint a snapshot of actual fundraising in the economy, there’s still one notable emission from the formula: China’s informal lending sector. China’s banks have long neglected lending to entrepreneurs and small firms. Beijing has been trying to redress the problem in recent years by launching a raft of small-scale financial institutions to plug the gap and by encouraging the major commercial banks to set up SME funding units. Still, there is a major unregulated cottage industry for loans, the relative size of which varies from year to year: According to some estimates informal lending was about a third of the size of total new banks loans in 2007, a year when monetary conditions were significantly tighter than the last couple of years. With the banks sloshing money around over the last couple of years, the informal lending networks, loans between family and friends, and underground banks have been relatively less important. And Beijing may now feel that its efforts to encourage formal institutions to extend credit to smaller firms is also reducing the overall importance of informal lending. But if monetary policy does start to tighten meaningfully this year, it Beijing might find its new indicator comes up short. –Dinny McMahon
2010 was a tough year for China’s financial regulators. While on the face of it banks sharply reduced their lending, in line with Beijing’s decision to call an end to economic stimulus spending, the reality was banks lent just as much as the year before but hid a lot of it off-balance-sheet. Though the China Banking Regulatory Commission has been trying to bring wayward lending back onto the books, the genie is out of the bottle. And in a country where new loan data is one of the key determinants of monetary policy, that’s a real problem. Now moves are being made to do something about it. In an essay posted on its Web site Thursday, the People’s Bank of China proposed a radical overhaul of how monetary policy wonks look at the economy. “New yuan loan data no longer actually reflects the extent of financing in the real economy,” said the essay ( in Chinese ), authored by Sheng Songcheng, director of the PBOC’s Survey and Statistics Department. Sheng proposes a new formula that includes more than just loan data. “That will help avoid overly focusing on the size of loans and needing to play whack-a-mole, where one problem pops up while you’re dealing with another, such as banks using off-balance sheet lending to avoid credit limits,” Sheng wrote. While banks formally lent 7.95 trillion yuan, or roughly $1.2 trillion, in loans last year, according to the essay, the use of entrustment loans (where-by banks match-make lenders and borrowers and take a fee for their pains) and bank acceptance bills (a type of bank guarantee) meant off-balance-sheet lending inflated banks’ credit creation by a further 3.47 trillion yuan. An Fitch Ratings report issued in December estimated “credit leakage” from the banking sector at more than 3 trillion yuan . The new formula to calculate what the PBOC has termed “social financing” adds yuan loans to foreign currency loans, entrustment loans, trust loans, bank acceptance bills, corporate bonds, funds raised by share sales of non-financial companies, insurance payouts, insurance companies’ investment properties and “others,” and leaves open the option of including private equity and hedge funds in the future as those sectors mature. According to the essay, focusing on new loan data once made sense in an economy where the banks were by and large the only source of financing, but the development of China’s capital markets over the last nine years now means at the end of last year loans accounted for less than 60% of all financing. Despite the fairly holistic attempt to paint a snapshot of actual fundraising in the economy, there’s still one notable emission from the formula: China’s informal lending sector. China’s banks have long neglected lending to entrepreneurs and small firms. Beijing has been trying to redress the problem in recent years by launching a raft of small-scale financial institutions to plug the gap and by encouraging the major commercial banks to set up SME funding units. Still, there is a major unregulated cottage industry for loans, the relative size of which varies from year to year: According to some estimates informal lending was about a third of the size of total new banks loans in 2007, a year when monetary conditions were significantly tighter than the last couple of years. With the banks sloshing money around over the last couple of years, the informal lending networks, loans between family and friends, and underground banks have been relatively less important. And Beijing may now feel that its efforts to encourage formal institutions to extend credit to smaller firms is also reducing the overall importance of informal lending. But if monetary policy does start to tighten meaningfully this year, it Beijing might find its new indicator comes up short. –Dinny McMahon
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Beijing Goes on the Hunt for Hidden Lending
China
New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
China has been the world’s largest manufacturer for 14 years, producing one-third of global manufacturing output. In the Emerging Asia Manufacturing Index 2024, China ranks highest among eight emerging countries in the region. Challenges for these countries include global demand disparities affecting industrial output and export orders.
Known as the “World’s Factory”, China has held the title of the world’s largest manufacturer for 14 consecutive years, starting from 2010. Its factories churn out approximately one-third of the global manufacturing output, a testament to its industrial might and capacity.
China’s dominant role as the world’s sole manufacturing power is reaffirmed in Dezan Shira & Associates’ Emerging Asia Manufacturing Index 2024 report (“EAMI 2024”), in which China secures the top spot among eight emerging countries in the Asia-Pacific region. The other seven economies are India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Bangladesh.
The EAMI 2024 aims to assess the potential of these eight economies, navigate the risks, and pinpoint specific factors affecting the manufacturing landscape.
In this article, we delve into the key findings of the EAMI 2024 report and navigate China’s advantages and disadvantages in the manufacturing sector, placing them within the Asia-Pacific comparative context.
Emerging Asia countries face various challenges, especially in the current phase of increased volatility, uncertainty, complexity, and ambiguity (VUCA). One notable challenge is the impact of global demand disparities on the manufacturing sector, affecting industrial output and export orders.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Is journalist Vicky Xu preparing to return to China?
Chinese social media influencers have recently claimed that prominent Chinese-born Australian journalist Vicky Xu had posted a message saying she planned to return to China.
There is no evidence for this. The source did not provide evidence to support the claim, and Xu herself later confirmed to AFCL that she has no such plans.
Currently working as an analyst at the Australian Strategic Policy Institute, or ASPI, Xu has previously written for both the Australian Broadcasting Corporation, or ABC, and The New York Times.
A Chinese language netizen on X initially claimed on March 31 that the changing geopolitical relations between Sydney and Beijing had caused Xu to become an expendable asset and that she had posted a message expressing a strong desire to return to China. An illegible, blurred photo of the supposed message accompanied the post.
This claim was retweeted by a widely followed influencer on the popular Chinese social media site Weibo one day later, who additionally commented that Xu was a “traitor” who had been abandoned by Australian media.
Following the publication of an ASPI article in 2021 which exposed forced labor conditions in Xinjiang co-authored by Xu, the journalist was labeled “morally bankrupt” and “anti-China” by the Chinese state owned media outlet Global Times and subjected to an influx of threatening messages and digital abuse, eventually forcing her to temporarily close several of her social media accounts.
AFCL found that neither Xu’s active X nor LinkedIn account has any mention of her supposed return to China, and received the following response from Xu herself about the rumor:
“I can confirm that I don’t have plans to go back to China. I think if I do go back I’ll most definitely be detained or imprisoned – so the only career I’ll be having is probably going to be prison labor or something like that, which wouldn’t be ideal.”
Neither a keyword search nor reverse image search on the photo attached to the original X post turned up any text from Xu supporting the netizens’ claims.
Translated by Shen Ke. Edited by Shen Ke and Malcolm Foster.
Asia Fact Check Lab (AFCL) was established to counter disinformation in today’s complex media environment. We publish fact-checks, media-watches and in-depth reports that aim to sharpen and deepen our readers’ understanding of current affairs and public issues. If you like our content, you can also follow us on Facebook, Instagram and X.
Read the rest of this article here >>> Is journalist Vicky Xu preparing to return to China?
China
Guide for Foreign Residents: Obtaining a Certificate of No Criminal Record in China
Foreign residents in China can request a criminal record check from their local security bureau. This certificate may be required for visa applications or job opportunities. Requirements and procedures vary by city. In Shanghai, foreigners must have lived there for 180 days with a valid visa to obtain the certificate.
Foreign residents living in China can request a criminal record check from the local security bureau in the city in which they have lived for at least 180 days. Certificates of no criminal record may be required for people leaving China, or those who are starting a new position in China and applying for a new visa or residence permit. Taking Shanghai as an example, we outline the requirements for obtaining a China criminal record check.
Securing a Certificate of No Criminal Record, often referred to as a criminal record or criminal background check, is a crucial step for various employment opportunities, as well as visa applications and residency permits in China. Nevertheless, navigating the process can be a daunting task due to bureaucratic procedures and language barriers.
In this article, we use Shanghai as an example to explore the essential information and steps required to successfully obtain a no-criminal record check. Requirements and procedures may differ in other cities and counties in China.
Note that foreigners who are not currently living in China and need a criminal record check to apply for a Chinese visa must obtain the certificate from their country of residence or nationality, and have it notarized by a Chinese embassy or consulate in that country.
Foreigners who have a valid residence permit and have lived in Shanghai for at least 180 days can request a criminal record check in the city. This means that the applicant will also need to currently have a work, study, or other form of visa or stay permit that allows them to live in China long-term.
If a foreigner has lived in another part of China and is planning to or has recently moved to Shanghai, they will need to request a criminal record check in the place where they previously spent at least 180 days.
There are two steps to obtaining a criminal record certificate in Shanghai: requesting the criminal record check from the Public Security Bureau (PSB) and getting the resulting Certificate of No Criminal Record notarized by an authorized notary agency.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
- New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
- Is journalist Vicky Xu preparing to return to China?
- Guide for Foreign Residents: Obtaining a Certificate of No Criminal Record in China
- China Unveils Plan to Upgrade Industrial Equipment
- China deepens engagement with new Indonesian president as top diplomat visits Jakarta
- New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
