China
China props up state-owned developer Vanke as property crisis deepens
China has asked 12 banks to provide financing to the beleaguered state-owned real estate firm, Vanke Group, just days after the housing and urban-rural development ministry vowed to let insolvent property developers go bankrupt.
The Chinese government’s support bucks its recent trend of letting indebted developers take their own downward course, which has compounded a spiraling crisis in the sector, once a major economic growth driver.
Privately-held Evergrande Group and Country Garden Holdings were left to their own devices as their debts soared, leaving their creditors and homebuyers high and dry in trying to recover investments. The Hong Kong High Court issued a liquidation order for Evergrande in January. A similar fate looms for Country Garden which received a liquidation petition from one of its creditors in Hong Kong. Both companies are listed in Hong Kong.
In contrast, rescue efforts for Vanke, part-owned by the Shenzhen government, are being coordinated by the State Council, China’s cabinet amid Chinese President Xi Jinping’s policy of advancing state enterprises and a retreat of the private sector.
The State Council has requested financial institutions to make swift progress and called on creditors to consider private debt maturity extension, according to a Reuters report on Monday, citing unnamed sources.
Separately, the state-owned Cailian Press reported that the 12 institutions are expected to raise as much as 80 billion yuan (US$11.1 billion) for Vanke. But the report cited sources saying that the attitude maintained by each bank was conservative.
Shaky ground
Nonetheless, Vanke is likely to stay on shaky ground among investors after rating agency Moody’s lowered its credit rating to “junk.”
“The rating actions reflect Moody’s expectation that China Vanke’s credit metrics, financial flexibility and liquidity buffer will weaken over the next 12-18 months because of its declining contracted sales and the rising uncertainties over its access to funding amid the prolonged property market downturn in China,” said Kaven Tsang, a Moody’s senior vice president in a statement this week.
The rating agency said it has placed all the ratings on review for downgrade, as it saw the company’s ability to recover sales, improve funding access, and maintain an adequate liquidity buffer to be worrying.
The government’s bid to save Vanke has aroused discussion online. Some netizens questioned the discrepancy between saving Vanke and abandoning Evergrande, while others worried that saving Vanke would reduce national resources at a time when the economy is growing at its slowest pace since 1990. There are also many posts rationalizing the government’s efforts to support Vanke.
The blogger “Wuxinxinshuofang” believes that propping up Vanke is to ensure that the “hunt” for foreign capital won’t be disrupted by a Vanke-triggered real estate crisis.
“The collapse of Vanke will bring about the debt crisis and liquidity crisis of all real estate companies. Efforts so far to prop up the market have only begun to show effects. Vanke can fail next year, but not this,” the blogger wrote.
Zombie developers to zombie banks?
Frank Xie, a professor at the University of South Carolina Aiken Business School, attributed Beijing’s support to Vanke’s state-owned background.
“The Chinese Communist Party cannot let Vanke fail, because the CCP [Communist Party of China] treats its own people and outsiders differently,” Xie pointed out.
The failure of any state-owned assets would be “tantamount to the bankruptcy of national capital, questioning the Communist Party’s ability to run enterprises.”
Xie said that Chinese banks have accumulated a large backlog of mortgage loans involving real estate, and even assisting Vanke will only delay the explosion.
“As for other private companies facing the same problems as Evergrande, the CCP cannot save them, nor does it want to save them,” he added.
Beijing has also established a “white list” of approved property projects by distressed developers that banks and financial institutions should support in a stop-gap measure. Those deemed beyond rescue should go bankrupt.
Chen Songxing, director of the New Economic Policy Research Center at National Donghua University in Taiwan, said that the Chinese official statement of “bankruptcy should be bankrupt” is merely to show the outside world Beijing is unable to save real estate developers.
Chen said the amount of rescue for Vanke this time was insufficient to solve the problem, given how intertwined the real estate and banking industries are. He warned this was only a delay tactic which could lead to a bigger crisis.
“China’s current financial situation actually does not have the ability to save the real estate industry, as this is just transferring the debts of real estate developers and local governments to banks.
“If you continue to save these zombie real estate developers this year, it is very likely that banks will also become zombies in the future. It is very detrimental to China’s economic development,” Chen said.
Edited by Taejun Kang and Mike Firn.
Read the rest of this article here >>> China props up state-owned developer Vanke as property crisis deepens
China
Navigating Turbulent Waters: Trust Between China and the Philippines
Despite a July 2024 deal ensuring Philippine resupply missions at Second Thomas Shoal, tensions with China persist, marked by confrontations and deep distrust, indicating potential for future conflict escalation.
Ongoing Tensions in the South China Sea
Despite a July 2024 agreement facilitating uninterrupted resupply missions to the contentious Second Thomas Shoal, tensions between China and the Philippines remain significantly high. Increased aerial and naval confrontations in August, compounded by longstanding mutual mistrust, hint at a precarious situation. Both nations are employing legal strategies alongside military maneuvers, while China’s recent maritime regulations and the Philippines’ military modernization efforts suggest a future marked by conflict.
Rising Provocations and Distrust
The situation deteriorated further in June 2024, when Manila accused Chinese forces of intercepting its boats and injuring a sailor. Although the July deal allowed for a resupply mission without incident, broader tensions persisted as China reportedly fired flares dangerously close to Philippine aircraft in August. The incidents at Second Thomas Shoal illustrate the deepening security crisis that has persisted since 2021, as China continues to challenge Philippine resupply efforts.
Potential for Escalation
While the recent agreement may offer temporary relief, it is unlikely to resolve the long-standing maritime disputes in the region comprehensively. The continuing misinterpretations of the deal and the profound distrust between the two nations suggest an ongoing trajectory of escalating tensions. As disputes over competing claims in the South China Sea intensify, the situation at Second Thomas Shoal serves as a volatile flashpoint for future conflicts.
China
Is life getting better for China’s tech billionaires?
Pony Ma, Tencent co-founder, is China’s richest person with over A$65 billion. Despite past crackdowns, his wealth indicates a potential market recovery, while maintaining state control over the economy.
According to the latest Bloomberg Billionaires Index, Pony Ma, co-founder of Tencent Holdings, is once again China’s richest person, now with a net worth of more than A$65 billion, placing him 27th globally.
Close behind him in the rankings are bottled water tycoon Zhong Shanshan, and Zhang Yiming, the main co-founder of tech giant ByteDance, which owns TikTok.
Only a few years ago, China’s ruling Communist Party launched a crackdown on billionaires and other business leaders. Some were publicly jailed. Others simply disappeared from public view.
Ma’s resurgence might seem like a positive signal of a more permissive market environment. But as we watch China’s private sector grow, we should remember it follows China’s unique playbook.
The ascent of Tencent
Ma’s wealth primarily comes from his stake in Tencent, which he co-founded in 1998 with its headquarters in Shenzhen. As China’s economy grew, Tencent became a world-leading internet and technology company.
Tech billionaire Pony Ma at a government meeting in 2018.
Song Fan/AP
Tencent is well-known for QQ and WeChat, which quickly became two of the most popular instant messaging apps in China and connect more than a billion people.
Tencent is also the largest video game vendor in China, with popular games such as “Honour of Kings” and “League of Legends”.
Last month, Tencent released “Black Myth: Wukong”, China’s first-ever “AAA” video game. AAA is a globally recognised gaming industry buzzword that refers to major, high-budget, standalone productions.
The much-hyped game surpassed 10 million sales across platforms within three days of its release, becoming one of China’s most successful games of all time.
The game itself draws on a 16th century Chinese novel called “Journey to the West” and features various Chinese landscapes. Its popularity aligns with Beijing’s ongoing efforts to boost China’s international cultural appeal.
China’s state-owned media outlet Xinhua highly praised the game for “telling Chinese stories with world-class quality” and offering a new way for global players to understand Chinese culture.
Ma’s fortunes reflect his company’s
This official appraisal means a lot. In previous years, Tencent has had a challenging time coping with Beijing’s strict gaming regulations.
In August 2021, China’s video game regulator announced policies to limit online gamers under the age of 18 to only one hour of play on Fridays, weekends and holidays. This was a major blow to China’s gaming industry, including Tencent.
In December 2023, Beijing introduced more legislation aimed at further capping the amount of money and time that could be spent on video games. The announcement resulted in a 12.4% drop in Tencent’s share price. But the company still promised to strictly implement any new regulatory requirements.
The success of ‘Black Myth: Wukong’ reflects an improving outlook for Tencent.
Andy Wong/AP
A cautionary tale
In China, complying with state regulations is important. Another Chinese tech billionaire, Jack Ma, faced the consequences of publicly challenging them.
In 2020, Jack Ma was poised to launch what was set to be the world’s largest initial public offering (IPO), raising about A$50 billion for his financial technology giant, Ant Group.
However, after he gave a speech in Shanghai harshly criticising Chinese financial regulators for outdated rules and excessive intervention, regulators halted the Ant Group IPO.
Citing concerns that Ant Group’s e-finance products encouraged unrestrained borrowing and investment, China ultimately suspended the IPO in late 2020.
Over the following years, Ant and its affiliate company Alibaba were slapped with billions in fines for alleged breaches of financial regulations.
Getting on the front foot
This phase marked a much stricter regulatory posture from China. The tech tycoons had to adapt to a new reality.
In 2021, Pony Ma publicly stressed the importance of tightly regulating internet businesses, including his own. He also proactively volunteered to meet with antitrust authorities.
Tencent downsized by divesting stakes in various sectors, and the government demanded a restructuring of its financial business.
Many of China’s other billionaires heeded lessons from Jack Ma’s troubles at Ant Group.
Alex Plavevski/EPA
The party remains the ultimate authority
China’s economy is a “socialist market economy”. That is, China’s government thinks of the market as a useful tool to achieve socialist objectives.
That doesn’t mean the private sector doesn’t play a huge role, but the government has long been cautious about the emerging market power of oligarchs as a potential threat to the party’s authorities.
Over past decades of reform and opening up, Beijing has been committed to unleashing market forces, encouraging private sector development and modernising its financial institutions. The precondition is that the state should maintain the ultimate authority to regulate and mobilise market resources.
However, its economy has been stubbornly sluggish post-COVID. The clampdown on the private sector has undermined the confidence of many investors and entrepreneurs, which is crucial for restoring China’s economic vitality.
Last year, Beijing introduced a 31-point action plan in response, aiming to make the private economy “bigger, better and stronger”. Hours after its release, Pony Ma publicly praised the government’s move as “encouraging and inspiring”.
Could spring now be coming for China’s private sector? Perhaps, but only on China’s terms.
Remember, market development is always a means for the state to achieve its own ends. This will never be a story of the market growing while the state steps back.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
China
Zhejiang Province Increases Marriage Leave to 13 Days
On September 27, Zhejiang Province expanded marriage leave from 3 to 13 days for legally married employees. The new regulations ensure continued pay and benefits during leave and address demographic challenges by encouraging population growth. Businesses must update internal policies accordingly.
On September 27, the 12th meeting of the Standing Committee of the 14th Zhejiang Provincial People’s Congress approved the Zhejiang Province Marriage Leave Regulations (hereinafter referred to as the “Regulations”), extending the marriage leave to 13 days from three days.
According to the Regulations, employees who legally register their marriage are entitled to 13 days of marriage leave, excluding national statutory holidays and rest days. During the marriage leave, employees’ wages, bonuses, and other benefits will continue to be paid by their employers.
Notably, to ensure a smooth transition between the old and new leave regulations and to minimize disputes following the implementation of the new rules, the Regulations state that employees who registered their marriage within one year before the implementation of the new regulations and have not yet taken their marriage leave will be entitled to the new 13-day leave. Those who have already taken their marriage leave can supplement it according to the new regulations.
Businesses with operations in Zhejiang province are advised to amend their internal leave policies and employee handbook as soon as possible.
The extension of marriage leave in Zhejiang Province is part of a broader effort to support population growth and address demographic challenges. The province has seen some positive effects from its initial fertility support policies, which have helped to slow the sharp decline in birth rates.
*Granted to those who take pre-marital checkups, which involve being checked for any health conditions that will affect childbirth.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
Read the rest of the original article.
- Navigating Turbulent Waters: Trust Between China and the Philippines
- Is life getting better for China’s tech billionaires?
- Zhejiang Province Increases Marriage Leave to 13 Days
- China ETFs Celebrate Beijing’s Stimulus Initiative
- From Bubble Tea to Business Partnerships: Exploring China-ASEAN Trade Integration
- With China seeking AI dominance, Taiwan’s efforts to slow neighbor’s access to advanced chips needs support from the West
