Date
26 September 2017
File photo of a steel worker operating a furnace at a steel manufacturing plant in Hefei

The Big Picture: DELEVERAGING PHASE

China’s central bank said Tuesday that the nation’s economy is set for a long period of deleveraging and elimination of excess capacity, and pointed out that the key will be to ensure a stable monetary and financial environment during the process. 

The country’s previous economic development model, which relied heavily on external demand and local government investments, is facing strong reform pressure, the People’s Bank of China (PBoC) said in its quarterly monetary report. As a new growth engine is yet to emerge, the economy will remain volatile, it said. 

Companies that took on a lot of debt over the past few years will have to go through a deleveraging period and remove excess capacity, the PBoC said, adding that such trend will inevitably affect the overall economic growth. 

Property and local government debt issues are becoming more acute, the central bank warned. And small and medium-sized enterprises (SMEs) will continue to grapple with limited access to financing as most financial resources have been channeled into sectors like real estate, it said.

Meanwhile, Shang Fulin {尚福林}, chairman of the China Banking Regulatory Commission, has called on lenders to handle their loans properly and prevent credit risks in industries with overcapacity problems, according to a statement posted on the banking regulator’s website Monday.

Observers expect the regulator to continue to prompt lenders to tighten credit to cement, iron and steel sectors, which are suffering from overcapacity problems, while granting more loans to SMEs. This will be in line with Premier Li Keqiang’s {李克強} call to boost the quality of the economy.

Govt backs corporate pension schemes

China will offer tax incentives to encourage companies to establish their own pension schemes, China Securities Journal reported Wednesday, citing an unnamed official. In addition, the central government may take over management of basic pension funds to ensure a balanced policy across all regions.

CBRC said to mull higher provisions for interbank business

The China Banking Regulatory Commission will require lenders to increase their interbank risk provisions to curb fraud in credit reporting, news website caixin.com reported Tuesday, citing an unnamed person close to the regulator. Details of the new policy are expected to be announced after the Communist Party plenum that will kick off on Nov. 9.

Beijing may cut new passenger car licenses

The Beijing municipal government will cut the number of new passenger car licenses to 150,000 a year from 240,000 starting next year, The Mirror newspaper reported Tuesday. At the same time, licenses for new energy vehicles will increase to 60,000 a year from 20,000. Meanwhile, conventional passenger cars will be limited to 90,000 licenses a year from 2017. Beijing will not consider a traffic congestion levy until 2015, the report said.

Shanghai sees surge in new syndicated loans

Shanghai saw a 57 percent surge in new syndicated loans in the third quarter from the previous year on strong demand from the real estate and construction sectors, Shanghai Daily reported Wednesday. Banks lent 48.8 billion yuan (US$8 billion) of such loans in the three months to September. By the end of the third quarter, the outstanding syndicated loans were 300.4 billion yuan, up 17.4 billion yuan from the previous three months, the report said, citing the Shanghai Banking Association.  

– Contact HKEJ at [email protected]

JP/AC/RC

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