China's megacity property markets show new signs of life
Only 40% of big private equity funds profitable in 2024. Chinese bond market cools as central bank borrows treasuries.
Our briefing on critical economic and financial developments in China as of Tuesday, 9 July, 2024:
China’s megacity property markets show new signs of life following launch of loosening measures in May.
Ministry of Finance offers fiscal subsidies for capital replacement loans.
Big state-owned venture capital funds ordered to target investment in hi-tech sectors.
Beijing calls for nation-wide promotion of green technologies.
Private businesses rise to over 96% of all market entities in China.
Only 40% of China’s big private equity funds post profits since start of 2024.
State Council wants market forces to drive China’s digital economy.
China cracks down on stock market fraud in a bid to enhance financial efficiency.
Leading economist wants China to issue 5 trillion yuan in treasuries every year.
Chinese central bank cools bond market with plans to sell treasuries.
China's megacity property markets show new signs of life
The property markets of China's biggest cities have recently posted a surge in transaction levels, following the launch of loosening and support measures by authorities at the local and national levels.
New home transaction levels leaped in Beijing and Shanghai in June, rising 21% and 66% on-month respectively, to hit 430,000 square metres and 810,000 square metres.
In the Guangdong province megacities of Guangzhou and Shenzhen new home transaction levels rose 48% and 38% respectively, to hit 830,000 square metres and 390,000 square metres a piece.
The rise in transactions arrives after Chinese authorities adopted measures to boost faltering property markets, including adjustments to home purchase restrictions, deposit ratios and home loan rates.
Ministry of Finance offers fiscal subsidies for capital replacement loans
China's Ministry of Finance (MOF) recently led the issuance of the "Notice on Implementing Policies on Fiscal Subsidies for Equipment Replacement" (关于实施设备更新贷款财政贴息政策的通知).
A MOF official said that since the start of the year, the ministry had actively developed a raft of fiscal policy measures to drive large-scale equipment replacement and spur domestic consumption via "exchanges of the old for the new."
These policies entail the use of multiple tools, including government bonds, tax incentives, government procurement and fiscal subsidies.
The MOF official highlighted three benefits of its fiscal subsidies for fiscal upgrade loans:
Organically integrating strategies for the expansion of domestic demand with the deepening of supply-side structural reforms.
Coordinated usage of fiscal, financial and industrial policy.
Accelerating the formation of new quality productive forces.
China's state-owned venture capital funds told to target hi-tech sectors
Central state-owned enterprises (SOEs) have established a total of 126 venture investment funds with 52.9 billion yuan in capital subscribed, as well as made investments worth 31.3 billion yuan, according to figures recently released by China's State-owned Assets Supervision and Administration Commission (SASAC).
Most of these investments have been directed towards science and tech endeavours, including advanced manufacturing, clean energy and digital technology.
"[We] will guide central SOEs to make use of venture investment funds to expand the strength of investment in leading science and technology companies, the commercialisation of scientific research, as well as small and medium-sized enterprises on the industrial chain," said Wang Hailin (王海琳), head of SASAC's Capital Operation and Revenue Management Department.
Chinese central government calls for promotion of green technologies
Eight central authorities led by the National Development and Reform Commission (NDRC) recently issued a notice on promoting the use of green technologies.
In order to accelerate the adoption of green technologies throughout China, the NDRC has led the compilation and release of the 2024 edition of the "Green Technology Promotion Catalogue" (绿色技术推广目录(2024年版)).
The Notice calls for the promotion of technologies related to energy efficiency and carbon reduction, environmental protection, resource recycling, low carbon transformation, ecological upgrade, and the green upgrade of infrastructure.
Private businesses rise to over 96% of all market entities in China
As of the end of May, China was host to 180.45 million private businesses, according to figures released by the State Administration for Market Regulation (SAMR).
This included 55.177 million private enterprises, and 123.273 million individual industrial and commercial registrants.
The figures indicate that the share of private businesses out of all market entities in China has risen from 95.5% in 2019 to 96.4%.
“The further increase in the share of private enterprises indicates that China's business environment has continued to optimise," said a SAMR official.
"Business registration is more convenient, and market activity is higher."
Only 40% of China's big private equity funds prove profitable in 2024
Out of 79 private equity funds at the 10 billion yuan-scale or more, only 32, or 40.51% of the total, posted floating profits in the first half of 2024, according to a report from Securities Daily.
The average return for these funds in the first half was 0.40%. Dongfang Gangwan (东方港湾) was the strongest performer, achieving returns of 47.92%, while Hainan Xiwa (海南希瓦) came in second, with floating returns of 29.48%. Both of these figures marked record highs for these investors.
Despite their faltering performance in the first half, China's private equity sector has expressed optimism about A-share performance and investment opportunities in the second half, particularly with regard to dividend and growth stocks.
"Following the launch of various macro-economic measures and given the intrinsic resilience of the economy, as the second half starts we can expect more data points to show a trend of improvement," said a report from Jinglin Assets (景林资产).
"At present many blue chip companies are undervalued, and this kind of market opportunity only appears once in many years."
State Council wants market forces to drive China's digital economy
Premier Li Qiang convened a regular meeting of the State Council - China's highest government authority, on 5 July, to discuss work in relation to driving the "high-quality development of the digital economy.
The meeting highlighted the role of the market in driving growth of the digital economy in future, and called for the "market-based allocation of data as a factor of production."
The State Council also called for the "continued optimisation of the digital economy development environment," and coordinated improvements to fundamental data systems and infrastructure.
China cracks down on stock market fraud to enhance financial efficiency
The State Council recently endorsed the "Opinions on Further Effectively Performing Work to Comprehensively Punish and Prevent Financial Falsification on Capital Markets" (关于进一步做好资本市场财务造假综合惩防工作的意见).
The Opinions were originally released by six central government authorities led by the China Securities Regulatory Commission (CSRC), outlining a total of 17 specific policy measures.
State-owned media said the move sends the strong policy signal that China's authorities are about to crack down on malfeasance on the stock market, in order to improve the trust and efficiency of the financial ecosystem.
Leading economist wants China to issue 5 trillion yuan in treasuries every year.
Li Xunlei, chief economist with Zhongtai International, has called for the Chinese government to step up its issuance of treasuries to 5 trillion yuan per year, to lift its total liabilities by 50 trillion yuan over a decade-long period.
Chinese central bank cools down bond market with talk of selling treasuries
As of the close of trading on Friday, 5 July, the yield on 30-year Chinese treasuries had risen 2.6 basis point to 2.69%. The yield on 10-year treasuries had risen 2.05 basis points to 2.28%, while 5-year treasuries saw an increase of 2.5 basis points to 1.98%.
The People's Bank of China (PBOC) recently announced plans to borrow Chinese treasuries from primary dealers for its open market operations, in a move interpreted by domestic analysts as paving the way for their sale to cool down the bond market.