|Bid||3.130 x 0|
|Ask||3.140 x 0|
|Day's Range||3.110 - 3.140|
|52 Week Range||2.330 - 3.190|
|Beta (5Y Monthly)||0.61|
|PE Ratio (TTM)||4.59|
|Forward Dividend & Yield||0.23 (7.47%)|
|Ex-Dividend Date||May 27, 2021|
|1y Target Est||4.49|
(Bloomberg) -- Discover what’s driving the global economy and what it means for policy makers, businesses, investors and you with The New Economy Daily. Sign up hereA gauge of China’s manufacturing industry slipped in April and the services sector also weakened, suggesting the economy is still recovering but at a slower pace.The official manufacturing purchasing managers’ index fell to 51.1 in April from 51.9 in the previous month, the National Bureau of Statistics said Friday, lower than the median estimate of 51.8 in a Bloomberg survey of economists.The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 54.9, compared to 56.1 projected by economists. Readings above 50 indicate an expansion in output.The latest data adds more caution to China’s outlook after the economy showed more balanced growth in the first quarter, as retail sales climbed and industrial output growth moderated.The PMI figures show “China’s economy continued to recover steadily,” Zhao Qinghe, an economist at the statistics bureau, said in a statement accompanying the data release. But “some surveyed companies said problems such as chip shortages, poor international logistics, shortages of containers, and rising freight rates are still serious,” he said. A slowdown in manufacturing supply and demand and rising cost pressures are also issues, he said.What Bloomberg’s Economists Say...Both manufacturing and non-manufacturing sectors remained comfortably in expansionary territory, confirming that the recovery is well underway. The non-manufacturing PMI again outpaced manufacturing, supporting our view of the services sector catching up and manufacturing activity peaking.-- Chang Shu, chief Asia economistSee the full note hereManufacturers, especially those in upstream sectors, are benefiting from rising prices and profits, while the U.S. fiscal stimulus is giving a boost to exporters, allowing them to increase production. However, measures to contain carbon emissions in heavy-polluting industries may be weighing on some manufacturing output.Stronger consumer confidence is boosting services industries, especially after travel restrictions imposed earlier in the year were lifted. The outlook for construction is more complicated though, with local governments slowing the pace of debt sales to finance infrastructure projects and approvals for fixed-asset projects dropping sharply in the first quarter compared with previous years. The real estate sector is also faced with stricter financing rules. The construction sub-index in the non-manufacturing PMI fell 4.9 points to 57.4.The “services PMI slowed more than manufacturing PMI due to deleveraging reform in the real estate sector, and this will continue,” said Iris Pang, chief economist for Greater China at ING Bank NV in Hong Kong. But there should be a rebound as domestic tourism picks up over the long holiday starting May 1, she said.Other key details:A sub-index of new export orders for factories eased to 50.4 in April from 51.2 in the previous month, while new orders were at 52.A sub-index of manufacturing employment was at 49.6, while non-manufacturing employment was 48.7.Indexes tracking large and medium companies both fell in the month, while that of small firms rose 0.4 percentage points to 50.8.High-frequency indicators tracked by Bloomberg show the economy continued to boom in April from the record growth in the first quarter, with strong exports and rising business confidence supporting the recovery.In a separate report Friday, the Caixin Manufacturing Purchasing Managers’ Index -- a private gauge of China’s manufacturing activities that tracks smaller companies than the official PMI -- rose to the highest level this year. The increase was supported by significant expansion in both manufacturing demand and supply, as “manufacturers stayed confident about the economic recovery and keeping Covid-19 under control,” according to a statement by Caixin and IHS Markit.“Details of both official and Caixin surveys pointed to continued improvement in smaller enterprises while the large and medium enterprises’ growth moderated,” said Liu Peiqian, an economist at Natwest Group Plc, adding that the chip shortage may have temporarily impaired the pace of growth but the recovery trend is intact.The data suggests the central bank’s tapering of its stimulus “should only happen in a gradual way and the targeted easing for corporates are still necessary to support further growth,” Liu said. “We expect the People’s Bank of China to keep benchmark rates unchanged throughout 2021 while focusing on gradually guiding credit growth lower.”(Updates with Caixin PMI and comments.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- It’s been another dramatic week for China Huarong Asset Management Co., with a drip-feed of news offering investors a range of potential outcomes for the company’s future.Fitch Ratings cut its credit rating on China Huarong close to junk on Monday, a day after the company said it would miss a second deadline to report its annual results. The firm used a loan given by a state-owned bank to repay an offshore bond maturing Tuesday, according to a Bloomberg News report. While that suggests state support will be extended to China Huarong’s offshore debt, it raises questions over whether the company is short of cash.With $6.5 billion worth of bonds maturing over the rest of this year, there’s a lot at stake in a successful resolution to China Huarong’s challenges. The company is deeply entwined in the country’s financial system: on Wednesday, the nation’s largest life insurer told investors it was exposed to “non-standard assets” issued by China Huarong, according to Citigroup Inc. analysts.A debt restructuring could force investors to shoulder some of the financial burden, while a default would undermine confidence that the government will back the nation’s state-owned firms in times of stress. On the other hand, an equity injection or full-blown financial bailout would be the best-case scenario for bondholders, but would go against government efforts to make markets punish badly run firms.So far, only the China Banking and Insurance Regulatory Commission has publicly commented on China Huarong, saying the company is operating normally and has ample liquidity. Here are some of the potential outcomes analysts are considering:Larger lossesA ‘bail in,’ rather than a bailout. Even if authorities inject capital into China Huarong, equity and debt holders bear the majority of the costs of restructuring. Either creditors accept a steep haircut or face the possibility of a default.Another example can be seen in the central bank’s rescue of troubled Bank of Jinzhou Co. Chengfang Huida, a fund managed by the central bank, last year bought Bank of Jinzhou assets at a 70% discount. This is “the market price,” the central bank said in its 2020 financial stability report. Separately, the troubled business arm of a top Chinese university may impose haircuts approaching 70% on its unsecured creditors as part of a debt restructuring plan, people familiar with the matter said Wednesday.Bloomberg News earlier reported the government is considering a plan that would see a unit of the People’s Bank of China assume more than 100 billion yuan ($15 billion) of Huarong’s assets. Further details on how the arrangement would work weren’t clear.“How much would Huarong get from selling 100 billion yuan in assets? Based on past experience, not 100 billion yuan,” said Bloomberg economist David Qu.Not so badA milder case for offshore bondholders would involve splitting China Huarong International Holdings Ltd. into bad and good entities, with the dollar debt included in the latter. In this scenario, Beijing would spin off the bad entity, protecting the unit that issues or guarantees most of Huarong’s dollar bonds.A clear separation -- with transparency over which assets are transfered to where -- would help restore investor trust in the good entity. China may still need to make an equity injection to shore up the good entity’s balance sheet. These changes wouldn’t necessarily be pain-free for bondholders, though the costs would be lower than the most bearish scenario.Bloomberg News reported last week that Huarong International is in the process of transferring distressed assets worth tens of billions of yuan into a separate offshore entity called China Huarong Overseas Investment Holding Co.Bullish outcomeA full and speedy bailout without a haircut imposed on investors. There’s no restructuring of the debt; the firm releases its 2020 earnings. The central bank assumes full responsibility for the firm’s finances and authorities clearly state their support for the company.China Huarong commits publicly to honor the keepwell provisions on nearly $22 billion of its dollar bonds. All the overseas units repay the $3.7 billion of outstanding offshore notes due this year in a timely manner.Improved investor confidence and a recovery in the firm’s dollar bond prices allow China Huarong’s international units to raise funds at an affordable cost in the offshore market, easing concern about refinancing.(Adds details about life insurer exposure in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- As President Xi Jinping targets China’s massive tech giants, the big question now is how he’ll get them to share key data as part of a sweeping plan to transform the world’s second-biggest economy.Until recently, China’s megafirms like Jack Ma’s Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have operated in a similar way to U.S. counterparts Facebook Inc. and Alphabet Inc., harnessing user data to refine an expanding array of digital services. Since more data leads to better products, the tech platforms often become natural monopolies -- giving them enormous wealth and power that also opens the door for abuses.More U.S. lawmakers have started calling for legislation to break up the American firms, but so far those efforts have failed to gain much traction. Europe has focused mainly on giving users more control over data and levying hefty antitrust fines against companies like Google.China, by contrast, is going further than any other country to rein its tech behemoths. Xi last month declared his intention to go after “platform” companies that amass data to create monopolies and gobble up smaller competitors. China’s regulators followed up by slapping a record $2.8 billion fine on Alibaba for abuse of market dominance, and gave dozens of other top internet companies a month to rectify anti-competitive practices.While part of the motivation is political, a potentially more important aspect is China’s attempt to create a market for data that unleashes its value and propels growth. Beijing is pouring money into digital infrastructure, drafting new laws on data usage and building new data centers around the country with the goal of positioning China as a leader in transforming the world economy over the next few decades.“This is not a short-term initiative -- it is a complete national refocusing on data as an economic driver,” said Kendra Schaefer, head of digital research at Trivium China, a consultancy in Beijing. “With such significant upsides, you are also potentially looking at a scenario where companies are more willing to adapt to Chinese net controls to gain access to the market.”China’s digital economy grew much faster than national gross domestic product in 2019, underscoring its significance to future growth, according to the Chinese Academy of Information and Communications Technology. Market research firm IDC projected that China would hold around a third of the world’s data by 2025, or roughly 48.6 zettabytes -- about 60% more than the U.S., or equivalent to more than 10 trillion DVDs.One big challenge will be how to get some of the country’s biggest holders of data on board. The bluntest way would be to seize their data outright, which some hardliners have suggested.Zhao Yanqing, a Xiamen University professor, made the case for nationalizing the data of big tech giants at a Chinese economic forum. Since China blocked foreign firms like Google and Facebook, he said, companies like Alibaba and Tencent received a benefit that should now be shared with society.“Only by establishing public ownership for platforms can we ‘tame’ capital,” Zhao said, according to a transcript published by the nationalistic news site Guancha.Still, most analysts view that as unlikely. While Xi has a long history of knocking back billionaires who could pose a threat to the Communist Party, he also wants to find a way to ensure growth is more evenly distributed among China’s 1.4 billion people. Although China is a one-party state, the party has staked its legitimacy in part on hitting targets for improved living standards -- and a booming digital economy is key to success.Nationalizing data could quickly backfire, stifling innovation at a time Xi needs technological breakthroughs as the U.S. works with allies to prevent China from obtaining advanced computer chips.“You need companies that are very competitive,” said Lizhi Liu, an assistant professor at Georgetown University who has written about data politics in China. “Nationalization of data would hurt the tech companies. If you take away the data, the companies will lose their incentive and their ability to innovate.”So Chinese officials are focused on crafting legislation on data ownership that addresses concerns from a range of competing interests. Local officials in tech hub Shenzhen might differ with antitrust bureaucrats on how much proprietary data companies must share, while security departments could clash with economic ministries on issues like data security.‘Expensive to Exploit’Much of the other work involves setting standards for datasets that are not uniform between different entities and provinces. This would allow them to be more easily used on new data exchanges such as the one recently launched in Beijing that aims to allow companies to trade anonymous proprietary data -- effectively a pilot for a national data trading system.So far similar projects set up in past years in cities like Shanghai and Guiyang in southern Guizhou province have only received tepid reception, partly because they are disconnected from each other and only hold small pools of data. While it’s crucial for big tech platforms and other private companies to buy in to the exchanges, the still-evolving regulatory framework is putting many players off.“Data in China is very fragmented and lacks common standards, which makes it difficult and expensive to exploit,” said Camille Boullenois, a consultant with Europe-based Sinolytics. “Drafting standards and encouraging cross-provincial databases will help incentivize data trade.”Until recently, Chinese lawmakers focused mostly on security. A 2017 law gave authorities the right to access almost all private data when necessary and demanded foreign firms store data from Chinese customers locally, forcing Apple Inc. to open a data center with local officials.China’s leaders are now focused on using big data to help governments provide better services. Firefighters can use it to respond to calls quicker, while data from hospitals can help track citizens and stem the spread of Covid-19. It would form the foundation of everything from smart cities to financial regulation to surveillance operations against political dissidents.China’s government is developing a digital yuan that will compete with Ant Group Co.’s Alipay and Tencent’s WeChat Pay, which together account for nearly all of the mobile-payments market, allowing the People’s Bank of China to gather enormous amounts of data on transactions. Authorities have also made significant advances with a system for measuring the social credit of companies on everything from tax payments to environmental protection to product quality.‘Still Exploring’For now, Chinese authorities have stressed they won’t force companies to hand over data. On a trip this month to the Guiyang data center, a local Communist Party official told Bloomberg News that companies are mostly concerned they will lose their competitive edge if they part ways with an essential resource.“With regard to the use, development and trade of data, we’re still exploring the mechanisms,” said Hu Jianhua, deputy director-general of Guizhou Provincial Big Data Development Administration. “For enterprises, they have the ownership of the data. We encourage them to make their data open but not force them to do so.”One possible solution is for the government to become co-investors with the companies. Bloomberg reported last month that China proposed establishing a joint venture led by the People’s Bank of China with local technology giants that would oversee the data they collect from hundreds of millions of consumers. The Financial Times reported Friday that Ant Group Co. is resisting such a proposal, which risks facing the same obstacles as when Tencent and Alibaba reportedly refused to share data with China’s central bank several years ago after it set up credit scoring company Baihang.Data privacy is the “biggest obstacle” the government faces in dealing with the tech giants, said Angela Zhang, author of “Chinese Antitrust Exceptionalism” and director of the Centre for Chinese Law at the University of Hong Kong. “There is an inherent tension between protecting consumer privacy and promoting competition among different platforms.”Big Tech SpookedExecutives at China’s biggest companies have sought to blunt the damage from Xi’s crackdown.After the Alibaba probe wrapped up, Chief Executive Officer Daniel Zhang told investors last week that the company will continue to work with regulators on data privacy. Earlier this month, companies including JD.com Inc. and Meituan pledged to play fair in data usage after Guangzhou antitrust regulators summoned them into a meeting. Robin Li, the head of top search company Baidu Inc., in March proposed to top Chinese lawmakers a pilot program to break up barriers in data flows among internet companies.The company reactions show they are spooked after years of limited measures to align with government policies, according to Dev Lewis, a research fellow at Digital Asia Hub in Shanghai.“Now that mirage has been lifted,” he said. “The onus is now firmly on the platform if they want to reinstate that. They need to take the initiative on the data front.”(Updates with report on central bank in 23rd paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.