|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||9.94 - 10.04|
|52 Week Range||7.61 - 10.04|
|Beta (5Y Monthly)||0.59|
|PE Ratio (TTM)||4.27|
|Forward Dividend & Yield||0.75 (7.49%)|
|Ex-Dividend Date||May 26, 2021|
|1y Target Est||N/A|
(Bloomberg) -- After fueling its V-shaped recovery by boosting spending on housing and infrastructure, China appears in no rush to drop its investment-led growth model despite international calls for it to “rebalance” its economy.First quarter data released Friday underlined just how reliant China remains on its current approach: investment spending rose 6% compared with a 4.2% increase in retail sales, based on two-year average growth rates to strip out base effects from last year’s coronavirus lockdowns. Beijing approved investment projects in energy, transport and hi-tech sectors worth 45.4 billion yuan ($7 billion) in the first quarter alone, it said Monday.The International Monetary Fund and others have long argued that China’s unusually heavy dependence on investment in infrastructure and property has led to an unbalanced economy. While it’s helped to fuel decades of rapid growth, critics say it’s also led to a reliance on debt -- which could spark a financial crisis -- and overcapacity in the economy, as has happened in the past in industries like steel and coal.Raising the share of household consumption would help to “rebalance” the economy, the argument goes. At about 43% of gross domestic product, China has one of the highest investment ratios of any major economy, while consumption is about 38%.Justin Yifu Lin, a former chief economist at the World Bank who was an adviser to President Xi Jinping last year, said in an interview that calls for consumption-led growth “are not supported by empirical evidence or economic theory.” He argues that high investment in new infrastructure and equipment enables workers to be more productive and raises their income, in turn increasing consumption.“If I’m an ordinary person what I care about will be the growth rate of consumption. We’d like to have higher consumption, but not necessarily a higher consumption ratio,” he said. Any increase in China’s consumer spending share in the next five years “will be gradual,” he said.Growth SourcesThat message is echoed by the central bank. In a working paper last week, People’s Bank of China researchers led by Chen Hao wrote that “consumption has never been a source of growth” and that “we attach importance to investment.” They singled out the U.S. as a warning, arguing that excessive consumption and low savings fueled a large trade deficit and contributed to the 2008 global financial crisis.The pandemic increased China’s gap between investment and consumption as Beijing aimed financial aid at companies to resume production, rather than handing cash to households. The U.S. Treasury said in a report last week that China’s lack of government support for households had fueled its rising trade surplus in 2020, calling on Beijing to “take decisive steps” to allocate more resources to consumers.Lin says declining household consumption and an increased trade surplus are short-term effects of the pandemic and Beijing doesn’t need aggressive policies to counter them.“Once the world returns to a normal situation I think the structure will spontaneously adjust back to the more balanced pattern,” he said.In the longer term, because China is the leading producer of consumer goods but relies on other countries for raw materials it uses for investment, increasing the consumption share would not have a direct effect on the country’s trade surplus, Lin said. China’s current account surplus, the broadest measure of trade in goods and services, fell below 2% of GDP before the coronavirus pandemic, even as it maintained a high investment rate.The share of consumer spending in China’s GDP will increase at a slower pace in the next few years and economic growth still needs the support of investment, said Xu Hongcai, deputy director of the China Association of Policy Science’s economic policy committee, a think tank affiliated with the ruling Communist Party’s Central Committee. There’s still a lack of infrastructure to support urbanization and an aging population, he added.There are other indications that Beijing’s consumption push will be muted. The government’s latest five-year plan released last month predicts that the share of household income in GDP, the main determinant of consumer spending power, will remain roughly constant through to 2025. Beijing plans to invest the equivalent of trillions of dollars in digital infrastructure and green energy over the next five years.‘Demand-Side Reforms’Late last year, the Communist Party called for “demand-side reform,” a pledge that many interpreted as emphasizing policies aimed at creating a more equal distribution of household income. Since those with lower incomes tend to save less, re-distributive policies could increase consumption without raising the overall household income share.Yet the five-year plan shifted language to “demand side management,” which is a “less ambitious formulation,” according to Andrew Batson, China research director at Gavekal Dragonomics. Bejing has announced plans to increase consumption this year, but “none of these policy goals are associated with quantitative targets, or seem sizable enough to move the needle on aggregate consumer spending,” Batson wrote in a note. “The government does not actually have a plan to boost consumption.”Some Chinese economists worry that investment spending is too low, rather than too high. Former central bank adviser Yu Yongding last week argued for a faster rate of increase in government infrastructure spending to boost growth, dismissing fears that added debt will increase financial risks.“An inadequate economic growth rate will increase, rather than reduce, vulnerabilities of the financial environment,” he wrote in the state-run China Daily.(Updates with first-quarter investment in second 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) -- China sought to allay fears it wants to topple the dollar as the world’s main reserve currency as Beijing makes bigger strides in creating its own digital yuan.People’s Bank of China Deputy Governor Li Bo said the goal for internationalizing its currency is not to replace the dollar, and the efforts to create a digital yuan are aimed at domestic use.“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” Li said on a panel at the Boao forum Sunday. “I think our goal is to allow the market to choose, to facilitate international trade and investment.”China’s central bank is currently testing the use of a “digital yuan” in various pilot programs across the country. A report earlier this week showed the Biden administration is increasing its scrutiny of China’s progress toward the digital yuan amid concern it could kick off a long-term bid to displace the dollar.The PBOC has been working on a digital currency since 2014 and its moves have heightened interest among central banks and policy makers, while the spread of cryptocurrencies has added to a sense that competitors to regular cash could change how the financial sector operates. The PBOC has moved closer to becoming the first major central bank to launch a virtual currency, rolling out a trial for consumers and businesses in 11 cities across the country.“The motivation for the e-yuan, for now at least, is focusing primarily on domestic use,” Li said. International “interoperability is a very complex issue and we are not in a hurry to reach any particular solution yet,” although there could be cross-border use “in the long term,” Li said.China’s Digital Yuan Won’t Topple Dollar, BOJ Official SaysThe central bank is planning to test the cross-border use of the digital yuan at the 2022 Beijing Winter Olympics, where it could be used by both domestic users as well as athletes and visitors from overseas, Li said.Agustin Carstens, general manager of Bank for International Settlements, said on the same panel there was huge potential in the cross-border use of digital currencies as they could make foreign exchange transaction and payment settlement extremely efficient. He said countries can explore various ways to achieve international interoperability, including making different systems compatible and creating connectivity links among the systems.Bahamas Tops China in Ranking of Central Bank Digital CurrenciesWhile the digitization of the yuan could benefit its use in cross-border transactions, the key factor in determining the currency’s global role is whether China will relax its capital controls, said Shen Jianguang, chief economist at JD.com Inc. “If you want to have a global reserve currency, you need to allow foreigners to hold it, to use it.”China will also need to allow its citizens to buy more foreign assets, further develop its financial markets and allow greater exchange rate flexibility in order to push for the internationalization of yuan, Shen said in an interview at the forum.China has seen a flood of capital flows into its financial markets since last year, boosting the amount of yuan traded globally. Yet, in the context of its vast markets, foreign ownership of local stocks and bonds remains relatively low at around 5% and 3% respectively. The yuan’s share of global payments and central bank reserves is still only about 2%.“The digital yuan is a means to help monetary policy efficiency and cross-border usage with partners that tend to trade with China in goods and services, less so the major economies like the U.S.,” said Stephen Chiu, Asia FX and rates strategist at Bloomberg Intelligence. “Digital or not, it’s not so easy to move the dollar’s dominance, be it as a trade settlement or reserve currency.”How China Is Closing In on Its Own Digital Currency: QuickTakeThe initial plans for a digital currency weren’t motivated by considerations of cross-border use, according to former People’s Bank of China Governor Zhou Xiaochuan, who noted that there are many issues with using a digital currency across national borders. International use could affect monetary policy independence, and it’s important it isn’t used for crime, he said on the same panel in Boao.(Updates with comments from BIS, details on yuan trade.)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) -- Ant Group denied a report that the Chinese finance-technology company is exploring ways for founder Jack Ma to sell his stake and give up control as a means to ease pressure from the country’s regulators.Reuters reported earlier that officials from the People’s Bank of China and the China Banking and Insurance Regulatory Commission held talks with Ma and Ant separately between January and March, where the possibility of Ma’s exit was discussed. The report cited people familiar with the matter.The company hoped that Ma’s stake would be sold to existing shareholders in Ant or its e-commerce partner Alibaba Group Holding Ltd., Reuters said.Ant issued a statement to the news agency that said the divestment of Ma’s stake wasn’t considered. The company reiterated the denial in a tweet following the report, saying the “divestment of Mr. Ma’s stake in Ant Group has never been the subject of discussions with anyone.”The Chinese’ government has been squeezing Ma’s internet empire as part of an effort to imprint its authority indelibly on the country’s technology industry. In landmark announcements this month, it slapped a record $2.8 billion fine on Alibaba for abusing its market dominance, then ordered an overhaul of Ant.Read more: Jack Ma’s Double-Whammy Marks End of China Tech’s Golden Age Ant will effectively be supervised more like a bank, a move with far-reaching implications for its growth and ability to press ahead with a landmark initial public offering that the government abruptly delayed late last year.The overhaul outlined by regulators and the company will see Ant transform itself into a financial holding company, with authorities directing the firm to open its payments app to competitors, increase oversight of how that business fuels it crucial consumer lending operations, and ramp up data protections. It will also need to cut the outstanding value of its money-market fund Yu’ebao.Bloomberg Intelligence senior analyst Francis Chan said in a report earlier this week he expects Ant’s valuation to drop below 700 billion yuan ($107 billion) from 2.1 trillion yuan in an earlier attempt to go public.“Ant Group’s prospects could wane further after China halts improper linking of Alipay payments with Ant’s other products,” he said. “New curbs on Yu’ebao also hurts its wealth business.”Ant’s Prospects Wane on Alipay’s Decoupling From Products: ReactFor 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.