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Delivery.com Chooses Hong Kong as First International Market

Delivery.com Chooses Hong Kong as First International Market


Delivery.com has officially launched as a corporate delivery service in Hong Kong, the company's first international city

Delivery.com Hong Kong will provide delivery services for corporate customers.

Delivery.com, the online service that brings restaurant deliveries, groceries, home essentials, and more to neighborhoods from New York to San Francisco, has officially entered the international market with the launch of Delivery.com Hong Kong.

Delivery.com Hong Kong will offer “a curated list of premium and popular merchants tailored to the corporate consumer.” Products available to Hong Kong businesses will include groceries, meals, craft beers and beverages, and more.

Local businesses will also offer special menu items and lunch sets that are only available to corporate consumers through Delivery.com.

“Hong Kong is ripe for hyperlocal e-commerce and Delivery.com’s proven expertise,” announced the company of the decision to choose Hong Kong as its first international platform. “Long working hours, the growing popularity of team lunches, and increasingly tech-savvy consumers support the need for a central online marketplace where busy professionals with limited free time can order high-quality delivery.”

Karen Lo is an associate editor at The Daily Meal. Follow her on Twitter @appleplexy.


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Millions of Hong Kongers to Take to the Streets Again—This Time to Vote

Natasha Khan

HONG KONG—Voters head to the polls here Sunday for scheduled district elections that may offer residents a political outlet to vent frustrations after months of violent clashes between protesters and police.

More than four million registered voters can take part in the semiautonomous city’s most representative and democratic election and—for the first time—all 452 elected seats for District Councils will be contested. Many candidates are young people entering political life for the first time and provide challenges against established rivals allied to the government and Beijing.

Authorities have said they intend to push ahead with polls despite earlier warnings that violence could lead to the election being postponed. Friday saw a relative lull in aggressive clashes after a recent surge in violence and a standoff at a university, which is ongoing.

While Hong Kong’s district councilors represent voters in community matters such as garbage collection and pet rights in housing estates, this year the poll will be seen as a referendum on the recent political crisis that has engulfed the city. Opinion surveys suggest the majority of people blame the government for the long-running protests that have pushed Hong Kong into recession, but the vote will more accurately reflect people’s sentiment.

“Historically, when the government is not in the public’s good graces, the democrats do better,” said Ivan Choy, a senior lecturer at Chinese University of Hong Kong’s school of government and public administration. “The election will be an important gauge on the society’s mood after close to half a year of protests.”


Cryptocurrency giant Bitmain chooses Hong Kong for IPO

HONG KONG (Reuters) - Bitmain Technologies, the world's largest designer of products used for mining cryptocurrencies, confirmed it was bringing its IPO to Hong Kong in what will be an important test of institutional investors' interest in the crypto sector.

Bitmain's prospectus, investors' first official look at its financial health, was filed late on Wednesday, and revealed that it made a profit of $742 million for the first six months of this year. The bulk of the company's revenue came from selling hardware to mine cryptocurrencies, the filing said.

The company said it will use the proceeds of the IPO to invest in research and development and expand its production output.

Bitmain designs different microchips specialised for mining cryptocurrenies and for artificial intelligence applications, as well as manufacturing cryptocurrency and AI hardware, and managing crypto mining farms.

The IPO comes at a time when the cryptocurrency sector is facing a number of headwinds.

The price of bitcoin has fallen 65 percent since its December 2017 peak, and on Wednesday one bitcoin was worth around $6,500. This fall has hurt the profitability of mining, and in turn has been weighing on sales of mining hardware.

In addition, there are regulatory concerns, given the Chinese authorities' public scepticism about cryptocurrencies.

Bitmain is the third, and largest, Chinese maker of bitcoin miners hoping to float in Hong Kong this year. It had 85 percent share of the cryptocurrency mining rig market in 2017 according to Bernstein research.

Canaan Inc, which had 10 percent of the market according to Bernstein and smaller rival Ebang filed their listing documents in May and June respectively, but have yet to complete their IPOs.

As well as testing investor sentiment around bitcoin, Bitmain's IPO will be another test of confidence in Hong Kong's equity market.

The IPO is expected to be the city's third largest tech float after Chinese smartphone marker Xiaomi Corp's 1810.HK IPO of $5.4 billion, and that of online food delivery-to-ticketing services platform Meituan Dianping, which earlier this month raised $4.2 biilion..

Like Xiaomi and Meituan, Bitmain said in its prospectus that it had adopted a dual class share structure, and that each share held by the company's founders, Zhan Ketuan and Wu Jihan, would allow them to exercise 10 votes.

In April, the Hong Kong bourse changed its rules to allow some companies with two classes of shares to list, in a bid to lure listings from large innovative companies.

(Reporting by Alun John, additional reporting by Julia Fioretti and Julie Zhu, Editing by William Maclean)

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China Braces for $1.3 Trillion Maturity Wall as Defaults Surge

(Bloomberg) -- Even by the standards of a record-breaking global credit binge, China’s corporate bond tab stands out: $1.3 trillion of domestic debt payable in the next 12 months.That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla Inc. twice over. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at an unprecedented pace.The combination has investors bracing for another turbulent stretch for the world’s second-largest credit market. It’s also underscoring the challenge for Chinese authorities as they work toward two conflicting goals: reducing moral hazard by allowing more defaults, and turning the domestic bond market into a more reliable source of long-term funding.While average corporate bond maturities have increased in the U.S., Europe and Japan in recent years, they’re getting shorter in China as defaults prompt investors to reduce risk. Domestic Chinese bonds issued in the first quarter had an average tenor of 3.02 years, down from 3.22 years for all of last year and on course for the shortest annual average since Fitch Ratings began compiling the data in 2016.“As credit risk increases, everyone wants to limit their exposure by investing in shorter maturities only,” said Iris Pang, chief economist for Greater China at ING Bank NV. “Issuers also want to sell shorter-dated bonds because as defaults rise, longer-dated bonds have even higher borrowing costs.”The move toward shorter maturities has coincided with a Chinese government campaign to instill more discipline in local credit markets, which have long been underpinned by implicit state guarantees. Investors are increasingly rethinking the widely held assumption that authorities will backstop big borrowers amid a string of missed payments by state-owned companies and a selloff in bonds issued by China Huarong Asset Management Co.The country’s onshore defaults have swelled from negligible levels in 2016 to exceed 100 billion yuan ($15.5 billion) for four straight years. That milestone was reached again last month, putting defaults on track for another record annual high.The resulting preference for shorter-dated bonds has exacerbated one of China’s structural challenges: a dearth of long-term institutional money. Even before authorities began allowing more defaults, short-term investments including banks’ wealth management products played an outsized role.Social security funds and insurance firms are the main providers of long-term funding in China, but their presence in the bond market is limited, said Wu Zhaoyin, chief strategist at AVIC Trust Co., a financial firm. “It’s difficult to sell long-dated bonds in China because there is a lack of long-term capital,” Wu said.Chinese authorities have been taking steps to attract long-term investors, including foreign pension funds and university endowments. The government has in recent years scrapped some investment quotas and dismantled foreign ownership limits for life insurers, brokerages and fund managers.But even if those efforts gain traction, it’s not clear Chinese companies will embrace longer maturities. Many prefer selling short-dated bonds because they lack long-term capital management plans, according to Shen Meng, director at Chanson & Co., a Beijing-based boutique investment bank. That applies even for state-owned enterprises, whose senior managers typically get reshuffled by the government every three to five years, Shen said.The upshot is that China’s domestic credit market faces a near constant cycle of refinancing and repayment risk, which threatens to exacerbate volatility as defaults rise. A similar dynamic is also playing out in the offshore market, where maturities total $167 billion over the next 12 months.For ING’s Pang, the cycle is unlikely to change anytime soon. “It may last for another decade in China,” she said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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First Warning Sign in the Global Commodity Boom Flashes in China

(Bloomberg) -- One pillar of this year’s blistering commodities rally -- Chinese demand -- may be teetering.Beijing aced its economic recovery from the pandemic largely via an expansion in credit and a state-aided construction boom that sucked in raw materials from across the planet. Already the world’s biggest consumer, China spent $150 billion on crude oil, iron ore and copper ore alone in the first four months of 2021. Resurgent demand and rising prices mean that’s $36 billion more than the same period last year.With global commodities rising to record highs, Chinese government officials are trying to temper prices and reduce some of the speculative froth that’s driven markets. Wary of inflating asset bubbles, the People’s Bank of China has also been restricting the flow of money to the economy since last year, albeit gradually to avoid derailing growth. At the same time, funding for infrastructure projects has shown signs of slowing.Economic data for April suggest that both China’s economic expansion and its credit impulse -- new credit as a percentage of GDP -- may already have crested, putting the rally on a precarious footing. The most obvious impact of China’s deleveraging would fall on those metals keyed to real estate and infrastructure spending, from copper and aluminum, to steel and its main ingredient, iron ore.“Credit is a major driver for commodity prices, and we reckon prices peak when credit peaks,” said Alison Li, co-head of base metals research at Mysteel in Shanghai. “That refers to global credit, but Chinese credit accounts for a big part of it, especially when it comes to infrastructure and property investment.”But the impact of China’s credit pullback could ripple far and wide, threatening the rally in global oil prices and even China’s crop markets. And while tighter money supply hasn’t stopped many metals hitting eye-popping levels in recent weeks, some, like copper, are already seeing consumers shying away from higher prices.“The slowdown in credit will have a negative impact on China’s demand for commodities,” said Hao Zhou, senior emerging markets economist at Commerzbank AG. “So far, property and infrastructure investments haven’t shown an obvious deceleration. But they are likely to trend lower in the second half of this year.”A lag between the withdrawal of credit and stimulus from the economy and its impact on China’s raw material purchases may mean that markets haven’t yet peaked. However, its companies may eventually soften imports due to tighter credit conditions, which means the direction of the global commodity market will hinge on how much the recovery in economies including the U.S. and Europe can continue to drive prices higher.Some sectors have seen policy push an expansion in capacity, such as Beijing’s move to grow the country’s crude oil refining and copper smelting industries. Purchases of the materials needed for production in those sectors may continue to see gains although at a slower pace.One example of slowing purchases is likely to be in refined copper, said Mysteel’s Li. The premium paid for the metal at the port of Yangshan has already hit a four-year low in a sign of waning demand, and imports are likely to fall this year, she said.At the same time, the rally in copper prices probably still has a few months to run, according to a recent note from Citigroup Inc., citing the lag between peak credit and peak demand. From around $10,000 a ton now, the bank expects copper to reach $12,200 by September.It’s a dynamic that’s also playing out in ferrous metals markets.“We’re still at an early phase of tightening in terms of money reaching projects,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. “Iron ore demand reacts with a lag of several months to tightening. Steel demand is still around record highs on the back of the economic recovery and ongoing investments, but is likely to pull back slightly by the end of the year.”For agriculture, credit tightening may only affect China’s soaring crop imports around the margins, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Co. Less cash in the system could soften domestic prices by curbing speculation, which may in turn reduce the small proportion of imports handled by private firms, he said.The wider trend is for China’s state-owned giants to keep importing grains to cover the nation’s domestic shortfall, to replenish state reserves and to meet trade deal obligations with the U.S.No DisasterMore broadly, Beijing’s policy tightening doesn’t spell disaster for commodities bulls. For one, the authorities are unlikely to accelerate deleveraging from this point, according the latest comments from the State Council, China’s cabinet.“Internal guidance from our macro department is that the country won’t tighten credit too much -- they just won’t loosen further,” said Harry Jiang, head of trading and research at Yonggang Resouces, a commodity trader in Shanghai. “We don’t have many concerns over credit tightening.”And in any case, raw materials markets are no longer almost entirely in thrall to Chinese demand.“In the past, the inflection point of industrial metal prices often coincides with that of China’s credit cycle,” said Larry Hu, chief China economist at Macquarie Group Ltd. “But that doesn’t mean it will be like that this time too, because the U.S. has unleashed much larger stimulus than China, and its demand is very strong.”Hu also pointed to caution among China’s leaders, who probably don’t want to risk choking off their much-admired recovery by sharp swings in policy.“I expect China’s property investment will slow down, but not by too much,” he said. “Infrastructure investment hasn’t changed too much in the past few years, and won’t this year either.”Additionally, China has been pumping up consumer spending as a lever for growth, and isn’t as reliant on infrastructure and property investment as it used to be, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. The disruption to global commodities supply because of the pandemic is also a new factor that can support prices, he said.Other policy priorities, such as cutting steel production to make inroads on China’s climate pledges, or boosting the supply of energy products, whether domestically or via purchases from overseas, are other complicating factors when it comes to assessing import demand and prices for specific commodities, according to analysts.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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Hong Kong Exchange’s New CEO Is Put on Cleanup Duty

(Bloomberg) -- The veteran JPMorgan Chase & Co. banker who’s taking the helm at Hong Kong’s exchange has been put on cleanup duty.Chairman Laura Cha has handed Nicolas Aguzin, who takes charge Monday, the task of reviewing the exchange’s practices after a bribery scandal and censure from the regulator, according to people familiar with the matter. The 52-year-old former head of JPMorgan’s international private bank is seen by Cha as having the experience to force a cultural shake-up given his background at a heavily regulated bank, said the people, asking to remain anonymous discussing sensitive issues.Aguzin takes over as the bourse is delivering record earnings. His predecessor, Charles Li, oversaw a doubling of revenue during his decade in charge through acquisitions, loosened listing rules and, most importantly, trading links with mainland China. The easier oversight allowed the listing of Chinese technology giants such as Alibaba Group Holding Ltd. and positioned it as the exchange-of-choice for mainland firms amid tensions with the U.S.But there has also been criticism that investor protections were sacrificed to win business. Over the past years, there has been a steady stream of flareups between the bourse and the regulator over IPO quality, the proliferation of shell companies and whether to allow dual class shares.“The HKEX has done a great job in market development, and has introduced measures to improve investor protection,” Sally Wong, CEO of Hong Kong Investment Funds Association, said in an email. “But it seems that issuers’ voices tend to prevail over that of the investors. We very much look forward to working with the new CEO to see how to strike a more appropriate balance to better safeguard investor interests.”Spokespeople for the exchange and the Securities and Futures Commission as well as Aguzin declined to comment.In a review released last year after the former IPO vetting co-head was arrested for bribery, the SFC discovered “numerous ambiguities” in the Chinese Wall between its listing and business divisions. Other issues highlighted last year include keeping track of share options and following up on complaints on withdrawn IPO applications.Cha had begun to tighten internal checks and balances for senior managers toward the end of Li’s tenure as well as assert more board control over hiring, people familiar have said. The exchange has halted the interactions between its listing and business units, according to the SFC review. Last week, in a joint statement with the SFC, the bourse vowed to better police its frothy IPO market, citing concerns about companies inflating their values, market manipulation and unusually high underwriting fees.Aguzin is expected by the board to prioritize the exchange’s role as a regulator alongside its growth ambitions, people familiar said.David Webb, a former HKEX director, investor and corporate governance activist, is skeptical the bourse will institute any meaningful reforms. “HKEX has, with government approval, lowered its standards to attract business, for example, by listing second-class shares with weak voting rights,” he said in an email. “It shows no sign of raising them again.”Investors have also urged the exchange to set rules requiring company boards to have a lead outside board member or an independent chair, according to Wong. “But it seems that the HKEX is not ready to even bring them up for market consultation.”The government is on board with Aguzin’s appointment, which comes at a fraught time after Beijing has tightened its grip on the city, raising questions about its continued status as an international financial hub.Secretary for Financial Services and the Treasury Christopher Hui said the three-tiered regulatory system comprising his department, the SFC and HKEX has worked well. Aguzin’s appointment embodies the city’s openness and its role as a gateway between China and the world, he said. “This is exactly what we will pursue.”Further deepening connections to China is seen as key to growth for the bourse, which also faces stiffer competition from mainland exchanges as China opens its financial markets.While Aguzin has worked in Asia for the past decade -- also serving as JPMorgan’s CEO of Asia Pacific from 2013 to 2020 -- he will be the first non-Chinese CEO of a bourse that often needs to deal with Beijing.Cha is well connected in China, having served as vice chairman of China Securities Regulatory Commission. She has signaled that she sees the bourse’s role as serving Beijing’s interests and avoiding competition with the mainland, a person said familiar with the matter said last year.The push toward the mainland is not all welcome in China. Expanding the link to include several benchmark stocks has proved difficult, with one sticking point being whether to include shares like Alibaba Group, which are dual listed and with weighted voting rights.Even so, Cha said at the time of the appointment that Aguzin’s remit will include further strengthening the link to the mainland.Another board member, Fred Hu, said in an interview that “Aguzin is well positioned to take HKEX into the future, to further deepen the connectivity with China but also connectivity with the rest of the world.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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(Bloomberg) -- An unprecedented fight over who should sit on the board of Exxon Mobil Corp. is turning into a referendum on Chief Executive Officer Darren Woods as a decades-long struggle by climate campaigners comes to a head.Activist investor Engine No. 1 LLC wants to replace one-third of Exxon’s board in an effort to force the Western world’s largest oil explorer to embrace a transition away from fossil fuels and end a decade of what it calls “value destruction.” Shareholders are set to gather — virtually — for their annual meeting on May 26.The stakes are high. Under Exxon’s bylaws, a victory for any dissident director would mean an incumbent must step down, equating to a zero-sum proxy contest: of 16 candidates, only 12 will prevail. Any dilution of Woods’s influence over the board could derail his long-term plans and force strategic and tactical changes he has previously rejected.Although Engine No. 1 hasn’t targeted Woods for removal, even a partial victory for the activist would be a serious, and perhaps fatal, blow to his leadership, according to Ceres, a coalition of environmentally active investors managing $37 trillion.“I don’t see how Darren Woods remains as CEO if one of the dissidents, let alone all four, are elected,” said Andrew Logan, director of oil and gas at Ceres. “It would be such a sign of fundamental dissatisfaction with the status quo that something would have to change. And that starts with the CEO.”Exxon's engagement with environmental activists was once characterized by a sense of bemusement — under former CEO Lee Raymond, Greenpeace protesters outside its annual meetings were offered donuts. But as worries about climate change have gone mainstream in the investment world, the clash has evolved into a confrontation over boardroom seats.In other corners of the commodities sector, shareholders this year have already shown frustration with executives’ reluctance to embrace tough environmental goals. DuPont de Nemours Inc. suffered an 81% vote against management on plastic-pollution disclosures, while ConocoPhillips lost a contest on adopting more stringent emission targets.Exxon’s meeting this year threatens to be one of the stormiest on the U.S. corporate calendar, made all the more remarkable for being instigated by a newly formed fund that only has a $54 million, or 0.02%, stake in the oil behemoth. Investor dissatisfaction with the company largely centers on two issues that are becoming more interlinked: climate change and profits. The oil giant envisages a profitable, long-term future for fossil fuels, but sees no point in investing in traditional renewable energy businesses. It also refuses to commit to a net-zero emissions target, unlike European rivals.Climate concerns are are resonating more deeply with investors at the same time that Exxon’s status as a financial powerhouse crumbles after multiple corporate missteps, some of which preceded Woods’s elevation to CEO in 2017. Returns on invested capital are a fraction of what they were in Exxon’s heyday a decade ago and debt ballooned 40% last year as Covid-19 paralyzed economies and energy demand around the world. Under mounting pressure and concerns over Exxon’s ability to pay the S&P 500’s third-largest dividend, the CEO slashed an ambitious $200 billion expansion program by a third late last year. It was a relief to some investors who had questioned both the cost and the need for such projects at a time when policymakers — and even rivals like BP Plc and Royal Dutch Shell Plc — are planning for the twilight of the petroleum era.Still, Engine No. 1 says Exxon needs higher-quality directors who are willing to challenge management. Exxon missed key industry trends such as the shale revolution, “the shift to focusing on project returns over chasing production growth, and the need to gradually prepare for rather than ignore the energy transition,” according to the San Francisco-based activist.After receiving early backing from major state pension funds, Engine No. 1’s campaign gathered momentum this month as two prominent shareholder-advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., threw their partial support behind the activist’s efforts. ISS wrote a scathing rebuke of Exxon’s climate strategy, saying the company had only taken “incremental steps to prepare for the inevitable.”Top 20 shareholder Legal & General Investment Management, a previous critic of Exxon, is also backing Engine No. 1 and has pledged to vote against Woods. However, the voting intentions of some other major investors, such as Vanguard Group, BlackRock Inc. and State Street Corp. aren’t clear — all three declined to comment when contacted by Bloomberg News. Norway’s giant sovereign wealth fund said late last week that it would support the reelection of most Exxon directors, but not Woods, part of its long-standing push to separate the roles of CEO and chairman at Exxon.With such animosity brewing, the usual course of action would be for Exxon’s board to meet with the activists and hash out a compromise. But that has yet to happen, and both sides appear to be entrenched.Exxon said in a May 14 letter to shareholders its board “listens and responds to shareholder feedback,” but that Engine No. 1, founded only a few months ago, wasn’t interested in engaging and “is trying to replace four of our world-class directors with unqualified nominees.'' The company added that the activist fund's plans would “derail our progress and jeopardize your dividend.”For its part, Engine No. 1 said Exxon refused to meet its nominees: Gregory Goff, former CEO of refiner Andeavor environmental scientist Kaisa Hietala private equity investor Alexander Karsner and Anders Runevad, ex-CEO of power producer Vestas Wind Systems A/S.Exxon did talk with another investor, hedge fund D.E. Shaw & Co., which built a stake in an effort to push for change. Those discussions led to the appointment of the new directors, including activist investor Jeff Ubben. The oil company has also announced new emissions targets, started a low-carbon business, and supported policies that will help technological innovations like carbon capture.In some respects Exxon is in a better position that it was at the start of 2021. Its stock has rallied more than 40% as oil prices rebounded and lockdowns are eased. Engine No. 1 points to its involvement as the turning point, while Exxon claims the market is rewarding prudent cost cutting and high-return investments made over the last couple of years. The forthcoming vote will help to determine which side of the debate other investors lean toward.“There’s a governance challenge at Exxon,” said John Hoeppner, head of U.S. sustainable investments at Legal & General. “How seriously is the current board questioning management’s business model? It’s important to add urgency to the debate.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Bubble Risks Test China’s Commitment to No Sharp Turn in Policy

(Bloomberg) -- Despite Beijing’s best efforts, asset bubbles are forming in China.Home prices are soaring, prompting officials to revive the idea of a national property tax. A surge in raw material prices spurred pledges to increase domestic supply, toughen market oversight, and crack down on speculation and hoarding.The rapid gains are challenging the central bank’s ability to restrain inflation without hiking borrowing costs or making a sharp turn in monetary policy -- something the People’s Bank of China has said it will avoid. The risk is the government’s attempts to curb price increases won’t be enough, forcing the central bank’s hand at a vulnerable time for domestic consumption.That would be a shock to the nation’s financial markets, which are pricing in a relatively benign scenario. The 10-year government bond yield has fallen to the lowest level in eight months, while the stock benchmark CSI 300 Index is the least volatile since January. The calm contrasts with the rest of the world, where investors are becoming increasingly obsessed with how central banks may react to the threat of an overheating global economy.“How to mitigate the boom in property and commodities without tightening macro policy -- it’s a real challenge for the Chinese government,” said Zhou Hao, an economist at Commerzbank AG in Singapore.More than 15 months after the pandemic first forced China to cut rates and inject trillions of yuan into the financial system, policy makers in Beijing are -- like many others across the world -- dealing with the aftermath. As the global economic recovery accelerates, some are being forced to act because of inflation: Brazil in March became the first Group of 20 nation to lift borrowing costs, with Turkey and Russia following suit. Even Iceland hiked a short-term rate in May.Others, like the Federal Reserve and the European Central Bank, have insisted spikes in prices are only temporary. The PBOC also downplayed inflation worries in its first-quarter monetary report, published shortly after data showed factory prices surged 6.8% in April -- the fastest pace since 2017.What Bloomberg Economists Say. “It will be a challenge for China to contain rising producer prices because few commodities are priced within the country. There’s not much China can do, and even tightening monetary policy will not be able to change the situation,” said David Qu, China economist at Bloomberg Economics.-- Bloomberg Terminal subscribers can access more insight HEREWhile the rapid increase in commodity prices moderated in recent days, a continuation of gains could pressure companies to pass on rising costs to consumers, who are already spending less than expected. Analysts at Huachuang Securities Co. said in a May 9 report that prices of consumer goods, like home appliances and furniture, as well as electric vehicles and food, are rising. Still, there’s little evidence of demand-driven pressures, with core inflation, which strips out volatile food and energy costs, fairly subdued.The threat of inflation -- coupled with a fragile economy -- tends to be bad news for stocks because of how it erodes corporate profits, and for bonds it reduces the value of future cash flows. Accelerating prices walloped China’s bond market in 2019, and contributed to a steep selloff in stocks in early 2016.In a sign of how seriously that threat is being taken, China’s cabinet said Wednesday more effort needs to be taken to tackle rising commodity prices. A PBOC official said China should allow the yuan to appreciate to offset the impact of rising import prices, according to an article published Friday. The currency is trading near an almost three-year high against the dollar.Imported inflation is a headache for China’s leaders already dealing with risks caused by a surge in capital inflows. In recent years Beijing opened investment channels to allow more funds into its financial system. The goal was to use foreign institutions’ heft to anchor its markets and stabilize its currency, but the record liquidity unleashed by global central banks in the wake of the pandemic is now pressuring prices in China.That’s prompted some strong language from senior officials. Top securities regulator Yi Huiman said in March large flows of “hot money” into China must be strictly controlled. The same month, banking regulator Guo Shuqing said he was “very worried” that asset bubbles in overseas markets would burst soon, posing a risk to the global economy.Deciding whether recent spikes in prices are temporary or a permanent shift toward sustained inflation is something Chinese policy makers have to grapple with. For now, Beijing’s current approach of jawboning, boosting supply and penalizing speculation appears to be targeted at the former.“It’s still too early to tell if China can contain the surge in producer prices, and if it can’t, whether that will have large-scale impact on consumer prices,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “This inflation is largely imported -- it’s not something that can be solved by the PBOC.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Inside the Race to Avert Disaster at China’s Biggest ‘Bad Bank’

(Bloomberg) -- It was past 9 p.m. on Financial Street in Beijing by the time the figure inside Huarong Tower there picked up an inkbrush and, with practiced strokes, began to set characters to paper.Another trying workday was ending for Wang Zhanfeng, corporate chairman, Chinese Communist Party functionary—and, less happily, replacement for a man who very recently had been executed.On this April night, Wang was spotted unwinding as he often does in his office: practicing the art of Chinese calligraphy, a form that expresses the beauty of classical characters and, it is said, the nature of the person who writes them.Its mastery requires patience, resolve, skill, calm—and Wang, 54, needs all that and more. Because here on Financial Street, a brisk walk from the hulking headquarters of the People’s Bank of China, a dark drama is playing out behind the mirrored façade of Huarong Tower. How it unfolds will test China’s vast, debt-ridden financial system, the technocrats working to fix it, and the foreign banks and investors caught in the middle.Welcome to the headquarters of China Huarong Asset Management Co., the troubled state-owned ‘bad bank’ that has set teeth on edge around the financial world.For months now Wang and others have been trying to clean up the mess here at Huarong, an institution that sits—quite literally—at the center of China’s financial power structure. To the south is the central bank, steward of the world’s second-largest economy to the southwest, the Ministry of Finance, Huarong’s principal shareholder less than 300 meters to the west, the China Banking and Insurance Regulatory Commission, entrusted with safeguarding the financial system and, of late, ensuring Huarong has a funding backstop from state-owned banks until at least August.The patch though doesn’t settle the question of how Huarong makes good on some $41 billion borrowed on the bond markets, most incurred under Wang’s predecessor before he was ensnared in a sweeping crackdown on corruption. That long-time executive, Lai Xiaomin, was put to death in January—his formal presence expunged from Huarong right down to the signature on its stock certificates.The bigger issue is what all this might portend for the nation’s financial system and efforts by China’s leader, Xi Jinping, to centralize control, rein in years of risky borrowing and set the nation’s financial house in order.“They’re damned if they do and damned if they don’t,” said Michael Pettis, a Beijing-based professor of finance at Peking University and author of Avoiding the Fall: China’s Economic Restructuring. Bailing out Huarong would reinforce the behavior of investors who ignore risk, he said, while a default endangers financial stability if a “chaotic” repricing of the bond market ensues.Just what is going on inside Huarong Tower? Given the stakes, few are willing to discuss that question publicly. But interviews with people who work there, as well as at various Chinese regulators, provide a glimpse into the eye of this storm.Huarong, simply put, has been in full crisis mode ever since it delayed its 2020 earnings results, eroding investor confidence. Executives have come to expect to be summoned by government authorities at a moment’s notice whenever market sentiment sours and the price of Huarong debt sinks anew. Wang and his team must provide weekly written updates on Huarong’s operations and liquidity. They have turned to state-owned banks, pleading for support, and reached out to bond traders to try to calm nerves, with little lasting success.In public statements, Huarong has insisted repeatedly that its position is ultimately sound and that it will honor its obligations. Banking regulators have had to sign off on the wording of those statements—another sign of how serious the situation is considered and, ultimately, who’s in charge.Then there are regular audiences with the finance ministry and the other powerful financial bureaucracies nearby. Among items usually on the agenda: possible plans to hive off various Huarong businesses.Huarong executives are often kept waiting and, people familiar with the meetings say, tend to gain only limited access to top officials at the CBIRC, the banking overseer.The country’s apex financial watchdog—chaired by Liu He, Xi’s right-hand man in overseeing the economy and financial system—has asked for briefings on the Huarong situation and coordinated meetings between regulators, according to regulatory officials. But it has yet to communicate to them a long-term solution, including whether to impose losses on bondholders, the officials said.Representatives at the People’s Bank of China, the CBIRC, Huarong and the Ministry of Finance didn’t respond to requests for comment.Focus on BasicsA mid-level party functionary with a PhD in finance from China’s reputed Southwestern University of Finance and Economics, Wang arrived at Huarong Tower in early 2018, just as the corruption scandal was consuming the giant asset management company. He is regarded inside Huarong as low-key and down-to-earth, particularly in comparison to the company’s previous leader, Lai, a man once known as the God of Wealth.Hundreds of Huarong staff, from Beijing division chiefs to branch employees in faraway outposts, listened in on April 16 as Wang reviewed the quarterly numbers. He stressed that the company’s fundamentals had improved since he took over, a view shared by some analysts though insufficient to pacify investors. But he had little to say about what is on so many minds: plans to restructure and shore up the giant company, which he’d pledged to clean up within three years of taking over.His main message to the troops: focus on the basics, like collecting on iffy assets and improving risk management. The employees were silent. No one asked a question.One employee characterized the mood in his area as business as usual. Another said co-workers at a Huarong subsidiary were worried the company might not be able to pay their salaries. There’s a widening gulf between the old guard and new, said a third staffer. Those who outlasted Lai and have seen their compensation cut year after year have little confidence in the turnaround, while new joiners are more hopeful about the opportunities the change of direction offers.Others joke that Huarong Tower must suffer from bad feng shui: after Lai was arrested, a bank that had a branch in the building had to be bailed out to the tune of $14 billion.Dark humor aside, a rough consensus has begun to emerge among senior management and mid-level regulators: like other key state-owned enterprises, Huarong still appears to be considered too big to fail. Many have come away with the impression—and it is that, an impression—that for now, at least, the Chinese government will stand behind Huarong.At the very least, these people say, no serious financial tumult, such as a default by Huarong, is likely to be permitted while the Chinese Communist Party is planning a nationwide spectacle to celebrate the 100th anniversary of its founding on July 1. Those festivities will give Xi—who has been positioning to stay in power indefinitely—an opportunity to cement his place among China’s most powerful leaders including Mao Zedong and Deng Xiaoping.What will come after that patriotic outpouring on July 1 is uncertain, even to many inside Huarong Tower. Liu He, China’s vice premier and chair of the powerful Financial Stability and Development Committee, appears in no hurry to force a difficult solution. Silence from Beijing has started to rattle local debt investors, who until about a week ago had seemed unmoved by the sell-off in Huarong’s offshore bonds.Competing InterestsHuarong’s role in absorbing and disposing of lenders’ soured debt is worth preserving to support the banking sector cleanup, but requires government intervention, according to Dinny McMahon, an economic analyst for Beijing-based consultancy Trivium China and author of China’s Great Wall of Debt.“We anticipate that foreign bondholders will be required to take a haircut, but it will be relatively small,” he said. “It will be designed to signal that investors should not assume government backing translates into carte blanche support.”For now, in the absence of direct orders from the top, Huarong has been caught in the middle of the competing interests among various state-owned enterprises and government bureaucracies.China Investment Corp., the $1 trillion sovereign fund, for instance, has turned down the idea of taking a controlling stake from the finance ministry. CIC officials have argued they don’t have the bandwidth or capability to fix Huarong’s problems, according to people familiar with the matter.The People’s Bank of China, meantime, is still trying to decide whether to proceed with a proposal that would see it assume more than 100 billion yuan ($15.5 billion) of bad assets from Huarong, those people said.And the Ministry of Finance, which owns 57% of Huarong on behalf of the Chinese government, hasn’t committed to recapitalizing the company, though it hasn’t ruled it out, either, one person said.CIC didn’t respond to requests for comment.The banking regulator has bought Huarong some time, brokering an agreement with state-owned lenders including Industrial & Commercial Bank of China Ltd. that would cover any funding needed to repay the equivalent of $2.5 billion coming due by the end of August. By then, the company aims to have completed its 2020 financial statements after spooking investors by missing deadlines in March and April.“How China deals with Huarong will have wide ramifications on global investors’ perception of and confidence in Chinese SOEs,” said Wu Qiong, a Hong Kong-based executive director at BOC International Holdings. “Should any defaults trigger a reassessment of the level of government support assumed in rating SOE credits, it would have deep repercussions for the offshore market.”The announcement of a new addition to Wang’s team underscores the stakes and, to some insiders, provides a measure of hope. Liang Qiang is a standing member of the All-China Financial Youth Federation, widely seen as a pipeline to groom future leaders for financial SOEs. Liang, who arrived at Huarong last week and will soon take on the role of president, has worked for the three other big state asset managers that were established, like Huarong, to help clean up bad debts at the nation’s banks. Some speculate this points to a wider plan: that Huarong might be used as a blueprint for how authorities approach these other sprawling, debt-ridden institutions.Meantime, inside Huarong Tower, a key item remains fixed in the busy schedules of top executives and rank-and-file employees alike. It is a monthly meeting, the topic of which is considered vital to Huarong’s rebirth: studying the doctrines of the Chinese Communist Party and speeches of President Xi Jinping. More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Crypto miners halt China business after Beijing cracks down, bitcoin dives

SHANGHAI (Reuters) -Cryptocurrency mining operators, including a Huobi Mall and BTC.TOP, are suspending their China operations after Beijing stepped up its efforts to crack down on bitcoin mining and trading, sending the digital currency tumbling. A State Council committee led by Vice Premier Liu He announced the crackdown late on Friday - the first time the council has targeted virtual currency mining, a big business in China that accounts for as much as 70% of the world's crypto supply. Crypto miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify virtual coin transactions in a process which produces newly minted crypto currencies such as bitcoin.

Dollar near 3-month low, weighed by Fed's dovish tilt

The dollar stood near its lowest level in three months against a resurgent euro, and traders pared earlier bets the Federal Reserve may move soon to taper its stimulus though markets were not fully convinced that higher U.S. inflation is transient. Minutes from the Fed's April policy meeting released last week showed a sizable minority of policymakers wanted to discuss tapering bond purchase on worries that pouring more money to an economy on the mend could stoke inflation. Still, Fed Chairman Jerome Powell's repeated comments that it is not yet time to discuss a reduction in quantitative monetary easing has led many investors to believe it will be months before the central bank actually tweaks policy.

Is Buying Bitcoin Right Now a Smart Idea?

It’s no longer news that Bitcoin’s dramatic fall on Thursday weighed on market sentiments relatively but Willy Woo a top crypto analyst, still believes the curtain call for Bitcoin’s overall upward rally has not occurred yet.

Bitcoin Volatility Puts Weekend Traders on Stomach-Churning Ride

(Bloomberg) -- Bitcoin’s extreme volatility carried into the weekend as the world’s largest cryptocurrency continued to whipsaw investors with double-digit percentage moves.Bitcoin traded at $33,052, down 13%, as of 3:45 p.m. in New York, holding below its 200-day moving average other cryptocurrencies, including Ethereum and Dogecoin, also slumped, according to CoinGecko.com. Earlier in the weekend, Bitcoin had climbed more than 8% to move back above $38,000 following a tweet from Elon Musk.A measure of implied volatility on Bitcoin comparable to the U.S. equity market’s VIX indicator sits above 130, higher than the stock version has ever gotten in 30 years. Thirty-day historical volatility in the coin is about 100, some seven times more than the S&P 500 and surpassing the comparable measure in lumber futures, and an ETF designed to pay twice the daily return in crude oil.Investors in Bitcoin are experiencing one of its rockiest weeks ever after a string of negative headlines, with prices swinging as much as 30% in each direction Wednesday alone, when it fell as low as $30,016, the least since January. Even with the gyrations, Bitcoin is still up more than 250% in the past year.The turbulent stretch began after Musk said Tesla would no longer accept Bitcoin as payment for its electric vehicles, citing the coin’s intensive energy use. Another blow came Friday when China reiterated a warning that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks.“Bitcoin has two problems, ESG and decreasing reliance on China, both of which could take some time” Edward Moya, senior market analyst with Oanda Corp., wrote in a note.Other cryptocurrencies also slumped on Sunday, with Ethereum briefly trading below $1,900 and satirical token Dogecoin dropping more than 16%, according to Coinmarketcap.com.Read more: Musk Tweets He Supports Crypto in Battle Against Fiat CurrenciesThe latest warning from Beijing followed a statement earlier in the week disseminated by the People’s Bank of China that financial institutions weren’t allowed to accept cryptocurrencies for payment.China has long expressed displeasure with the anonymity provided by Bitcoin and other crypto tokens. The country is home to a large concentration of the world’s crypto miners who use vast sums of computing power to verify transactions on the blockchain.“It is no surprise that governments are not inclined to give up their monetary monopolies. Throughout history, governments first regulate and then take ownership,” Deutsche Bank macro strategist Marion Laboure wrote in a May 20 report titled “Bitcoin: Trendy Is the Last Stage Before Tacky.” “As cryptocurrencies begin to seriously compete with regular currencies and fiat currencies, regulators and policymakers will crack down.”‘Higher Stakes’A mid-week report from blockchain analysis firm Chainalysis showed over half of the $410 billion spent on acquiring current Bitcoin holdings occurred in the past 12 months. About $110 billion of that was spent on buying it at an average cost of less than $36,000 per coin. That means the vast majority of investments aren’t making a profit unless the coin trades at $36,000 or higher.“The stakes are much higher now than they were in the past,” Philip Gradwell, chief economist at Chainalysis, said in an email. “This week’s price fall means that a lot of investments are now held at a loss. This is going to be a serious test for recent investors, but so much is at stake now that there is the incentive and resources to address the problems in crypto that prevent it from becoming a mature asset.”Weekends tend to be particularly volatile for crypto assets which -- unlike most traditional assets -- trade around the clock every day of the week. Before this weekend, Bitcoin’s average swing on Saturdays and Sundays this year comes in at 5.14%.That type of volatility is owing to a few factors: Bitcoin’s held by relatively few people, meaning that price swings can be magnified during low-volume periods. And the market remains hugely fragmented with dozens of platforms operating under different standards. That means cryptocurrencies lack a centralized market structure akin to that of traditional assets.“When noise is accompanied by a huge amount of speculation and the noise can be interpreted negatively, you get these huge swings,” said Eric Green, chief investment officer of equity at Penn Capital. “What goes straight up is going to come down at some point.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Gold Holds Near Four-Month High Amid Bullish Investor Sentiment

(Bloomberg) -- Gold steadied near the highest level in more than four months amid signs that investors are turning more bullish on the precious metal.Hedge fund managers increased their net-long gold positions to the highest in 16 weeks, data showed Friday. Bullion-backed exchange-traded funds have seen inflows in May, following three straight months of sales, according to data compiled by Bloomberg.Gold capped three straight weeks of gains as investors weighed inflation risks and spikes in coronavirus cases in some countries. Market-based gauges of inflation expectations have declined of late, though concerns linger that the post-pandemic recovery could stoke price pressures and force a pullback in extraordinary central bank support.Spot gold rose 0.1% to $1,883.89 an ounce by 8:15 a.m. in Singapore. Prices climbed to $1,890.13 last week, the highest since Jan. 8. Silver and palladium were steady, while platinum rose. The Bloomberg Dollar Spot Index was flat after rising 0.2% on Friday.Meanwhile, investors were also weighing the extreme volatility in Bitcoin, which may have lent an added pillar of support to bullion. Former Treasury Secretary Lawrence Summers said cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies will remain limited. Cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments,” he said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Huobi Scales Back Due to China Crackdown Bitcoin Falls Below $32K, Ether Past $2K

The exchange made the move on the heels of a series of crackdown notices from Bejing in recent weeks.


Cryptocurrency giant Bitmain chooses Hong Kong for IPO

By Alun John HONG KONG (Reuters) - Bitmain Technologies, the world's largest designer of products used for mining cryptocurrencies, confirmed it was bringing its IPO to Hong Kong in what will be an important test of institutional investors' interest in the crypto sector. Bitmain's prospectus, investors' first official look at its financial health, was filed late on Wednesday, and revealed that it made a profit of $742 million for the first six months of this year. The bulk of the company's revenue came from selling hardware to mine cryptocurrencies, the filing said. The company said it will use the proceeds of the IPO to invest in research and development and expand its production output. Bitmain designs different microchips specialized for mining cryptocurrenies and for artificial intelligence applications, as well as manufacturing cryptocurrency and AI hardware, and managing crypto mining farms. The IPO comes at a time when the cryptocurrency sector is facing a number of headwinds. The price of bitcoin has fallen 65 percent since its December 2017 peak, and on Wednesday one bitcoin was worth around $6,500. This fall has hurt the profitability of mining, and in turn has been weighing on sales of mining hardware. In addition, there are regulatory concerns, given the Chinese authorities' public scepticism about cryptocurrencies. TEST OF CONFIDENCE Bitmain is the third, and largest, Chinese maker of bitcoin miners hoping to float in Hong Kong this year. It had 85 percent share of the cryptocurrency mining rig market in 2017 according to Bernstein research. Canaan Inc, which had 10 percent of the market according to Bernstein and smaller rival Ebang filed their listing documents in May and June respectively, but have yet to complete their IPOs. As well as testing investor sentiment around bitcoin, Bitmain's IPO will be another test of confidence in Hong Kong's equity market. The IPO is expected to be the city's third largest tech float after Chinese smartphone marker Xiaomi Corp's 1810.HK IPO of $5.4 billion, and that of online food delivery-to-ticketing services platform Meituan Dianping, which earlier this month raised $4.2 billion.. Like Xiaomi and Meituan, Bitmain said in its prospectus that it had adopted a dual class share structure, and that each share held by the company's founders, Zhan Ketuan and Wu Jihan, would allow them to exercise 10 votes. In April, the Hong Kong bourse changed its rules to allow some companies with two classes of shares to list, in a bid to lure listings from large innovative companies. (Reporting by Alun John, additional reporting by Julia Fioretti and Julie Zhu, Editing by William Maclean)

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China Braces for $1.3 Trillion Maturity Wall as Defaults Surge

(Bloomberg) -- Even by the standards of a record-breaking global credit binge, China’s corporate bond tab stands out: $1.3 trillion of domestic debt payable in the next 12 months.That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla Inc. twice over. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at an unprecedented pace.The combination has investors bracing for another turbulent stretch for the world’s second-largest credit market. It’s also underscoring the challenge for Chinese authorities as they work toward two conflicting goals: reducing moral hazard by allowing more defaults, and turning the domestic bond market into a more reliable source of long-term funding.While average corporate bond maturities have increased in the U.S., Europe and Japan in recent years, they’re getting shorter in China as defaults prompt investors to reduce risk. Domestic Chinese bonds issued in the first quarter had an average tenor of 3.02 years, down from 3.22 years for all of last year and on course for the shortest annual average since Fitch Ratings began compiling the data in 2016.“As credit risk increases, everyone wants to limit their exposure by investing in shorter maturities only,” said Iris Pang, chief economist for Greater China at ING Bank NV. “Issuers also want to sell shorter-dated bonds because as defaults rise, longer-dated bonds have even higher borrowing costs.”The move toward shorter maturities has coincided with a Chinese government campaign to instill more discipline in local credit markets, which have long been underpinned by implicit state guarantees. Investors are increasingly rethinking the widely held assumption that authorities will backstop big borrowers amid a string of missed payments by state-owned companies and a selloff in bonds issued by China Huarong Asset Management Co.The country’s onshore defaults have swelled from negligible levels in 2016 to exceed 100 billion yuan ($15.5 billion) for four straight years. That milestone was reached again last month, putting defaults on track for another record annual high.The resulting preference for shorter-dated bonds has exacerbated one of China’s structural challenges: a dearth of long-term institutional money. Even before authorities began allowing more defaults, short-term investments including banks’ wealth management products played an outsized role.Social security funds and insurance firms are the main providers of long-term funding in China, but their presence in the bond market is limited, said Wu Zhaoyin, chief strategist at AVIC Trust Co., a financial firm. “It’s difficult to sell long-dated bonds in China because there is a lack of long-term capital,” Wu said.Chinese authorities have been taking steps to attract long-term investors, including foreign pension funds and university endowments. The government has in recent years scrapped some investment quotas and dismantled foreign ownership limits for life insurers, brokerages and fund managers.But even if those efforts gain traction, it’s not clear Chinese companies will embrace longer maturities. Many prefer selling short-dated bonds because they lack long-term capital management plans, according to Shen Meng, director at Chanson & Co., a Beijing-based boutique investment bank. That applies even for state-owned enterprises, whose senior managers typically get reshuffled by the government every three to five years, Shen said.The upshot is that China’s domestic credit market faces a near constant cycle of refinancing and repayment risk, which threatens to exacerbate volatility as defaults rise. A similar dynamic is also playing out in the offshore market, where maturities total $167 billion over the next 12 months.For ING’s Pang, the cycle is unlikely to change anytime soon. “It may last for another decade in China,” she said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Bitcoin, Ether Now Down 50% From Last Month’s ATHs as Rout Resumes

Even if Huobi is the specific catalyst for today's plunge, it's just the latest negative news in the sector that has been battered in the last few weeks.

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Summers Says Crypto Has Chance of Becoming ‘Digital Gold’

(Bloomberg) -- Former U.S. Treasury Secretary Lawrence Summers said cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies will remain limited.Speaking at the end of a week in which Bitcoin whipsawed, Summers told Bloomberg Television’s “Wall Street Week” with David Westin that cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments.”“Gold has been a primary asset of that kind for a long time,” said Summers, a paid contributor to Bloomberg. “Crypto has a chance of becoming an agreed form that people who are looking for safety hold wealth in. My guess is that crypto is here to stay, and probably here to stay as a kind of digital gold.”If cryptocurrencies became even a third of the total value of gold, Summers said that would be a “substantial appreciation from current levels” and that means there’s a “good prospect that crypto will be part of the system for quite a while to come.”Comparing Bitcoin to the yellow metal is common in the crypto community, with various estimates as to whether and how quickly their total market values might equalize.Yassine Elmandjra, crypto analyst at Cathie Wood’s Ark Investment Management LLC, said earlier this month that if gold is assumed to have a market cap of around $10 trillion, “it’s not out of the question that Bitcoin will reach gold parity in the next five years.” With Bitcoin’s market cap around $700 billion, that could mean price appreciation of around 14-fold or more.But Summers said cryptocurrencies do not matter to the overall economy and were unlikely to ever serve as a majority of payments.Summers is on the board of directors of Square Inc. The company said this month that sales in the first quarter more than tripled, driven by skyrocketing Bitcoin purchases through the company’s Cash App.Summers’ comments were echoed by Nobel laureate Paul Krugman, who doubted crypto’s value as a medium of exchange or stable purchasing power, but said some forms of it may continue to exist as an alternative to gold.“Are cryptocurrencies headed for a crash sometime soon? Not necessarily,” Krugman wrote in the New York Times. “One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset.”Summers also said that President Joe Biden’s administration is heading in the “right direction” by asking companies to pay more tax. He argued policy makers in the past had not been guilty of pursuing “too much antitrust” regulation although he warned it would be “badly wrong” to go after companies just because of increasing market share and profits.Returning to his worry that the U.S. economy risks overheating, Summers said the Federal Reserve should be more aware of the inflationary threat.“I don’t think the Fed is projecting in a way that reflects the potential seriousness of the problem,” he said. “I am concerned that with everything that’s going on, the economy may be a bit charging toward a wall.”(Adds Summers is on Square’s board in 8th paragraph)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Credit card debt has plunged — but what if you're still up to your neck?

If your finances are being hit hard by the pandemic, you may need to get creative.

First Warning Sign in the Global Commodity Boom Flashes in China

(Bloomberg) -- One pillar of this year’s blistering commodities rally -- Chinese demand -- may be teetering.Beijing aced its economic recovery from the pandemic largely via an expansion in credit and a state-aided construction boom that sucked in raw materials from across the planet. Already the world’s biggest consumer, China spent $150 billion on crude oil, iron ore and copper ore alone in the first four months of 2021. Resurgent demand and rising prices mean that’s $36 billion more than the same period last year.With global commodities rising to record highs, Chinese government officials are trying to temper prices and reduce some of the speculative froth that’s driven markets. Wary of inflating asset bubbles, the People’s Bank of China has also been restricting the flow of money to the economy since last year, albeit gradually to avoid derailing growth. At the same time, funding for infrastructure projects has shown signs of slowing.Economic data for April suggest that both China’s economic expansion and its credit impulse -- new credit as a percentage of GDP -- may already have crested, putting the rally on a precarious footing. The most obvious impact of China’s deleveraging would fall on those metals keyed to real estate and infrastructure spending, from copper and aluminum, to steel and its main ingredient, iron ore.“Credit is a major driver for commodity prices, and we reckon prices peak when credit peaks,” said Alison Li, co-head of base metals research at Mysteel in Shanghai. “That refers to global credit, but Chinese credit accounts for a big part of it, especially when it comes to infrastructure and property investment.”But the impact of China’s credit pullback could ripple far and wide, threatening the rally in global oil prices and even China’s crop markets. And while tighter money supply hasn’t stopped many metals hitting eye-popping levels in recent weeks, some, like copper, are already seeing consumers shying away from higher prices.“The slowdown in credit will have a negative impact on China’s demand for commodities,” said Hao Zhou, senior emerging markets economist at Commerzbank AG. “So far, property and infrastructure investments haven’t shown an obvious deceleration. But they are likely to trend lower in the second half of this year.”A lag between the withdrawal of credit and stimulus from the economy and its impact on China’s raw material purchases may mean that markets haven’t yet peaked. However, its companies may eventually soften imports due to tighter credit conditions, which means the direction of the global commodity market will hinge on how much the recovery in economies including the U.S. and Europe can continue to drive prices higher.Some sectors have seen policy push an expansion in capacity, such as Beijing’s move to grow the country’s crude oil refining and copper smelting industries. Purchases of the materials needed for production in those sectors may continue to see gains although at a slower pace.One example of slowing purchases is likely to be in refined copper, said Mysteel’s Li. The premium paid for the metal at the port of Yangshan has already hit a four-year low in a sign of waning demand, and imports are likely to fall this year, she said.At the same time, the rally in copper prices probably still has a few months to run, according to a recent note from Citigroup Inc., citing the lag between peak credit and peak demand. From around $10,000 a ton now, the bank expects copper to reach $12,200 by September.It’s a dynamic that’s also playing out in ferrous metals markets.“We’re still at an early phase of tightening in terms of money reaching projects,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. “Iron ore demand reacts with a lag of several months to tightening. Steel demand is still around record highs on the back of the economic recovery and ongoing investments, but is likely to pull back slightly by the end of the year.”For agriculture, credit tightening may only affect China’s soaring crop imports around the margins, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Co. Less cash in the system could soften domestic prices by curbing speculation, which may in turn reduce the small proportion of imports handled by private firms, he said.The wider trend is for China’s state-owned giants to keep importing grains to cover the nation’s domestic shortfall, to replenish state reserves and to meet trade deal obligations with the U.S.No DisasterMore broadly, Beijing’s policy tightening doesn’t spell disaster for commodities bulls. For one, the authorities are unlikely to accelerate deleveraging from this point, according the latest comments from the State Council, China’s cabinet.“Internal guidance from our macro department is that the country won’t tighten credit too much -- they just won’t loosen further,” said Harry Jiang, head of trading and research at Yonggang Resouces, a commodity trader in Shanghai. “We don’t have many concerns over credit tightening.”And in any case, raw materials markets are no longer almost entirely in thrall to Chinese demand.“In the past, the inflection point of industrial metal prices often coincides with that of China’s credit cycle,” said Larry Hu, chief China economist at Macquarie Group Ltd. “But that doesn’t mean it will be like that this time too, because the U.S. has unleashed much larger stimulus than China, and its demand is very strong.”Hu also pointed to caution among China’s leaders, who probably don’t want to risk choking off their much-admired recovery by sharp swings in policy.“I expect China’s property investment will slow down, but not by too much,” he said. “Infrastructure investment hasn’t changed too much in the past few years, and won’t this year either.”Additionally, China has been pumping up consumer spending as a lever for growth, and isn’t as reliant on infrastructure and property investment as it used to be, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. The disruption to global commodities supply because of the pandemic is also a new factor that can support prices, he said.Other policy priorities, such as cutting steel production to make inroads on China’s climate pledges, or boosting the supply of energy products, whether domestically or via purchases from overseas, are other complicating factors when it comes to assessing import demand and prices for specific commodities, according to analysts.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Zara owner Inditex to close all stores in Venezuela, local partner says

Inditex, owner of brands including Zara, Bershka and Pull & Bear, will close all its stores in Venezuela in coming weeks as a deal between the retailer and its local partner Phoenix World Trade has come under review, a spokesperson for Phoenix World Trade said. Phoenix World Trade, a company based in Panama and controlled by Venezuelan businessman Camilo Ibrahim, took over operation of Inditex stores in the South American country in 2007. "Phoenix World Trade is re-evaluating the commercial presence of its franchised brands Zara, Bershka and Pull&Bear in Venezuela, to make it consistent with the new model of integration and digital transformation announced by Inditex," the company said in response to a Reuters request.

Hong Kong Exchange’s New CEO Is Put on Cleanup Duty

(Bloomberg) -- The veteran JPMorgan Chase & Co. banker who’s taking the helm at Hong Kong’s exchange has been put on cleanup duty.Chairman Laura Cha has handed Nicolas Aguzin, who takes charge Monday, the task of reviewing the exchange’s practices after a bribery scandal and censure from the regulator, according to people familiar with the matter. The 52-year-old former head of JPMorgan’s international private bank is seen by Cha as having the experience to force a cultural shake-up given his background at a heavily regulated bank, said the people, asking to remain anonymous discussing sensitive issues.Aguzin takes over as the bourse is delivering record earnings. His predecessor, Charles Li, oversaw a doubling of revenue during his decade in charge through acquisitions, loosened listing rules and, most importantly, trading links with mainland China. The easier oversight allowed the listing of Chinese technology giants such as Alibaba Group Holding Ltd. and positioned it as the exchange-of-choice for mainland firms amid tensions with the U.S.But there has also been criticism that investor protections were sacrificed to win business. Over the past years, there has been a steady stream of flareups between the bourse and the regulator over IPO quality, the proliferation of shell companies and whether to allow dual class shares.“The HKEX has done a great job in market development, and has introduced measures to improve investor protection,” Sally Wong, CEO of Hong Kong Investment Funds Association, said in an email. “But it seems that issuers’ voices tend to prevail over that of the investors. We very much look forward to working with the new CEO to see how to strike a more appropriate balance to better safeguard investor interests.”Spokespeople for the exchange and the Securities and Futures Commission as well as Aguzin declined to comment.In a review released last year after the former IPO vetting co-head was arrested for bribery, the SFC discovered “numerous ambiguities” in the Chinese Wall between its listing and business divisions. Other issues highlighted last year include keeping track of share options and following up on complaints on withdrawn IPO applications.Cha had begun to tighten internal checks and balances for senior managers toward the end of Li’s tenure as well as assert more board control over hiring, people familiar have said. The exchange has halted the interactions between its listing and business units, according to the SFC review. Last week, in a joint statement with the SFC, the bourse vowed to better police its frothy IPO market, citing concerns about companies inflating their values, market manipulation and unusually high underwriting fees.Aguzin is expected by the board to prioritize the exchange’s role as a regulator alongside its growth ambitions, people familiar said.David Webb, a former HKEX director, investor and corporate governance activist, is skeptical the bourse will institute any meaningful reforms. “HKEX has, with government approval, lowered its standards to attract business, for example, by listing second-class shares with weak voting rights,” he said in an email. “It shows no sign of raising them again.”Investors have also urged the exchange to set rules requiring company boards to have a lead outside board member or an independent chair, according to Wong. “But it seems that the HKEX is not ready to even bring them up for market consultation.”The government is on board with Aguzin’s appointment, which comes at a fraught time after Beijing has tightened its grip on the city, raising questions about its continued status as an international financial hub.Secretary for Financial Services and the Treasury Christopher Hui said the three-tiered regulatory system comprising his department, the SFC and HKEX has worked well. Aguzin’s appointment embodies the city’s openness and its role as a gateway between China and the world, he said. “This is exactly what we will pursue.”Further deepening connections to China is seen as key to growth for the bourse, which also faces stiffer competition from mainland exchanges as China opens its financial markets.While Aguzin has worked in Asia for the past decade -- also serving as JPMorgan’s CEO of Asia Pacific from 2013 to 2020 -- he will be the first non-Chinese CEO of a bourse that often needs to deal with Beijing.Cha is well connected in China, having served as vice chairman of China Securities Regulatory Commission. She has signaled that she sees the bourse’s role as serving Beijing’s interests and avoiding competition with the mainland, a person said familiar with the matter said last year.The push toward the mainland is not all welcome in China. Expanding the link to include several benchmark stocks has proved difficult, with one sticking point being whether to include shares like Alibaba Group, which are dual listed and with weighted voting rights.Even so, Cha said at the time of the appointment that Aguzin’s remit will include further strengthening the link to the mainland.Another board member, Fred Hu, said in an interview that “Aguzin is well positioned to take HKEX into the future, to further deepen the connectivity with China but also connectivity with the rest of the world.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

As mortgage rates hit 3% again, expert predicts we'll see 4% rates this year

Though rates have inched up, it’s not too late to get a low rate to buy or refinance.

Exxon Activist Battle Turns Climate Angst Into Referendum on CEO

(Bloomberg) -- An unprecedented fight over who should sit on the board of Exxon Mobil Corp. is turning into a referendum on Chief Executive Officer Darren Woods as a decades-long struggle by climate campaigners comes to a head.Activist investor Engine No. 1 LLC wants to replace one-third of Exxon’s board in an effort to force the Western world’s largest oil explorer to embrace a transition away from fossil fuels and end a decade of what it calls “value destruction.” Shareholders are set to gather — virtually — for their annual meeting on May 26.The stakes are high. Under Exxon’s bylaws, a victory for any dissident director would mean an incumbent must step down, equating to a zero-sum proxy contest: of 16 candidates, only 12 will prevail. Any dilution of Woods’s influence over the board could derail his long-term plans and force strategic and tactical changes he has previously rejected.Although Engine No. 1 hasn’t targeted Woods for removal, even a partial victory for the activist would be a serious, and perhaps fatal, blow to his leadership, according to Ceres, a coalition of environmentally active investors managing $37 trillion.“I don’t see how Darren Woods remains as CEO if one of the dissidents, let alone all four, are elected,” said Andrew Logan, director of oil and gas at Ceres. “It would be such a sign of fundamental dissatisfaction with the status quo that something would have to change. And that starts with the CEO.”Exxon's engagement with environmental activists was once characterized by a sense of bemusement — under former CEO Lee Raymond, Greenpeace protesters outside its annual meetings were offered donuts. But as worries about climate change have gone mainstream in the investment world, the clash has evolved into a confrontation over boardroom seats.In other corners of the commodities sector, shareholders this year have already shown frustration with executives’ reluctance to embrace tough environmental goals. DuPont de Nemours Inc. suffered an 81% vote against management on plastic-pollution disclosures, while ConocoPhillips lost a contest on adopting more stringent emission targets.Exxon’s meeting this year threatens to be one of the stormiest on the U.S. corporate calendar, made all the more remarkable for being instigated by a newly formed fund that only has a $54 million, or 0.02%, stake in the oil behemoth. Investor dissatisfaction with the company largely centers on two issues that are becoming more interlinked: climate change and profits. The oil giant envisages a profitable, long-term future for fossil fuels, but sees no point in investing in traditional renewable energy businesses. It also refuses to commit to a net-zero emissions target, unlike European rivals.Climate concerns are are resonating more deeply with investors at the same time that Exxon’s status as a financial powerhouse crumbles after multiple corporate missteps, some of which preceded Woods’s elevation to CEO in 2017. Returns on invested capital are a fraction of what they were in Exxon’s heyday a decade ago and debt ballooned 40% last year as Covid-19 paralyzed economies and energy demand around the world. Under mounting pressure and concerns over Exxon’s ability to pay the S&P 500’s third-largest dividend, the CEO slashed an ambitious $200 billion expansion program by a third late last year. It was a relief to some investors who had questioned both the cost and the need for such projects at a time when policymakers — and even rivals like BP Plc and Royal Dutch Shell Plc — are planning for the twilight of the petroleum era.Still, Engine No. 1 says Exxon needs higher-quality directors who are willing to challenge management. Exxon missed key industry trends such as the shale revolution, “the shift to focusing on project returns over chasing production growth, and the need to gradually prepare for rather than ignore the energy transition,” according to the San Francisco-based activist.After receiving early backing from major state pension funds, Engine No. 1’s campaign gathered momentum this month as two prominent shareholder-advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., threw their partial support behind the activist’s efforts. ISS wrote a scathing rebuke of Exxon’s climate strategy, saying the company had only taken “incremental steps to prepare for the inevitable.”Top 20 shareholder Legal & General Investment Management, a previous critic of Exxon, is also backing Engine No. 1 and has pledged to vote against Woods. However, the voting intentions of some other major investors, such as Vanguard Group, BlackRock Inc. and State Street Corp. aren’t clear — all three declined to comment when contacted by Bloomberg News. Norway’s giant sovereign wealth fund said late last week that it would support the reelection of most Exxon directors, but not Woods, part of its long-standing push to separate the roles of CEO and chairman at Exxon.With such animosity brewing, the usual course of action would be for Exxon’s board to meet with the activists and hash out a compromise. But that has yet to happen, and both sides appear to be entrenched.Exxon said in a May 14 letter to shareholders its board “listens and responds to shareholder feedback,” but that Engine No. 1, founded only a few months ago, wasn’t interested in engaging and “is trying to replace four of our world-class directors with unqualified nominees.'' The company added that the activist fund's plans would “derail our progress and jeopardize your dividend.”For its part, Engine No. 1 said Exxon refused to meet its nominees: Gregory Goff, former CEO of refiner Andeavor environmental scientist Kaisa Hietala private equity investor Alexander Karsner and Anders Runevad, ex-CEO of power producer Vestas Wind Systems A/S.Exxon did talk with another investor, hedge fund D.E. Shaw & Co., which built a stake in an effort to push for change. Those discussions led to the appointment of the new directors, including activist investor Jeff Ubben. The oil company has also announced new emissions targets, started a low-carbon business, and supported policies that will help technological innovations like carbon capture.In some respects Exxon is in a better position that it was at the start of 2021. Its stock has rallied more than 40% as oil prices rebounded and lockdowns are eased. Engine No. 1 points to its involvement as the turning point, while Exxon claims the market is rewarding prudent cost cutting and high-return investments made over the last couple of years. The forthcoming vote will help to determine which side of the debate other investors lean toward.“There’s a governance challenge at Exxon,” said John Hoeppner, head of U.S. sustainable investments at Legal & General. “How seriously is the current board questioning management’s business model? It’s important to add urgency to the debate.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Bubble Risks Test China’s Commitment to No Sharp Turn in Policy

(Bloomberg) -- Despite Beijing’s best efforts, asset bubbles are forming in China.Home prices are soaring, prompting officials to revive the idea of a national property tax. A surge in raw material prices spurred pledges to increase domestic supply, toughen market oversight, and crack down on speculation and hoarding.The rapid gains are challenging the central bank’s ability to restrain inflation without hiking borrowing costs or making a sharp turn in monetary policy -- something the People’s Bank of China has said it will avoid. The risk is the government’s attempts to curb price increases won’t be enough, forcing the central bank’s hand at a vulnerable time for domestic consumption.That would be a shock to the nation’s financial markets, which are pricing in a relatively benign scenario. The 10-year government bond yield has fallen to the lowest level in eight months, while the stock benchmark CSI 300 Index is the least volatile since January. The calm contrasts with the rest of the world, where investors are becoming increasingly obsessed with how central banks may react to the threat of an overheating global economy.“How to mitigate the boom in property and commodities without tightening macro policy -- it’s a real challenge for the Chinese government,” said Zhou Hao, an economist at Commerzbank AG in Singapore.More than 15 months after the pandemic first forced China to cut rates and inject trillions of yuan into the financial system, policy makers in Beijing are -- like many others across the world -- dealing with the aftermath. As the global economic recovery accelerates, some are being forced to act because of inflation: Brazil in March became the first Group of 20 nation to lift borrowing costs, with Turkey and Russia following suit. Even Iceland hiked a short-term rate in May.Others, like the Federal Reserve and the European Central Bank, have insisted spikes in prices are only temporary. The PBOC also downplayed inflation worries in its first-quarter monetary report, published shortly after data showed factory prices surged 6.8% in April -- the fastest pace since 2017.What Bloomberg Economists Say. “It will be a challenge for China to contain rising producer prices because few commodities are priced within the country. There’s not much China can do, and even tightening monetary policy will not be able to change the situation,” said David Qu, China economist at Bloomberg Economics.-- Bloomberg Terminal subscribers can access more insight HEREWhile the rapid increase in commodity prices moderated in recent days, a continuation of gains could pressure companies to pass on rising costs to consumers, who are already spending less than expected. Analysts at Huachuang Securities Co. said in a May 9 report that prices of consumer goods, like home appliances and furniture, as well as electric vehicles and food, are rising. Still, there’s little evidence of demand-driven pressures, with core inflation, which strips out volatile food and energy costs, fairly subdued.The threat of inflation -- coupled with a fragile economy -- tends to be bad news for stocks because of how it erodes corporate profits, and for bonds it reduces the value of future cash flows. Accelerating prices walloped China’s bond market in 2019, and contributed to a steep selloff in stocks in early 2016.In a sign of how seriously that threat is being taken, China’s cabinet said Wednesday more effort needs to be taken to tackle rising commodity prices. A PBOC official said China should allow the yuan to appreciate to offset the impact of rising import prices, according to an article published Friday. The currency is trading near an almost three-year high against the dollar.Imported inflation is a headache for China’s leaders already dealing with risks caused by a surge in capital inflows. In recent years Beijing opened investment channels to allow more funds into its financial system. The goal was to use foreign institutions’ heft to anchor its markets and stabilize its currency, but the record liquidity unleashed by global central banks in the wake of the pandemic is now pressuring prices in China.That’s prompted some strong language from senior officials. Top securities regulator Yi Huiman said in March large flows of “hot money” into China must be strictly controlled. The same month, banking regulator Guo Shuqing said he was “very worried” that asset bubbles in overseas markets would burst soon, posing a risk to the global economy.Deciding whether recent spikes in prices are temporary or a permanent shift toward sustained inflation is something Chinese policy makers have to grapple with. For now, Beijing’s current approach of jawboning, boosting supply and penalizing speculation appears to be targeted at the former.“It’s still too early to tell if China can contain the surge in producer prices, and if it can’t, whether that will have large-scale impact on consumer prices,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “This inflation is largely imported -- it’s not something that can be solved by the PBOC.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Inside the Race to Avert Disaster at China’s Biggest ‘Bad Bank’

(Bloomberg) -- It was past 9 p.m. on Financial Street in Beijing by the time the figure inside Huarong Tower there picked up an inkbrush and, with practiced strokes, began to set characters to paper.Another trying workday was ending for Wang Zhanfeng, corporate chairman, Chinese Communist Party functionary—and, less happily, replacement for a man who very recently had been executed.On this April night, Wang was spotted unwinding as he often does in his office: practicing the art of Chinese calligraphy, a form that expresses the beauty of classical characters and, it is said, the nature of the person who writes them.Its mastery requires patience, resolve, skill, calm—and Wang, 54, needs all that and more. Because here on Financial Street, a brisk walk from the hulking headquarters of the People’s Bank of China, a dark drama is playing out behind the mirrored façade of Huarong Tower. How it unfolds will test China’s vast, debt-ridden financial system, the technocrats working to fix it, and the foreign banks and investors caught in the middle.Welcome to the headquarters of China Huarong Asset Management Co., the troubled state-owned ‘bad bank’ that has set teeth on edge around the financial world.For months now Wang and others have been trying to clean up the mess here at Huarong, an institution that sits—quite literally—at the center of China’s financial power structure. To the south is the central bank, steward of the world’s second-largest economy to the southwest, the Ministry of Finance, Huarong’s principal shareholder less than 300 meters to the west, the China Banking and Insurance Regulatory Commission, entrusted with safeguarding the financial system and, of late, ensuring Huarong has a funding backstop from state-owned banks until at least August.The patch though doesn’t settle the question of how Huarong makes good on some $41 billion borrowed on the bond markets, most incurred under Wang’s predecessor before he was ensnared in a sweeping crackdown on corruption. That long-time executive, Lai Xiaomin, was put to death in January—his formal presence expunged from Huarong right down to the signature on its stock certificates.The bigger issue is what all this might portend for the nation’s financial system and efforts by China’s leader, Xi Jinping, to centralize control, rein in years of risky borrowing and set the nation’s financial house in order.“They’re damned if they do and damned if they don’t,” said Michael Pettis, a Beijing-based professor of finance at Peking University and author of Avoiding the Fall: China’s Economic Restructuring. Bailing out Huarong would reinforce the behavior of investors who ignore risk, he said, while a default endangers financial stability if a “chaotic” repricing of the bond market ensues.Just what is going on inside Huarong Tower? Given the stakes, few are willing to discuss that question publicly. But interviews with people who work there, as well as at various Chinese regulators, provide a glimpse into the eye of this storm.Huarong, simply put, has been in full crisis mode ever since it delayed its 2020 earnings results, eroding investor confidence. Executives have come to expect to be summoned by government authorities at a moment’s notice whenever market sentiment sours and the price of Huarong debt sinks anew. Wang and his team must provide weekly written updates on Huarong’s operations and liquidity. They have turned to state-owned banks, pleading for support, and reached out to bond traders to try to calm nerves, with little lasting success.In public statements, Huarong has insisted repeatedly that its position is ultimately sound and that it will honor its obligations. Banking regulators have had to sign off on the wording of those statements—another sign of how serious the situation is considered and, ultimately, who’s in charge.Then there are regular audiences with the finance ministry and the other powerful financial bureaucracies nearby. Among items usually on the agenda: possible plans to hive off various Huarong businesses.Huarong executives are often kept waiting and, people familiar with the meetings say, tend to gain only limited access to top officials at the CBIRC, the banking overseer.The country’s apex financial watchdog—chaired by Liu He, Xi’s right-hand man in overseeing the economy and financial system—has asked for briefings on the Huarong situation and coordinated meetings between regulators, according to regulatory officials. But it has yet to communicate to them a long-term solution, including whether to impose losses on bondholders, the officials said.Representatives at the People’s Bank of China, the CBIRC, Huarong and the Ministry of Finance didn’t respond to requests for comment.Focus on BasicsA mid-level party functionary with a PhD in finance from China’s reputed Southwestern University of Finance and Economics, Wang arrived at Huarong Tower in early 2018, just as the corruption scandal was consuming the giant asset management company. He is regarded inside Huarong as low-key and down-to-earth, particularly in comparison to the company’s previous leader, Lai, a man once known as the God of Wealth.Hundreds of Huarong staff, from Beijing division chiefs to branch employees in faraway outposts, listened in on April 16 as Wang reviewed the quarterly numbers. He stressed that the company’s fundamentals had improved since he took over, a view shared by some analysts though insufficient to pacify investors. But he had little to say about what is on so many minds: plans to restructure and shore up the giant company, which he’d pledged to clean up within three years of taking over.His main message to the troops: focus on the basics, like collecting on iffy assets and improving risk management. The employees were silent. No one asked a question.One employee characterized the mood in his area as business as usual. Another said co-workers at a Huarong subsidiary were worried the company might not be able to pay their salaries. There’s a widening gulf between the old guard and new, said a third staffer. Those who outlasted Lai and have seen their compensation cut year after year have little confidence in the turnaround, while new joiners are more hopeful about the opportunities the change of direction offers.Others joke that Huarong Tower must suffer from bad feng shui: after Lai was arrested, a bank that had a branch in the building had to be bailed out to the tune of $14 billion.Dark humor aside, a rough consensus has begun to emerge among senior management and mid-level regulators: like other key state-owned enterprises, Huarong still appears to be considered too big to fail. Many have come away with the impression—and it is that, an impression—that for now, at least, the Chinese government will stand behind Huarong.At the very least, these people say, no serious financial tumult, such as a default by Huarong, is likely to be permitted while the Chinese Communist Party is planning a nationwide spectacle to celebrate the 100th anniversary of its founding on July 1. Those festivities will give Xi—who has been positioning to stay in power indefinitely—an opportunity to cement his place among China’s most powerful leaders including Mao Zedong and Deng Xiaoping.What will come after that patriotic outpouring on July 1 is uncertain, even to many inside Huarong Tower. Liu He, China’s vice premier and chair of the powerful Financial Stability and Development Committee, appears in no hurry to force a difficult solution. Silence from Beijing has started to rattle local debt investors, who until about a week ago had seemed unmoved by the sell-off in Huarong’s offshore bonds.Competing InterestsHuarong’s role in absorbing and disposing of lenders’ soured debt is worth preserving to support the banking sector cleanup, but requires government intervention, according to Dinny McMahon, an economic analyst for Beijing-based consultancy Trivium China and author of China’s Great Wall of Debt.“We anticipate that foreign bondholders will be required to take a haircut, but it will be relatively small,” he said. “It will be designed to signal that investors should not assume government backing translates into carte blanche support.”For now, in the absence of direct orders from the top, Huarong has been caught in the middle of the competing interests among various state-owned enterprises and government bureaucracies.China Investment Corp., the $1 trillion sovereign fund, for instance, has turned down the idea of taking a controlling stake from the finance ministry. CIC officials have argued they don’t have the bandwidth or capability to fix Huarong’s problems, according to people familiar with the matter.The People’s Bank of China, meantime, is still trying to decide whether to proceed with a proposal that would see it assume more than 100 billion yuan ($15.5 billion) of bad assets from Huarong, those people said.And the Ministry of Finance, which owns 57% of Huarong on behalf of the Chinese government, hasn’t committed to recapitalizing the company, though it hasn’t ruled it out, either, one person said.CIC didn’t respond to requests for comment.The banking regulator has bought Huarong some time, brokering an agreement with state-owned lenders including Industrial & Commercial Bank of China Ltd. that would cover any funding needed to repay the equivalent of $2.5 billion coming due by the end of August. By then, the company aims to have completed its 2020 financial statements after spooking investors by missing deadlines in March and April.“How China deals with Huarong will have wide ramifications on global investors’ perception of and confidence in Chinese SOEs,” said Wu Qiong, a Hong Kong-based executive director at BOC International Holdings. “Should any defaults trigger a reassessment of the level of government support assumed in rating SOE credits, it would have deep repercussions for the offshore market.”The announcement of a new addition to Wang’s team underscores the stakes and, to some insiders, provides a measure of hope. Liang Qiang is a standing member of the All-China Financial Youth Federation, widely seen as a pipeline to groom future leaders for financial SOEs. Liang, who arrived at Huarong last week and will soon take on the role of president, has worked for the three other big state asset managers that were established, like Huarong, to help clean up bad debts at the nation’s banks. Some speculate this points to a wider plan: that Huarong might be used as a blueprint for how authorities approach these other sprawling, debt-ridden institutions.Meantime, inside Huarong Tower, a key item remains fixed in the busy schedules of top executives and rank-and-file employees alike. It is a monthly meeting, the topic of which is considered vital to Huarong’s rebirth: studying the doctrines of the Chinese Communist Party and speeches of President Xi Jinping. More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Crypto miners halt China business after Beijing cracks down, bitcoin dives

SHANGHAI (Reuters) -Cryptocurrency mining operators, including a Huobi Mall and BTC.TOP, are suspending their China operations after Beijing stepped up its efforts to crack down on bitcoin mining and trading, sending the digital currency tumbling. A State Council committee led by Vice Premier Liu He announced the crackdown late on Friday - the first time the council has targeted virtual currency mining, a big business in China that accounts for as much as 70% of the world's crypto supply. Crypto miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify virtual coin transactions in a process which produces newly minted crypto currencies such as bitcoin.

Dollar near 3-month low, weighed by Fed's dovish tilt

The dollar stood near its lowest level in three months against a resurgent euro, and traders pared earlier bets the Federal Reserve may move soon to taper its stimulus though markets were not fully convinced that higher U.S. inflation is transient. Minutes from the Fed's April policy meeting released last week showed a sizable minority of policymakers wanted to discuss tapering bond purchase on worries that pouring more money to an economy on the mend could stoke inflation. Still, Fed Chairman Jerome Powell's repeated comments that it is not yet time to discuss a reduction in quantitative monetary easing has led many investors to believe it will be months before the central bank actually tweaks policy.

Is Buying Bitcoin Right Now a Smart Idea?

It’s no longer news that Bitcoin’s dramatic fall on Thursday weighed on market sentiments relatively but Willy Woo a top crypto analyst, still believes the curtain call for Bitcoin’s overall upward rally has not occurred yet.

Bitcoin Volatility Puts Weekend Traders on Stomach-Churning Ride

(Bloomberg) -- Bitcoin’s extreme volatility carried into the weekend as the world’s largest cryptocurrency continued to whipsaw investors with double-digit percentage moves.Bitcoin traded at $33,052, down 13%, as of 3:45 p.m. in New York, holding below its 200-day moving average other cryptocurrencies, including Ethereum and Dogecoin, also slumped, according to CoinGecko.com. Earlier in the weekend, Bitcoin had climbed more than 8% to move back above $38,000 following a tweet from Elon Musk.A measure of implied volatility on Bitcoin comparable to the U.S. equity market’s VIX indicator sits above 130, higher than the stock version has ever gotten in 30 years. Thirty-day historical volatility in the coin is about 100, some seven times more than the S&P 500 and surpassing the comparable measure in lumber futures, and an ETF designed to pay twice the daily return in crude oil.Investors in Bitcoin are experiencing one of its rockiest weeks ever after a string of negative headlines, with prices swinging as much as 30% in each direction Wednesday alone, when it fell as low as $30,016, the least since January. Even with the gyrations, Bitcoin is still up more than 250% in the past year.The turbulent stretch began after Musk said Tesla would no longer accept Bitcoin as payment for its electric vehicles, citing the coin’s intensive energy use. Another blow came Friday when China reiterated a warning that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks.“Bitcoin has two problems, ESG and decreasing reliance on China, both of which could take some time” Edward Moya, senior market analyst with Oanda Corp., wrote in a note.Other cryptocurrencies also slumped on Sunday, with Ethereum briefly trading below $1,900 and satirical token Dogecoin dropping more than 16%, according to Coinmarketcap.com.Read more: Musk Tweets He Supports Crypto in Battle Against Fiat CurrenciesThe latest warning from Beijing followed a statement earlier in the week disseminated by the People’s Bank of China that financial institutions weren’t allowed to accept cryptocurrencies for payment.China has long expressed displeasure with the anonymity provided by Bitcoin and other crypto tokens. The country is home to a large concentration of the world’s crypto miners who use vast sums of computing power to verify transactions on the blockchain.“It is no surprise that governments are not inclined to give up their monetary monopolies. Throughout history, governments first regulate and then take ownership,” Deutsche Bank macro strategist Marion Laboure wrote in a May 20 report titled “Bitcoin: Trendy Is the Last Stage Before Tacky.” “As cryptocurrencies begin to seriously compete with regular currencies and fiat currencies, regulators and policymakers will crack down.”‘Higher Stakes’A mid-week report from blockchain analysis firm Chainalysis showed over half of the $410 billion spent on acquiring current Bitcoin holdings occurred in the past 12 months. About $110 billion of that was spent on buying it at an average cost of less than $36,000 per coin. That means the vast majority of investments aren’t making a profit unless the coin trades at $36,000 or higher.“The stakes are much higher now than they were in the past,” Philip Gradwell, chief economist at Chainalysis, said in an email. “This week’s price fall means that a lot of investments are now held at a loss. This is going to be a serious test for recent investors, but so much is at stake now that there is the incentive and resources to address the problems in crypto that prevent it from becoming a mature asset.”Weekends tend to be particularly volatile for crypto assets which -- unlike most traditional assets -- trade around the clock every day of the week. Before this weekend, Bitcoin’s average swing on Saturdays and Sundays this year comes in at 5.14%.That type of volatility is owing to a few factors: Bitcoin’s held by relatively few people, meaning that price swings can be magnified during low-volume periods. And the market remains hugely fragmented with dozens of platforms operating under different standards. That means cryptocurrencies lack a centralized market structure akin to that of traditional assets.“When noise is accompanied by a huge amount of speculation and the noise can be interpreted negatively, you get these huge swings,” said Eric Green, chief investment officer of equity at Penn Capital. “What goes straight up is going to come down at some point.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Gold Holds Near Four-Month High Amid Bullish Investor Sentiment

(Bloomberg) -- Gold steadied near the highest level in more than four months amid signs that investors are turning more bullish on the precious metal.Hedge fund managers increased their net-long gold positions to the highest in 16 weeks, data showed Friday. Bullion-backed exchange-traded funds have seen inflows in May, following three straight months of sales, according to data compiled by Bloomberg.Gold capped three straight weeks of gains as investors weighed inflation risks and spikes in coronavirus cases in some countries. Market-based gauges of inflation expectations have declined of late, though concerns linger that the post-pandemic recovery could stoke price pressures and force a pullback in extraordinary central bank support.Spot gold rose 0.1% to $1,883.89 an ounce by 8:15 a.m. in Singapore. Prices climbed to $1,890.13 last week, the highest since Jan. 8. Silver and palladium were steady, while platinum rose. The Bloomberg Dollar Spot Index was flat after rising 0.2% on Friday.Meanwhile, investors were also weighing the extreme volatility in Bitcoin, which may have lent an added pillar of support to bullion. Former Treasury Secretary Lawrence Summers said cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies will remain limited. Cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments,” he said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Huobi Scales Back Due to China Crackdown Bitcoin Falls Below $32K, Ether Past $2K

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After Hong Kong’s Democratic Landslide

Voters line up at a polling station in Hong Kong, Nov. 24.

If there was any doubt that the population of this city opposes domination by the Chinese Communist Party, last month’s elections should have laid it to rest. Hong Kongers directly elect 452 of their 479 district councilors, and they voted in record numbers. When the newly elected take office in January, proponents of democracy will hold a 385-59 majority of elected seats (with eight independents), reversing the previous 292-120 pro-Beijing majority.

The rub is that district councilors have limited power, including minority votes and decision-making authority subject to approval from the Beijing-controlled Legislative Council. Leticia Wong, 27, who unseated a 12-year pro-Beijing incumbent, says she worries she’ll disappoint her supporters: “I am totally stressed.” They seem confident in her. As we talk over coffee a week and a half after the elections, four passersby wave at Ms. Wong or give her a proud thumbs up. Many more gape or beam at her.

Meager as their power is, Ms. Wong and her new colleagues plan to make the most of what voters entrusted to them. This week, several detailed their strategy.

Use the power of the purse to build and broaden the pro-democracy movement. Hong Kong’s 18 districts receive millions of dollars in public funding. District councilors allocate much of the money, but the Legislative Council must approve their proposals.


Cryptocurrency giant Bitmain chooses Hong Kong for IPO

HONG KONG (Reuters) - Bitmain Technologies, the world's largest designer of products used for mining cryptocurrencies, confirmed it was bringing its IPO to Hong Kong in what will be an important test of institutional investors' interest in the crypto sector.

Bitmain's prospectus, investors' first official look at its financial health, was filed late on Wednesday, and revealed that it made a profit of $742 million for the first six months of this year. The bulk of the company's revenue came from selling hardware to mine cryptocurrencies, the filing said.

The company said it will use the proceeds of the IPO to invest in research and development and expand its production output.

Bitmain designs different microchips specialised for mining cryptocurrenies and for artificial intelligence applications, as well as manufacturing cryptocurrency and AI hardware, and managing crypto mining farms.

The IPO comes at a time when the cryptocurrency sector is facing a number of headwinds.

The price of bitcoin has fallen 65 percent since its December 2017 peak, and on Wednesday one bitcoin was worth around $6,500. This fall has hurt the profitability of mining, and in turn has been weighing on sales of mining hardware.

In addition, there are regulatory concerns, given the Chinese authorities' public scepticism about cryptocurrencies.

Bitmain is the third, and largest, Chinese maker of bitcoin miners hoping to float in Hong Kong this year. It had 85 percent share of the cryptocurrency mining rig market in 2017 according to Bernstein research.

Canaan Inc, which had 10 percent of the market according to Bernstein and smaller rival Ebang filed their listing documents in May and June respectively, but have yet to complete their IPOs.

As well as testing investor sentiment around bitcoin, Bitmain's IPO will be another test of confidence in Hong Kong's equity market.

The IPO is expected to be the city's third largest tech float after Chinese smartphone marker Xiaomi Corp's 1810.HK IPO of $5.4 billion, and that of online food delivery-to-ticketing services platform Meituan Dianping, which earlier this month raised $4.2 biilion..

Like Xiaomi and Meituan, Bitmain said in its prospectus that it had adopted a dual class share structure, and that each share held by the company's founders, Zhan Ketuan and Wu Jihan, would allow them to exercise 10 votes.

In April, the Hong Kong bourse changed its rules to allow some companies with two classes of shares to list, in a bid to lure listings from large innovative companies.

(Reporting by Alun John, additional reporting by Julia Fioretti and Julie Zhu, Editing by William Maclean)

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China Braces for $1.3 Trillion Maturity Wall as Defaults Surge

(Bloomberg) -- Even by the standards of a record-breaking global credit binge, China’s corporate bond tab stands out: $1.3 trillion of domestic debt payable in the next 12 months.That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla Inc. twice over. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at an unprecedented pace.The combination has investors bracing for another turbulent stretch for the world’s second-largest credit market. It’s also underscoring the challenge for Chinese authorities as they work toward two conflicting goals: reducing moral hazard by allowing more defaults, and turning the domestic bond market into a more reliable source of long-term funding.While average corporate bond maturities have increased in the U.S., Europe and Japan in recent years, they’re getting shorter in China as defaults prompt investors to reduce risk. Domestic Chinese bonds issued in the first quarter had an average tenor of 3.02 years, down from 3.22 years for all of last year and on course for the shortest annual average since Fitch Ratings began compiling the data in 2016.“As credit risk increases, everyone wants to limit their exposure by investing in shorter maturities only,” said Iris Pang, chief economist for Greater China at ING Bank NV. “Issuers also want to sell shorter-dated bonds because as defaults rise, longer-dated bonds have even higher borrowing costs.”The move toward shorter maturities has coincided with a Chinese government campaign to instill more discipline in local credit markets, which have long been underpinned by implicit state guarantees. Investors are increasingly rethinking the widely held assumption that authorities will backstop big borrowers amid a string of missed payments by state-owned companies and a selloff in bonds issued by China Huarong Asset Management Co.The country’s onshore defaults have swelled from negligible levels in 2016 to exceed 100 billion yuan ($15.5 billion) for four straight years. That milestone was reached again last month, putting defaults on track for another record annual high.The resulting preference for shorter-dated bonds has exacerbated one of China’s structural challenges: a dearth of long-term institutional money. Even before authorities began allowing more defaults, short-term investments including banks’ wealth management products played an outsized role.Social security funds and insurance firms are the main providers of long-term funding in China, but their presence in the bond market is limited, said Wu Zhaoyin, chief strategist at AVIC Trust Co., a financial firm. “It’s difficult to sell long-dated bonds in China because there is a lack of long-term capital,” Wu said.Chinese authorities have been taking steps to attract long-term investors, including foreign pension funds and university endowments. The government has in recent years scrapped some investment quotas and dismantled foreign ownership limits for life insurers, brokerages and fund managers.But even if those efforts gain traction, it’s not clear Chinese companies will embrace longer maturities. Many prefer selling short-dated bonds because they lack long-term capital management plans, according to Shen Meng, director at Chanson & Co., a Beijing-based boutique investment bank. That applies even for state-owned enterprises, whose senior managers typically get reshuffled by the government every three to five years, Shen said.The upshot is that China’s domestic credit market faces a near constant cycle of refinancing and repayment risk, which threatens to exacerbate volatility as defaults rise. A similar dynamic is also playing out in the offshore market, where maturities total $167 billion over the next 12 months.For ING’s Pang, the cycle is unlikely to change anytime soon. “It may last for another decade in China,” she said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Bitcoin, Ether Now Down 50% From Last Month’s ATHs as Rout Resumes

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Summers Says Crypto Has Chance of Becoming ‘Digital Gold’

(Bloomberg) -- Former U.S. Treasury Secretary Lawrence Summers said cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies will remain limited.Speaking at the end of a week in which Bitcoin whipsawed, Summers told Bloomberg Television’s “Wall Street Week” with David Westin that cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments.”“Gold has been a primary asset of that kind for a long time,” said Summers, a paid contributor to Bloomberg. “Crypto has a chance of becoming an agreed form that people who are looking for safety hold wealth in. My guess is that crypto is here to stay, and probably here to stay as a kind of digital gold.”If cryptocurrencies became even a third of the total value of gold, Summers said that would be a “substantial appreciation from current levels” and that means there’s a “good prospect that crypto will be part of the system for quite a while to come.”Comparing Bitcoin to the yellow metal is common in the crypto community, with various estimates as to whether and how quickly their total market values might equalize.Yassine Elmandjra, crypto analyst at Cathie Wood’s Ark Investment Management LLC, said earlier this month that if gold is assumed to have a market cap of around $10 trillion, “it’s not out of the question that Bitcoin will reach gold parity in the next five years.” With Bitcoin’s market cap around $700 billion, that could mean price appreciation of around 14-fold or more.But Summers said cryptocurrencies do not matter to the overall economy and were unlikely to ever serve as a majority of payments.Summers is on the board of directors of Square Inc. The company said this month that sales in the first quarter more than tripled, driven by skyrocketing Bitcoin purchases through the company’s Cash App.Summers’ comments were echoed by Nobel laureate Paul Krugman, who doubted crypto’s value as a medium of exchange or stable purchasing power, but said some forms of it may continue to exist as an alternative to gold.“Are cryptocurrencies headed for a crash sometime soon? Not necessarily,” Krugman wrote in the New York Times. “One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset.”Summers also said that President Joe Biden’s administration is heading in the “right direction” by asking companies to pay more tax. He argued policy makers in the past had not been guilty of pursuing “too much antitrust” regulation although he warned it would be “badly wrong” to go after companies just because of increasing market share and profits.Returning to his worry that the U.S. economy risks overheating, Summers said the Federal Reserve should be more aware of the inflationary threat.“I don’t think the Fed is projecting in a way that reflects the potential seriousness of the problem,” he said. “I am concerned that with everything that’s going on, the economy may be a bit charging toward a wall.”(Adds Summers is on Square’s board in 8th paragraph)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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First Warning Sign in the Global Commodity Boom Flashes in China

(Bloomberg) -- One pillar of this year’s blistering commodities rally -- Chinese demand -- may be teetering.Beijing aced its economic recovery from the pandemic largely via an expansion in credit and a state-aided construction boom that sucked in raw materials from across the planet. Already the world’s biggest consumer, China spent $150 billion on crude oil, iron ore and copper ore alone in the first four months of 2021. Resurgent demand and rising prices mean that’s $36 billion more than the same period last year.With global commodities rising to record highs, Chinese government officials are trying to temper prices and reduce some of the speculative froth that’s driven markets. Wary of inflating asset bubbles, the People’s Bank of China has also been restricting the flow of money to the economy since last year, albeit gradually to avoid derailing growth. At the same time, funding for infrastructure projects has shown signs of slowing.Economic data for April suggest that both China’s economic expansion and its credit impulse -- new credit as a percentage of GDP -- may already have crested, putting the rally on a precarious footing. The most obvious impact of China’s deleveraging would fall on those metals keyed to real estate and infrastructure spending, from copper and aluminum, to steel and its main ingredient, iron ore.“Credit is a major driver for commodity prices, and we reckon prices peak when credit peaks,” said Alison Li, co-head of base metals research at Mysteel in Shanghai. “That refers to global credit, but Chinese credit accounts for a big part of it, especially when it comes to infrastructure and property investment.”But the impact of China’s credit pullback could ripple far and wide, threatening the rally in global oil prices and even China’s crop markets. And while tighter money supply hasn’t stopped many metals hitting eye-popping levels in recent weeks, some, like copper, are already seeing consumers shying away from higher prices.“The slowdown in credit will have a negative impact on China’s demand for commodities,” said Hao Zhou, senior emerging markets economist at Commerzbank AG. “So far, property and infrastructure investments haven’t shown an obvious deceleration. But they are likely to trend lower in the second half of this year.”A lag between the withdrawal of credit and stimulus from the economy and its impact on China’s raw material purchases may mean that markets haven’t yet peaked. However, its companies may eventually soften imports due to tighter credit conditions, which means the direction of the global commodity market will hinge on how much the recovery in economies including the U.S. and Europe can continue to drive prices higher.Some sectors have seen policy push an expansion in capacity, such as Beijing’s move to grow the country’s crude oil refining and copper smelting industries. Purchases of the materials needed for production in those sectors may continue to see gains although at a slower pace.One example of slowing purchases is likely to be in refined copper, said Mysteel’s Li. The premium paid for the metal at the port of Yangshan has already hit a four-year low in a sign of waning demand, and imports are likely to fall this year, she said.At the same time, the rally in copper prices probably still has a few months to run, according to a recent note from Citigroup Inc., citing the lag between peak credit and peak demand. From around $10,000 a ton now, the bank expects copper to reach $12,200 by September.It’s a dynamic that’s also playing out in ferrous metals markets.“We’re still at an early phase of tightening in terms of money reaching projects,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. “Iron ore demand reacts with a lag of several months to tightening. Steel demand is still around record highs on the back of the economic recovery and ongoing investments, but is likely to pull back slightly by the end of the year.”For agriculture, credit tightening may only affect China’s soaring crop imports around the margins, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Co. Less cash in the system could soften domestic prices by curbing speculation, which may in turn reduce the small proportion of imports handled by private firms, he said.The wider trend is for China’s state-owned giants to keep importing grains to cover the nation’s domestic shortfall, to replenish state reserves and to meet trade deal obligations with the U.S.No DisasterMore broadly, Beijing’s policy tightening doesn’t spell disaster for commodities bulls. For one, the authorities are unlikely to accelerate deleveraging from this point, according the latest comments from the State Council, China’s cabinet.“Internal guidance from our macro department is that the country won’t tighten credit too much -- they just won’t loosen further,” said Harry Jiang, head of trading and research at Yonggang Resouces, a commodity trader in Shanghai. “We don’t have many concerns over credit tightening.”And in any case, raw materials markets are no longer almost entirely in thrall to Chinese demand.“In the past, the inflection point of industrial metal prices often coincides with that of China’s credit cycle,” said Larry Hu, chief China economist at Macquarie Group Ltd. “But that doesn’t mean it will be like that this time too, because the U.S. has unleashed much larger stimulus than China, and its demand is very strong.”Hu also pointed to caution among China’s leaders, who probably don’t want to risk choking off their much-admired recovery by sharp swings in policy.“I expect China’s property investment will slow down, but not by too much,” he said. “Infrastructure investment hasn’t changed too much in the past few years, and won’t this year either.”Additionally, China has been pumping up consumer spending as a lever for growth, and isn’t as reliant on infrastructure and property investment as it used to be, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. The disruption to global commodities supply because of the pandemic is also a new factor that can support prices, he said.Other policy priorities, such as cutting steel production to make inroads on China’s climate pledges, or boosting the supply of energy products, whether domestically or via purchases from overseas, are other complicating factors when it comes to assessing import demand and prices for specific commodities, according to analysts.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Zara owner Inditex to close all stores in Venezuela, local partner says

Inditex, owner of brands including Zara, Bershka and Pull & Bear, will close all its stores in Venezuela in coming weeks as a deal between the retailer and its local partner Phoenix World Trade has come under review, a spokesperson for Phoenix World Trade said. Phoenix World Trade, a company based in Panama and controlled by Venezuelan businessman Camilo Ibrahim, took over operation of Inditex stores in the South American country in 2007. "Phoenix World Trade is re-evaluating the commercial presence of its franchised brands Zara, Bershka and Pull&Bear in Venezuela, to make it consistent with the new model of integration and digital transformation announced by Inditex," the company said in response to a Reuters request.

Hong Kong Exchange’s New CEO Is Put on Cleanup Duty

(Bloomberg) -- The veteran JPMorgan Chase & Co. banker who’s taking the helm at Hong Kong’s exchange has been put on cleanup duty.Chairman Laura Cha has handed Nicolas Aguzin, who takes charge Monday, the task of reviewing the exchange’s practices after a bribery scandal and censure from the regulator, according to people familiar with the matter. The 52-year-old former head of JPMorgan’s international private bank is seen by Cha as having the experience to force a cultural shake-up given his background at a heavily regulated bank, said the people, asking to remain anonymous discussing sensitive issues.Aguzin takes over as the bourse is delivering record earnings. His predecessor, Charles Li, oversaw a doubling of revenue during his decade in charge through acquisitions, loosened listing rules and, most importantly, trading links with mainland China. The easier oversight allowed the listing of Chinese technology giants such as Alibaba Group Holding Ltd. and positioned it as the exchange-of-choice for mainland firms amid tensions with the U.S.But there has also been criticism that investor protections were sacrificed to win business. Over the past years, there has been a steady stream of flareups between the bourse and the regulator over IPO quality, the proliferation of shell companies and whether to allow dual class shares.“The HKEX has done a great job in market development, and has introduced measures to improve investor protection,” Sally Wong, CEO of Hong Kong Investment Funds Association, said in an email. “But it seems that issuers’ voices tend to prevail over that of the investors. We very much look forward to working with the new CEO to see how to strike a more appropriate balance to better safeguard investor interests.”Spokespeople for the exchange and the Securities and Futures Commission as well as Aguzin declined to comment.In a review released last year after the former IPO vetting co-head was arrested for bribery, the SFC discovered “numerous ambiguities” in the Chinese Wall between its listing and business divisions. Other issues highlighted last year include keeping track of share options and following up on complaints on withdrawn IPO applications.Cha had begun to tighten internal checks and balances for senior managers toward the end of Li’s tenure as well as assert more board control over hiring, people familiar have said. The exchange has halted the interactions between its listing and business units, according to the SFC review. Last week, in a joint statement with the SFC, the bourse vowed to better police its frothy IPO market, citing concerns about companies inflating their values, market manipulation and unusually high underwriting fees.Aguzin is expected by the board to prioritize the exchange’s role as a regulator alongside its growth ambitions, people familiar said.David Webb, a former HKEX director, investor and corporate governance activist, is skeptical the bourse will institute any meaningful reforms. “HKEX has, with government approval, lowered its standards to attract business, for example, by listing second-class shares with weak voting rights,” he said in an email. “It shows no sign of raising them again.”Investors have also urged the exchange to set rules requiring company boards to have a lead outside board member or an independent chair, according to Wong. “But it seems that the HKEX is not ready to even bring them up for market consultation.”The government is on board with Aguzin’s appointment, which comes at a fraught time after Beijing has tightened its grip on the city, raising questions about its continued status as an international financial hub.Secretary for Financial Services and the Treasury Christopher Hui said the three-tiered regulatory system comprising his department, the SFC and HKEX has worked well. Aguzin’s appointment embodies the city’s openness and its role as a gateway between China and the world, he said. “This is exactly what we will pursue.”Further deepening connections to China is seen as key to growth for the bourse, which also faces stiffer competition from mainland exchanges as China opens its financial markets.While Aguzin has worked in Asia for the past decade -- also serving as JPMorgan’s CEO of Asia Pacific from 2013 to 2020 -- he will be the first non-Chinese CEO of a bourse that often needs to deal with Beijing.Cha is well connected in China, having served as vice chairman of China Securities Regulatory Commission. She has signaled that she sees the bourse’s role as serving Beijing’s interests and avoiding competition with the mainland, a person said familiar with the matter said last year.The push toward the mainland is not all welcome in China. Expanding the link to include several benchmark stocks has proved difficult, with one sticking point being whether to include shares like Alibaba Group, which are dual listed and with weighted voting rights.Even so, Cha said at the time of the appointment that Aguzin’s remit will include further strengthening the link to the mainland.Another board member, Fred Hu, said in an interview that “Aguzin is well positioned to take HKEX into the future, to further deepen the connectivity with China but also connectivity with the rest of the world.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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Exxon Activist Battle Turns Climate Angst Into Referendum on CEO

(Bloomberg) -- An unprecedented fight over who should sit on the board of Exxon Mobil Corp. is turning into a referendum on Chief Executive Officer Darren Woods as a decades-long struggle by climate campaigners comes to a head.Activist investor Engine No. 1 LLC wants to replace one-third of Exxon’s board in an effort to force the Western world’s largest oil explorer to embrace a transition away from fossil fuels and end a decade of what it calls “value destruction.” Shareholders are set to gather — virtually — for their annual meeting on May 26.The stakes are high. Under Exxon’s bylaws, a victory for any dissident director would mean an incumbent must step down, equating to a zero-sum proxy contest: of 16 candidates, only 12 will prevail. Any dilution of Woods’s influence over the board could derail his long-term plans and force strategic and tactical changes he has previously rejected.Although Engine No. 1 hasn’t targeted Woods for removal, even a partial victory for the activist would be a serious, and perhaps fatal, blow to his leadership, according to Ceres, a coalition of environmentally active investors managing $37 trillion.“I don’t see how Darren Woods remains as CEO if one of the dissidents, let alone all four, are elected,” said Andrew Logan, director of oil and gas at Ceres. “It would be such a sign of fundamental dissatisfaction with the status quo that something would have to change. And that starts with the CEO.”Exxon's engagement with environmental activists was once characterized by a sense of bemusement — under former CEO Lee Raymond, Greenpeace protesters outside its annual meetings were offered donuts. But as worries about climate change have gone mainstream in the investment world, the clash has evolved into a confrontation over boardroom seats.In other corners of the commodities sector, shareholders this year have already shown frustration with executives’ reluctance to embrace tough environmental goals. DuPont de Nemours Inc. suffered an 81% vote against management on plastic-pollution disclosures, while ConocoPhillips lost a contest on adopting more stringent emission targets.Exxon’s meeting this year threatens to be one of the stormiest on the U.S. corporate calendar, made all the more remarkable for being instigated by a newly formed fund that only has a $54 million, or 0.02%, stake in the oil behemoth. Investor dissatisfaction with the company largely centers on two issues that are becoming more interlinked: climate change and profits. The oil giant envisages a profitable, long-term future for fossil fuels, but sees no point in investing in traditional renewable energy businesses. It also refuses to commit to a net-zero emissions target, unlike European rivals.Climate concerns are are resonating more deeply with investors at the same time that Exxon’s status as a financial powerhouse crumbles after multiple corporate missteps, some of which preceded Woods’s elevation to CEO in 2017. Returns on invested capital are a fraction of what they were in Exxon’s heyday a decade ago and debt ballooned 40% last year as Covid-19 paralyzed economies and energy demand around the world. Under mounting pressure and concerns over Exxon’s ability to pay the S&P 500’s third-largest dividend, the CEO slashed an ambitious $200 billion expansion program by a third late last year. It was a relief to some investors who had questioned both the cost and the need for such projects at a time when policymakers — and even rivals like BP Plc and Royal Dutch Shell Plc — are planning for the twilight of the petroleum era.Still, Engine No. 1 says Exxon needs higher-quality directors who are willing to challenge management. Exxon missed key industry trends such as the shale revolution, “the shift to focusing on project returns over chasing production growth, and the need to gradually prepare for rather than ignore the energy transition,” according to the San Francisco-based activist.After receiving early backing from major state pension funds, Engine No. 1’s campaign gathered momentum this month as two prominent shareholder-advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., threw their partial support behind the activist’s efforts. ISS wrote a scathing rebuke of Exxon’s climate strategy, saying the company had only taken “incremental steps to prepare for the inevitable.”Top 20 shareholder Legal & General Investment Management, a previous critic of Exxon, is also backing Engine No. 1 and has pledged to vote against Woods. However, the voting intentions of some other major investors, such as Vanguard Group, BlackRock Inc. and State Street Corp. aren’t clear — all three declined to comment when contacted by Bloomberg News. Norway’s giant sovereign wealth fund said late last week that it would support the reelection of most Exxon directors, but not Woods, part of its long-standing push to separate the roles of CEO and chairman at Exxon.With such animosity brewing, the usual course of action would be for Exxon’s board to meet with the activists and hash out a compromise. But that has yet to happen, and both sides appear to be entrenched.Exxon said in a May 14 letter to shareholders its board “listens and responds to shareholder feedback,” but that Engine No. 1, founded only a few months ago, wasn’t interested in engaging and “is trying to replace four of our world-class directors with unqualified nominees.'' The company added that the activist fund's plans would “derail our progress and jeopardize your dividend.”For its part, Engine No. 1 said Exxon refused to meet its nominees: Gregory Goff, former CEO of refiner Andeavor environmental scientist Kaisa Hietala private equity investor Alexander Karsner and Anders Runevad, ex-CEO of power producer Vestas Wind Systems A/S.Exxon did talk with another investor, hedge fund D.E. Shaw & Co., which built a stake in an effort to push for change. Those discussions led to the appointment of the new directors, including activist investor Jeff Ubben. The oil company has also announced new emissions targets, started a low-carbon business, and supported policies that will help technological innovations like carbon capture.In some respects Exxon is in a better position that it was at the start of 2021. Its stock has rallied more than 40% as oil prices rebounded and lockdowns are eased. Engine No. 1 points to its involvement as the turning point, while Exxon claims the market is rewarding prudent cost cutting and high-return investments made over the last couple of years. The forthcoming vote will help to determine which side of the debate other investors lean toward.“There’s a governance challenge at Exxon,” said John Hoeppner, head of U.S. sustainable investments at Legal & General. “How seriously is the current board questioning management’s business model? It’s important to add urgency to the debate.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Bubble Risks Test China’s Commitment to No Sharp Turn in Policy

(Bloomberg) -- Despite Beijing’s best efforts, asset bubbles are forming in China.Home prices are soaring, prompting officials to revive the idea of a national property tax. A surge in raw material prices spurred pledges to increase domestic supply, toughen market oversight, and crack down on speculation and hoarding.The rapid gains are challenging the central bank’s ability to restrain inflation without hiking borrowing costs or making a sharp turn in monetary policy -- something the People’s Bank of China has said it will avoid. The risk is the government’s attempts to curb price increases won’t be enough, forcing the central bank’s hand at a vulnerable time for domestic consumption.That would be a shock to the nation’s financial markets, which are pricing in a relatively benign scenario. The 10-year government bond yield has fallen to the lowest level in eight months, while the stock benchmark CSI 300 Index is the least volatile since January. The calm contrasts with the rest of the world, where investors are becoming increasingly obsessed with how central banks may react to the threat of an overheating global economy.“How to mitigate the boom in property and commodities without tightening macro policy -- it’s a real challenge for the Chinese government,” said Zhou Hao, an economist at Commerzbank AG in Singapore.More than 15 months after the pandemic first forced China to cut rates and inject trillions of yuan into the financial system, policy makers in Beijing are -- like many others across the world -- dealing with the aftermath. As the global economic recovery accelerates, some are being forced to act because of inflation: Brazil in March became the first Group of 20 nation to lift borrowing costs, with Turkey and Russia following suit. Even Iceland hiked a short-term rate in May.Others, like the Federal Reserve and the European Central Bank, have insisted spikes in prices are only temporary. The PBOC also downplayed inflation worries in its first-quarter monetary report, published shortly after data showed factory prices surged 6.8% in April -- the fastest pace since 2017.What Bloomberg Economists Say. “It will be a challenge for China to contain rising producer prices because few commodities are priced within the country. There’s not much China can do, and even tightening monetary policy will not be able to change the situation,” said David Qu, China economist at Bloomberg Economics.-- Bloomberg Terminal subscribers can access more insight HEREWhile the rapid increase in commodity prices moderated in recent days, a continuation of gains could pressure companies to pass on rising costs to consumers, who are already spending less than expected. Analysts at Huachuang Securities Co. said in a May 9 report that prices of consumer goods, like home appliances and furniture, as well as electric vehicles and food, are rising. Still, there’s little evidence of demand-driven pressures, with core inflation, which strips out volatile food and energy costs, fairly subdued.The threat of inflation -- coupled with a fragile economy -- tends to be bad news for stocks because of how it erodes corporate profits, and for bonds it reduces the value of future cash flows. Accelerating prices walloped China’s bond market in 2019, and contributed to a steep selloff in stocks in early 2016.In a sign of how seriously that threat is being taken, China’s cabinet said Wednesday more effort needs to be taken to tackle rising commodity prices. A PBOC official said China should allow the yuan to appreciate to offset the impact of rising import prices, according to an article published Friday. The currency is trading near an almost three-year high against the dollar.Imported inflation is a headache for China’s leaders already dealing with risks caused by a surge in capital inflows. In recent years Beijing opened investment channels to allow more funds into its financial system. The goal was to use foreign institutions’ heft to anchor its markets and stabilize its currency, but the record liquidity unleashed by global central banks in the wake of the pandemic is now pressuring prices in China.That’s prompted some strong language from senior officials. Top securities regulator Yi Huiman said in March large flows of “hot money” into China must be strictly controlled. The same month, banking regulator Guo Shuqing said he was “very worried” that asset bubbles in overseas markets would burst soon, posing a risk to the global economy.Deciding whether recent spikes in prices are temporary or a permanent shift toward sustained inflation is something Chinese policy makers have to grapple with. For now, Beijing’s current approach of jawboning, boosting supply and penalizing speculation appears to be targeted at the former.“It’s still too early to tell if China can contain the surge in producer prices, and if it can’t, whether that will have large-scale impact on consumer prices,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “This inflation is largely imported -- it’s not something that can be solved by the PBOC.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Inside the Race to Avert Disaster at China’s Biggest ‘Bad Bank’

(Bloomberg) -- It was past 9 p.m. on Financial Street in Beijing by the time the figure inside Huarong Tower there picked up an inkbrush and, with practiced strokes, began to set characters to paper.Another trying workday was ending for Wang Zhanfeng, corporate chairman, Chinese Communist Party functionary—and, less happily, replacement for a man who very recently had been executed.On this April night, Wang was spotted unwinding as he often does in his office: practicing the art of Chinese calligraphy, a form that expresses the beauty of classical characters and, it is said, the nature of the person who writes them.Its mastery requires patience, resolve, skill, calm—and Wang, 54, needs all that and more. Because here on Financial Street, a brisk walk from the hulking headquarters of the People’s Bank of China, a dark drama is playing out behind the mirrored façade of Huarong Tower. How it unfolds will test China’s vast, debt-ridden financial system, the technocrats working to fix it, and the foreign banks and investors caught in the middle.Welcome to the headquarters of China Huarong Asset Management Co., the troubled state-owned ‘bad bank’ that has set teeth on edge around the financial world.For months now Wang and others have been trying to clean up the mess here at Huarong, an institution that sits—quite literally—at the center of China’s financial power structure. To the south is the central bank, steward of the world’s second-largest economy to the southwest, the Ministry of Finance, Huarong’s principal shareholder less than 300 meters to the west, the China Banking and Insurance Regulatory Commission, entrusted with safeguarding the financial system and, of late, ensuring Huarong has a funding backstop from state-owned banks until at least August.The patch though doesn’t settle the question of how Huarong makes good on some $41 billion borrowed on the bond markets, most incurred under Wang’s predecessor before he was ensnared in a sweeping crackdown on corruption. That long-time executive, Lai Xiaomin, was put to death in January—his formal presence expunged from Huarong right down to the signature on its stock certificates.The bigger issue is what all this might portend for the nation’s financial system and efforts by China’s leader, Xi Jinping, to centralize control, rein in years of risky borrowing and set the nation’s financial house in order.“They’re damned if they do and damned if they don’t,” said Michael Pettis, a Beijing-based professor of finance at Peking University and author of Avoiding the Fall: China’s Economic Restructuring. Bailing out Huarong would reinforce the behavior of investors who ignore risk, he said, while a default endangers financial stability if a “chaotic” repricing of the bond market ensues.Just what is going on inside Huarong Tower? Given the stakes, few are willing to discuss that question publicly. But interviews with people who work there, as well as at various Chinese regulators, provide a glimpse into the eye of this storm.Huarong, simply put, has been in full crisis mode ever since it delayed its 2020 earnings results, eroding investor confidence. Executives have come to expect to be summoned by government authorities at a moment’s notice whenever market sentiment sours and the price of Huarong debt sinks anew. Wang and his team must provide weekly written updates on Huarong’s operations and liquidity. They have turned to state-owned banks, pleading for support, and reached out to bond traders to try to calm nerves, with little lasting success.In public statements, Huarong has insisted repeatedly that its position is ultimately sound and that it will honor its obligations. Banking regulators have had to sign off on the wording of those statements—another sign of how serious the situation is considered and, ultimately, who’s in charge.Then there are regular audiences with the finance ministry and the other powerful financial bureaucracies nearby. Among items usually on the agenda: possible plans to hive off various Huarong businesses.Huarong executives are often kept waiting and, people familiar with the meetings say, tend to gain only limited access to top officials at the CBIRC, the banking overseer.The country’s apex financial watchdog—chaired by Liu He, Xi’s right-hand man in overseeing the economy and financial system—has asked for briefings on the Huarong situation and coordinated meetings between regulators, according to regulatory officials. But it has yet to communicate to them a long-term solution, including whether to impose losses on bondholders, the officials said.Representatives at the People’s Bank of China, the CBIRC, Huarong and the Ministry of Finance didn’t respond to requests for comment.Focus on BasicsA mid-level party functionary with a PhD in finance from China’s reputed Southwestern University of Finance and Economics, Wang arrived at Huarong Tower in early 2018, just as the corruption scandal was consuming the giant asset management company. He is regarded inside Huarong as low-key and down-to-earth, particularly in comparison to the company’s previous leader, Lai, a man once known as the God of Wealth.Hundreds of Huarong staff, from Beijing division chiefs to branch employees in faraway outposts, listened in on April 16 as Wang reviewed the quarterly numbers. He stressed that the company’s fundamentals had improved since he took over, a view shared by some analysts though insufficient to pacify investors. But he had little to say about what is on so many minds: plans to restructure and shore up the giant company, which he’d pledged to clean up within three years of taking over.His main message to the troops: focus on the basics, like collecting on iffy assets and improving risk management. The employees were silent. No one asked a question.One employee characterized the mood in his area as business as usual. Another said co-workers at a Huarong subsidiary were worried the company might not be able to pay their salaries. There’s a widening gulf between the old guard and new, said a third staffer. Those who outlasted Lai and have seen their compensation cut year after year have little confidence in the turnaround, while new joiners are more hopeful about the opportunities the change of direction offers.Others joke that Huarong Tower must suffer from bad feng shui: after Lai was arrested, a bank that had a branch in the building had to be bailed out to the tune of $14 billion.Dark humor aside, a rough consensus has begun to emerge among senior management and mid-level regulators: like other key state-owned enterprises, Huarong still appears to be considered too big to fail. Many have come away with the impression—and it is that, an impression—that for now, at least, the Chinese government will stand behind Huarong.At the very least, these people say, no serious financial tumult, such as a default by Huarong, is likely to be permitted while the Chinese Communist Party is planning a nationwide spectacle to celebrate the 100th anniversary of its founding on July 1. Those festivities will give Xi—who has been positioning to stay in power indefinitely—an opportunity to cement his place among China’s most powerful leaders including Mao Zedong and Deng Xiaoping.What will come after that patriotic outpouring on July 1 is uncertain, even to many inside Huarong Tower. Liu He, China’s vice premier and chair of the powerful Financial Stability and Development Committee, appears in no hurry to force a difficult solution. Silence from Beijing has started to rattle local debt investors, who until about a week ago had seemed unmoved by the sell-off in Huarong’s offshore bonds.Competing InterestsHuarong’s role in absorbing and disposing of lenders’ soured debt is worth preserving to support the banking sector cleanup, but requires government intervention, according to Dinny McMahon, an economic analyst for Beijing-based consultancy Trivium China and author of China’s Great Wall of Debt.“We anticipate that foreign bondholders will be required to take a haircut, but it will be relatively small,” he said. “It will be designed to signal that investors should not assume government backing translates into carte blanche support.”For now, in the absence of direct orders from the top, Huarong has been caught in the middle of the competing interests among various state-owned enterprises and government bureaucracies.China Investment Corp., the $1 trillion sovereign fund, for instance, has turned down the idea of taking a controlling stake from the finance ministry. CIC officials have argued they don’t have the bandwidth or capability to fix Huarong’s problems, according to people familiar with the matter.The People’s Bank of China, meantime, is still trying to decide whether to proceed with a proposal that would see it assume more than 100 billion yuan ($15.5 billion) of bad assets from Huarong, those people said.And the Ministry of Finance, which owns 57% of Huarong on behalf of the Chinese government, hasn’t committed to recapitalizing the company, though it hasn’t ruled it out, either, one person said.CIC didn’t respond to requests for comment.The banking regulator has bought Huarong some time, brokering an agreement with state-owned lenders including Industrial & Commercial Bank of China Ltd. that would cover any funding needed to repay the equivalent of $2.5 billion coming due by the end of August. By then, the company aims to have completed its 2020 financial statements after spooking investors by missing deadlines in March and April.“How China deals with Huarong will have wide ramifications on global investors’ perception of and confidence in Chinese SOEs,” said Wu Qiong, a Hong Kong-based executive director at BOC International Holdings. “Should any defaults trigger a reassessment of the level of government support assumed in rating SOE credits, it would have deep repercussions for the offshore market.”The announcement of a new addition to Wang’s team underscores the stakes and, to some insiders, provides a measure of hope. Liang Qiang is a standing member of the All-China Financial Youth Federation, widely seen as a pipeline to groom future leaders for financial SOEs. Liang, who arrived at Huarong last week and will soon take on the role of president, has worked for the three other big state asset managers that were established, like Huarong, to help clean up bad debts at the nation’s banks. Some speculate this points to a wider plan: that Huarong might be used as a blueprint for how authorities approach these other sprawling, debt-ridden institutions.Meantime, inside Huarong Tower, a key item remains fixed in the busy schedules of top executives and rank-and-file employees alike. It is a monthly meeting, the topic of which is considered vital to Huarong’s rebirth: studying the doctrines of the Chinese Communist Party and speeches of President Xi Jinping. More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Crypto miners halt China business after Beijing cracks down, bitcoin dives

SHANGHAI (Reuters) -Cryptocurrency mining operators, including a Huobi Mall and BTC.TOP, are suspending their China operations after Beijing stepped up its efforts to crack down on bitcoin mining and trading, sending the digital currency tumbling. A State Council committee led by Vice Premier Liu He announced the crackdown late on Friday - the first time the council has targeted virtual currency mining, a big business in China that accounts for as much as 70% of the world's crypto supply. Crypto miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify virtual coin transactions in a process which produces newly minted crypto currencies such as bitcoin.

Dollar near 3-month low, weighed by Fed's dovish tilt

The dollar stood near its lowest level in three months against a resurgent euro, and traders pared earlier bets the Federal Reserve may move soon to taper its stimulus though markets were not fully convinced that higher U.S. inflation is transient. Minutes from the Fed's April policy meeting released last week showed a sizable minority of policymakers wanted to discuss tapering bond purchase on worries that pouring more money to an economy on the mend could stoke inflation. Still, Fed Chairman Jerome Powell's repeated comments that it is not yet time to discuss a reduction in quantitative monetary easing has led many investors to believe it will be months before the central bank actually tweaks policy.

Is Buying Bitcoin Right Now a Smart Idea?

It’s no longer news that Bitcoin’s dramatic fall on Thursday weighed on market sentiments relatively but Willy Woo a top crypto analyst, still believes the curtain call for Bitcoin’s overall upward rally has not occurred yet.

Bitcoin Volatility Puts Weekend Traders on Stomach-Churning Ride

(Bloomberg) -- Bitcoin’s extreme volatility carried into the weekend as the world’s largest cryptocurrency continued to whipsaw investors with double-digit percentage moves.Bitcoin traded at $33,052, down 13%, as of 3:45 p.m. in New York, holding below its 200-day moving average other cryptocurrencies, including Ethereum and Dogecoin, also slumped, according to CoinGecko.com. Earlier in the weekend, Bitcoin had climbed more than 8% to move back above $38,000 following a tweet from Elon Musk.A measure of implied volatility on Bitcoin comparable to the U.S. equity market’s VIX indicator sits above 130, higher than the stock version has ever gotten in 30 years. Thirty-day historical volatility in the coin is about 100, some seven times more than the S&P 500 and surpassing the comparable measure in lumber futures, and an ETF designed to pay twice the daily return in crude oil.Investors in Bitcoin are experiencing one of its rockiest weeks ever after a string of negative headlines, with prices swinging as much as 30% in each direction Wednesday alone, when it fell as low as $30,016, the least since January. Even with the gyrations, Bitcoin is still up more than 250% in the past year.The turbulent stretch began after Musk said Tesla would no longer accept Bitcoin as payment for its electric vehicles, citing the coin’s intensive energy use. Another blow came Friday when China reiterated a warning that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks.“Bitcoin has two problems, ESG and decreasing reliance on China, both of which could take some time” Edward Moya, senior market analyst with Oanda Corp., wrote in a note.Other cryptocurrencies also slumped on Sunday, with Ethereum briefly trading below $1,900 and satirical token Dogecoin dropping more than 16%, according to Coinmarketcap.com.Read more: Musk Tweets He Supports Crypto in Battle Against Fiat CurrenciesThe latest warning from Beijing followed a statement earlier in the week disseminated by the People’s Bank of China that financial institutions weren’t allowed to accept cryptocurrencies for payment.China has long expressed displeasure with the anonymity provided by Bitcoin and other crypto tokens. The country is home to a large concentration of the world’s crypto miners who use vast sums of computing power to verify transactions on the blockchain.“It is no surprise that governments are not inclined to give up their monetary monopolies. Throughout history, governments first regulate and then take ownership,” Deutsche Bank macro strategist Marion Laboure wrote in a May 20 report titled “Bitcoin: Trendy Is the Last Stage Before Tacky.” “As cryptocurrencies begin to seriously compete with regular currencies and fiat currencies, regulators and policymakers will crack down.”‘Higher Stakes’A mid-week report from blockchain analysis firm Chainalysis showed over half of the $410 billion spent on acquiring current Bitcoin holdings occurred in the past 12 months. About $110 billion of that was spent on buying it at an average cost of less than $36,000 per coin. That means the vast majority of investments aren’t making a profit unless the coin trades at $36,000 or higher.“The stakes are much higher now than they were in the past,” Philip Gradwell, chief economist at Chainalysis, said in an email. “This week’s price fall means that a lot of investments are now held at a loss. This is going to be a serious test for recent investors, but so much is at stake now that there is the incentive and resources to address the problems in crypto that prevent it from becoming a mature asset.”Weekends tend to be particularly volatile for crypto assets which -- unlike most traditional assets -- trade around the clock every day of the week. Before this weekend, Bitcoin’s average swing on Saturdays and Sundays this year comes in at 5.14%.That type of volatility is owing to a few factors: Bitcoin’s held by relatively few people, meaning that price swings can be magnified during low-volume periods. And the market remains hugely fragmented with dozens of platforms operating under different standards. That means cryptocurrencies lack a centralized market structure akin to that of traditional assets.“When noise is accompanied by a huge amount of speculation and the noise can be interpreted negatively, you get these huge swings,” said Eric Green, chief investment officer of equity at Penn Capital. “What goes straight up is going to come down at some point.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Gold Holds Near Four-Month High Amid Bullish Investor Sentiment

(Bloomberg) -- Gold steadied near the highest level in more than four months amid signs that investors are turning more bullish on the precious metal.Hedge fund managers increased their net-long gold positions to the highest in 16 weeks, data showed Friday. Bullion-backed exchange-traded funds have seen inflows in May, following three straight months of sales, according to data compiled by Bloomberg.Gold capped three straight weeks of gains as investors weighed inflation risks and spikes in coronavirus cases in some countries. Market-based gauges of inflation expectations have declined of late, though concerns linger that the post-pandemic recovery could stoke price pressures and force a pullback in extraordinary central bank support.Spot gold rose 0.1% to $1,883.89 an ounce by 8:15 a.m. in Singapore. Prices climbed to $1,890.13 last week, the highest since Jan. 8. Silver and palladium were steady, while platinum rose. The Bloomberg Dollar Spot Index was flat after rising 0.2% on Friday.Meanwhile, investors were also weighing the extreme volatility in Bitcoin, which may have lent an added pillar of support to bullion. Former Treasury Secretary Lawrence Summers said cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies will remain limited. Cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments,” he said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Huobi Scales Back Due to China Crackdown Bitcoin Falls Below $32K, Ether Past $2K

The exchange made the move on the heels of a series of crackdown notices from Bejing in recent weeks.


Contents

Executive branch Edit

The Chief Executive (CE) is the head of the special administrative region, and is also the highest-ranking official in the Government of Hong Kong Special Administrative Region, and is the head of the executive branch.

The Chief Executive is elected by a 1200-member Election Committee drawn mostly from the voters in the functional constituencies but also from religious organisations and municipal and central government bodies. The CE is legally appointed by the Premier of the People's Republic of China. The Executive Council, the top policy organ of the executive government that advises on policy matters, is entirely appointed by the Chief Executive. [4]

Legislative branch Edit

In accordance with Article 26 of the Basic Law of the Hong Kong Special Administrative Region, permanent residents of Hong Kong are eligible to vote in direct elections for the 35 seats representing geographical constituencies and 35 seats from functional constituencies in the 70-seat, unicameral Legislative Council (LegCo). [5]

Within functional constituencies, 5 seats attribute to District Council (Second) which virtually regards the entire city as a single electoral constituency. The franchise for the other 30 seats is limited to about 230,000 voters in the other functional constituencies (mainly composed of business and professional sectors).

Judicial branch Edit

The Judiciary consists of a series of courts, of which the court of final adjudication is the Court of Final Appeal.

While Hong Kong retains the common law system, the Standing Committee of the National People's Congress of China has the power of final interpretation of national laws affecting Hong Kong, including the Basic Law, and its opinions are therefore binding on Hong Kong courts on a prospective basis.

Right of Abode Edit

On 29 January 1999, the Court of Final Appeal, the highest judicial authority in Hong Kong interpreted several Articles of the Basic Law, in such a way that the Government estimated would allow 1.6 million Mainland China immigrants to enter Hong Kong within ten years. This caused widespread concerns among the public on the social and economic consequences.

While some in the legal sector advocated that the National People's Congress (NPC) should be asked to amend the part of the Basic Law to redress the problem, the Government of Hong Kong (HKSAR) decided to seek an interpretation to, rather than an amendment of, the relevant Basic Law provisions from the Standing Committee of the National People's Congress (NPCSC). The NPCSC issued an interpretation in favour of the Hong Kong Government in June 1999, thereby overturning parts of the court decision. While the full powers of NPCSC to interpret the Basic Law is provided for in the Basic Law itself, some critics argue this undermines judicial independence.

1 July marches and Article 23 Edit

The Hong Kong 1 July March is an annual protest rally led by the Civil Human Rights Front since the 1997 handover on the HKSAR establishment day. However, it was only in 2003 when it drew large public attention by opposing the bill of Article 23. It has become the annual platform for demanding universal suffrage, calling for observance and preservation civil liberties such as free speech, venting dissatisfaction with the Hong Kong Government or the Chief Executive, rallying against actions of the Pro-Beijing camp.

In 2003, the HKSAR Government proposed to implement Article 23 of the Basic Law by enacting national security bill against acts such as treason, subversion, secession and sedition. [4] However, there were concerns that the legislation would infringe human rights by introducing the mainland's concept of "national security" into the HKSAR. Together with the general dissatisfaction with the Tung administration, about 500,000 people participated in this protest. Article 23 enactment was "temporarily suspended". [6]

Universal suffrage Edit

Towards the end of 2003, the focus of political controversy shifted to the dispute of how subsequent Chief Executives get elected. The Basic Law's Article 45 stipulates that the ultimate goal is universal suffrage when and how to achieve that goal, however, remains open but controversial. Under the Basic Law, electoral law could be amended to allow for this as soon as 2007 (Hong Kong Basic Law Annex .1, Sect.7). Arguments over this issue seemed to be responsible for a series of Mainland Chinese newspapers commentaries in February 2004 which stated that power over Hong Kong was only fit for "patriots."

The interpretation of the NPCSC to Annex I and II of the Basic Law, promulgated on 6 April 2004, made it clear that the National People's Congress' support is required over proposals to amend the electoral system under Basic Law. On 26 April 2004, the Standing Committee of National People's Congress denied the possibility of universal suffrage in 2007 (for the Chief Executive) and 2008 (for LegCo).

The NPCSC interpretation and decision were regarded as obstacles to the democratic development of Hong Kong by the democratic camp, and were criticised for lack of consultation with Hong Kong residents. On the other hand, the pro-government camp considered them to be in compliance with the legislative intent of the Basic Law and in line with the 'One country, two systems' principle, and hoped that this would put an end to the controversies on development of political structure in Hong Kong.

In 2007 Chief Executive Sir Donald Tsang requested for Beijing to allow direct elections for the Chief Executive. He referred to a survey which said more than half of the citizens of Hong Kong wanted direct elections by 2012. However, he said waiting for 2017 may be the best way to get two-thirds of the support of Legislative Council. [7] Donald Tsang announced that the NPC said it planned to allow the 2017 Chief Executive elections and the 2020 Legislative Council elections to take place by universal suffrage. [8]

In 2013, public concern was sparked that the election process for the Chief Executive would involve a screening process that swipes out candidates deemed suitable for the position by Beijing, incited by a comment made by a Deputy of the National People's Congress at an off-the-recorded gathering. [9]

Resignation of Tung Chee-hwa and interpretation of Basic Law Edit

On 12 March 2005, the Chief Executive, Tung Chee-hwa, resigned. Immediately after Tung's resignation, there was dispute over the length of the term of the Chief Executive. To most local legal professionals, the length is obviously five years, under whatever circumstances. [ citation needed ] It should also be noted that the wording of the Basic Law on the term of the Chief Executive is substantially different from the articles in the PRC constitution concerning the length of term of the president, premier, etc. Nonetheless, legal experts from the mainland said it is a convention a successor will only serve the remainder of the term if the position is vacant because the predecessor resigned.

The Standing Committee of the National People's Congress exercised its right to interpret the Basic Law, and affirmed that the successor would only serve the remainder of the term. Many in Hong Kong saw this as having an adverse impact on one country, two systems, as the Central People's Government interpret the Basic Law to serve its need, that is, a two-year probation for Tsang, instead of a five-year term. [ citation needed ]

Political reform package Edit

On 4 December 2005, people in Hong Kong demonstrated against Sir Donald Tsang's proposed reform package, before a vote on 21 December. According to the organisers, [5] an estimated 250,000 turned out into the streets. The police supplied a figure of 63,000, and Michael de Golyer of Baptist University estimated between 70,000 and 100,000. [10]

The march has sent a strong message to hesitant pro-democracy legislators to follow public opinion. The pro-government camp claims to have collected 700,000 signatures on a petition backing Mr. Tsang's reform package. This number, however, is widely seen as too small to influence pro-democracy lawmakers. The Reform Package debate has seen the return of key political figure and former Chief Secretary Anson Chan, raising speculations of a possible run up for the 2007 Chief Executive election, though she dismissed having a personal interest in standing for the next election.

In an attempt to win last minute votes from moderate pro-democracy lawmakers, the government amended its reform package on 19 December by proposing a gradual cut in the number of district council members appointed by the Chief Executive. Their number would be reduced from 102 to 68 by 2008. It would then be decided in 2011 whether to scrap the remaining seats in 2012 or in 2016. The amendment has been seen as a reluctant response by Sir Donald Tsang to give satisfaction to the democratic demands made by demonstrators on 4 December. The move has been qualified "Too little, too late" by pan-democrats in general.

On 21 December 2005, the reform political reform package was vetoed by the pro-democracy lawmakers. Chief Secretary Rafael Hui openly criticised pro-democracy Martin Lee and Bishop Zen for blocking the proposed changes.

Political Appointments System Edit

The 24 non-civil service positions under the political appointment system comprise 11 undersecretaries and 13 political assistants. [11]

The government named eight newly appointed Undersecretaries on 20 May, and nine Political Assistants on 22 May 2008. The posts were newly created, ostensibly to work closely with bureau secretaries and top civil servants in implementing the Chief Executive's policy blueprint and agenda in an executive-led government. Donald Tsang described the appointments as a milestone in the development of Hong Kong's political appointment system. [12] Controversies arose with the disclosure of foreign passports and salaries. [13] Pressure for disclosure continued to mount despite government insistence on the right of the individuals to privacy: on 10 June 2008, newly appointed Undersecretaries and political assistants, who had previously argued were contractually forbidden from disclosing their remuneration, revealed their salaries. The Government news release stated that the appointees had "voluntarily disclosed their salaries, given the sustained public interest in the issue." [14]

Inflation relief measures Edit

On 16 July 2008, Donald Tsang announced some "extraordinary measures for extraordinary times", [15] giving a total of HK$11 billion in inflation relief to help families' finances. Of which, the Employee Retraining levy on the employment of Foreign domestic helpers would be temporarily waived, [16] at an estimated cost of $HK2 billion. [15] It was intended that the levy would be waived for a two-year period on all helpers' employment contracts signed on or after 1 September 2008, but would not apply to ongoing contracts. The Immigration Department said it would not reimburse levies, which are prepaid half-yearly or yearly in advance. The announcement resulted in chaos and confusion, and uncertainty for the helpers as some employers deferred contracts or had dismissed helpers pending confirmation of the effective date, leaving helpers in limbo. [17]

On 20 July, Secretary for Labour and Welfare Matthew Cheung announced the waiver commencement date would be brought forward by one month. The Immigration Department would relax its 14-day re-employment requirement for helpers whose contracts expired. [18] On 30 July, the Executive Council approved the measures. After widespread criticism of the situation, the government also conceded that maids having advanced renewal of contract would not be required to leave Hong Kong through the discretion exercised by the Director of Immigration, and employers would benefit from the waiver simply by renewing the contract within the two-year period, admitting that some employers could benefit from the waiver for up to 4 years. [19] The administration's poor handling of the matter came in for heavy criticism. The administrative credibility and competence were called into question by journals from all sides of the political spectrum, [15] and by helpers and employers alike.

Leung Chin-man appointment Edit

In August 2008, the appointment of Leung Chin-man as deputy managing director and executive director of New World China Land, subsidiary of New World Development (NWD), was greeted with uproar amidst widespread public suspicion that job offer was a quid pro quo for the favours he allegedly granted to NWD. Leung was seen to have been involved with the sale of the Hung Hom Peninsula Home Ownership Scheme (HOS) public housing estate to NWD at under-value in 2004. [20]

After a 12-month 'sterilisation period' after retirement, Leung submitted an application to the government on 9 May for approval to take up employment with New World China Land. [21] The Secretary for the Civil Service, Denise Yue Chung-yee, signed off on the approval for him to take up the job after his request passed through the vetting committee. [22]

Controversies surrounded not only the suspicions of Leung's own conflict of interest, but also of the insensitivity of the committee which recommended the approval for him to take up his lucrative new job less than two years after his official retirement. [20] New World argued that they hired Leung in good faith after government clearance.

On 15 August, the Civil Service Bureau issued the report requested by Donald Tsang, where they admitted that they had neglected to consider Leung's role in the Hung Hom Peninsula affair. [23] Donald Tsang asked the SCS [ clarification needed ] to reassess the approval, and submit a report to him. [24] New World Development announced in the early hours of 16 August that Leung had resigned from his post, without any compensation from either side or from the government, for the termination. [25]

The next day, Donald Tsang confirmed that Denise Yue would not have to resign. He was satisfied with her apology and with the explanations offered by her. Tsang ordered a committee, of which Yue was to be a member, to be set up to perform a sweeping review of the system to process applications for former civil servants. [26]

May 2010 by-election Edit

In January 2010, five pan-democrats resigned from the Legislative Council of Hong Kong to trigger a by-election in response to the lack of progress in the move towards universal suffrage.

They wanted to use the by-election as a de facto referendum for universal suffrage and the abolition of the functional constituencies.

Umbrella Revolution Edit

The Umbrella Revolution erupted spontaneously in September 2014 in protest of a decision by China's Standing Committee of the National People's Congress (NPCSC) on proposed electoral reform. [27]

The austere package provoked mobilisation by students, and the effects became amplified into a political movement involving hundreds of thousands of Hong Kong citizens by heavy-handed policing and government tactics. [28]

Hong Kong Extradition bill Edit

In February 2019, the Legislative Council proposed a bill to amend extradition rights between Hong Kong and other countries. This bill was proposed because of an incident in which a Hong Kong citizen killed his pregnant girlfriend on vacation in Taiwan. However, there is no agreement to extradite to Taiwan, so he was unable to be charged in Taiwan. The bill proposes a mechanism for transfers of fugitives not only for Taiwan, but also for Mainland China and Macau, which are not covered in the existing laws. There have been a series of protests against the bill, such as on 9 June and 16 June, which were estimated to number one million and two million protesters, respectively. Police brutality and subsequent further oppression to the protesters by the government have led to even more demonstrations, including the anniversary of the handover on 1 July 2019 saw the storming of the Legislative Council Complex, and subsequent protests throughout the summer spread to different districts.

On 15 June 2019, Chief Executive Carrie Lam decided to indefinitely suspend the bill in light of the protest, but also made it clear in her remarks that the bill was not withdrawn. On 4 September 2019, Chief Executive Carrie Lam announced that the government would "formally withdraw" the Fugitive Offenders Bill, as well as enacting a number of other reforms. [29]

The 2019 Hong Kong District Council election was held on 24 November, the first poll since the beginning of the protests, and one that had been billed as a "referendum" on the government. More than 2.94 million votes were cast for a turnout rate of 71.2%, up from 1.45 million and 47% from the previous election. This was the highest turnout in Hong Kong's history, both in absolute numbers and in turnout rates. The results were a resounding landslide victory for the pro-democracy bloc, as they saw their seat share increased from 30% to almost 88%, with a jump in vote share from 40% to 57%. The largest party before the election, DAB, fell to third place, with its leader's vote share cut from a consistent 80% to 55%, and their three vice-chairs losing. Among those who were also legislators, the overwhelming majority of the losing candidates were from the pro-Beijing bloc. Commenting on the election results, New Statesman declared it "the day Hong Kong's true "silent majority" spoke.

After the election, the protests slowly became quiet due to the COVID-19 pandemic.

Year Event
2001 The Grand Bauhinia Medal being bestowed on Yeung Kwong, a leader of the Hong Kong 1967 Leftist Riots. [30]
2003 Central and Wan Chai Reclamation controversy
Harbour Fest controversy
2005 The Link REIT IPO controversy
Arrest of journalist Ching Cheong by the People's Republic of China on spying charges
Ma Ying-jeou denied visa to enter Hong Kong [31]
2006 Aborted proposal to grant development rights for the West Kowloon Cultural District to a single developer.
Aborted proposal to introduce a Goods and Services Tax
Battle for conservation of Star Ferry Pier
2007 Battle for conservation of Queen's Pier.
Hong Kong Institute of Education academic freedom controversy
2009 Johannes Chan Macau ban
Consultation Document on the Methods for Selecting the Chief Executive and for Forming the LegCo in 2012 launched
2010 2010 Hong Kong by-election
Goddess of Democracy controversies [32]
2014 Occupy movement expanded to Hong Kong
2017 2017 imprisonment of Hong Kong democracy activists
2019 2019–20 Hong Kong protests
2020 National Security Law passed

Chinese nationality Edit

All people of Chinese descent, who were born in Hong Kong on or before 30 June 1997, had access to only British nationality. They are therefore British nationals by birth, with the designation of "second class citizen" with no rights of abode in the U.K. The Chinese nationality of such British nationals was enforced involuntarily after 1 July 1997. [ original research? ]

Before and after the handover, the People's Republic of China has recognised ethnic Chinese people in Hong Kong as its citizens. The PRC issues Home Return Permits for them to enter mainland China. Hong Kong issues the HKSAR passport through its Immigration Department [33] to all PRC citizens who are permanent residents of Hong Kong fitting the right of abode rule.

The HKSAR passport is not the same as the ordinary PRC passport, which is issued to residents of mainland China. Only permanent residents of Hong Kong who are PRC nationals are eligible to apply. To acquire the status of permanent resident one has to have "ordinarily resided" in Hong Kong for a period of seven years and adopted Hong Kong as their permanent home. Therefore, citizenships rights enjoyed by residents of mainland China and residents Hong Kong are differentiated even though both hold the same citizenship.

New immigrants from mainland China (still possess Chinese Citizenship) to Hong Kong are denied from getting PRC passport from the mainland authorities, and are not eligible to apply for an HKSAR passport. They usually hold the Document of Identity (DI) as the travel document, until the permanent resident status is obtained after seven years of residence.

Naturalisation as a PRC Citizen is common among ethnic Chinese people in Hong Kong who are not PRC Citizens. Some who have surrendered their PRC citizenship, usually those who have emigrated to foreign countries and have retained the permanent resident status, can apply for PRC citizenship at the Immigration Department, though they must renounce their original nationality in order to acquire the PRC citizenship. [ citation needed ]

Naturalisation of persons of non-Chinese ethnicity is rare because China does not allow dual citizenship and becoming a Chinese citizen requires the renouncement of other passports. A notable example is Michael Rowse, a permanent resident of Hong Kong and the current Director-General of Investment Promotion of Hong Kong Government, naturalised and became a PRC citizen, for the offices of secretaries of the policy bureaux are only open to PRC citizens.

In 2008, a row erupted over political appointees. Five newly appointed Undersecretaries declared that they were in the process of renouncing foreign citizenship as at 4 June 2008, citing public opinion as an overriding factor, and one Assistant had initiated the renunciation process. This was done despite there being no legal or constitutional barrier for officials at this level of government to have foreign nationality. [34]

British nationality Edit

Hong Kong residents who were born in Hong Kong in the British-administered era could acquire the British Dependent Territories citizenship. Hong Kong residents who were not born in Hong Kong could also naturalise as a British Dependent Territories Citizen (BDTC) before the handover. To allow them to retain the status of British national while preventing a possible flood of immigrants from Hong Kong, the United Kingdom created a new nationality status, British National (Overseas) that Hong Kong British Dependent Territories citizens could apply for. Holders of the British National (Overseas) passport - BN(O) - have no right of abode in the United Kingdom. See British nationality law and Hong Kong for details.

British National (Overseas) status was given effect by the Hong Kong (British Nationality) Order 1986. Article 4(1) of the Order provided that on and after 1 July 1987, there would be a new form of British nationality, the holders of which would be known as British Nationals (Overseas). Article 4(2) of the Order provided that adults and minors who had a connection to Hong Kong were entitled to make an application to become British Nationals (Overseas) by registration.

Becoming a British National (Overseas) was therefore not an automatic or involuntary process and indeed many eligible people who had the requisite connection with Hong Kong never applied to become British Nationals (Overseas). Acquisition of the new status had to be voluntary and therefore a conscious act. To make it involuntary or automatic would have been contrary to the assurances given to the Chinese government which led to the words "eligible to" being used in paragraph (a) of the United Kingdom Memorandum to the Sino-British Joint Declaration. The deadline for applications passed in 1997. Any person who failed to register as a British Nationals (Overseas) by 1 July 1997 and were eligible to become PRC citizens became solely PRC citizens on 1 July 1997. However, any person who would be rendered stateless by failure to register as a British Nationals (Overseas) automatically became a British Overseas citizen under article 6(1) of the Hong Kong (British Nationality) Order 1986.

After the Tiananmen Square protests of 1989, people urged the British Government to grant full British citizenship to all Hong Kong BDTCs – but this request was never accepted. However, it was considered necessary to devise a British Nationality Selection Scheme to enable some of the population to obtain British citizenship. The United Kingdom made provision to grant citizenship to 50,000 families whose presence was important to the future of Hong Kong under the British Nationality Act (Hong Kong) 1990. [35]

After reunification, all PRC citizens with the right of abode in Hong Kong (holding Hong Kong permanent identity cards) are eligible to apply for the HKSAR passport issued by the Hong Kong Immigration Department. As the visa-free-visit destinations of the HKSAR passport are very similar with that of a BN(O) passport and the application fee for the former is much lower (see articles HKSAR passport and British passport for comparison and verification), the HKSAR passport is becoming more popular among residents of Hong Kong.

Hong Kong residents who were not born in Hong Kong (and had not naturalised as a BDTC) could only apply for the Certificate of identity (CI) from the colonial government as travel document. They are not issued (by neither the British nor Chinese authorities) after handover. Former CI holders holding PRC Citizenship (e.g. born in mainland China or Macau) and are permanent residents of Hong Kong are now eligible for the HKSAR passports, making the HKSAR passports more popular.

Recent changes to India's Citizenship Act, 1955 (see Indian nationality law) will also allow some children of Indian origin, born in Hong Kong after 7 January 2004, who have a solely BN(O) parent to automatically acquire British Overseas citizenship at birth under the provisions for reducing statelessness in article 6(2) or 6(3) of the Hong Kong (British Nationality) Order 1986. If they have acquired no other nationality after birth, they will be entitled to subsequently register for full British citizenship] with right of abode in the UK.

e • d Summary of the 4 September 2016 Legislative Council of Hong Kong election results
Political affiliation
Geographical Constituencies Traditional Functional Constituencies
District Council (Second) FC Total
seats
±
Votes
%
±pp
Seats
Votes
%
±pp
Seats
Votes
% ±pp
Seats
DAB 361,617 16.68 3.54 7 98 0.06 0.01 3 568,561 29.77 0.19 2 12 1
BPA 49,745 2.29 N/A 1 4,622 2.76 N/A 6 - - - - 7 0
FTU 169,854 7.83 0.77 3 - - - 2 233,236 12.11 3.36 0 5 1
Liberal 21,500 0.99 1.70 0 6,381 3.82 3.06 4 - - - - 4 1
NPP 167,589 7.73 3.97 3 - - - - - - - - 3 1
FLU - - - - - - - 1 - - - - 1 0
New Forum - - - - 1,389 0.83 - 1 - - - - 1 0
Pro-Beijing others 100,711 4.64 N/A 2 40,255 24.07 N/A 5 - - - - 7 1
Total for pro-Beijing camp 871,016 40.17 2.49 16 52,745 31.54 4.62 22 801,797 41.98 3.45 2 40 3
Democratic 199,876 9.22 4.43 5 1,231 0.74 0.29 0 735,597 38.51 4.25 2 7 1
Civic 207,885 9.59 4.49 5 3,405 2.04 1.11 1 28,311 1.48 N/A 0 6 0
PP–LSD 156,019 7.20 7.39 2 - - - - - - - - 2 1
Professional Commons - - - - 18,384 10.99 N/A 2 - - - - 2 0
Labour 101,860 4.70 1.49 1 - - - - - - - - 1 3
NWSC 20,974 0.97 1.45 0 - - - - 303,457 15.89 N/A 1 1 0
PTU - - - - 45,984 27.49 5.28 1 - - - - 1 0
ADPL 33,255 1.53 0.16 0 - - - - 17,175 0.90 15.57 0 0 1
Neo Democrats 31,595 1.46 0.12 0 - - - - 23,631 1.24 N/A 0 0 1
Other democrats 29,704 1.37 N/A 0 29,895 17.87 N/A 3 - - - - 3 2
Total for pan-democrats 781,168 36.02 20.14 13 98,899 59.13 3.15 7 1,108,171 58.02 7.29 3 23 3
ALLinHK 81,422 3.75 New 2 - - - - - - - - 2 2
CP–PPI–HKRO 154,176 7.11 N/A 1 - - - - - - - - 1 0
Demosistō 50,818 2.34 New 1 - - - - - - - - 1 1
Democracy Groundwork 38,183 1.76 New 1 - - - - - - - - 1 1
Other localists 87,294 4.03 N/A 1 - - - - - - - - 1 1
Total for localists 411,893 19.00 - 6 - - - - - - - - 6 5
Path of Democracy 18,112 0.84 New 0 - - - - - - - - 0 0
Third Side 13,461 0.62 New 0 - - - - - - - - 0 0
Non-aligned independents 72,761 3.36 N/A 0 15,613 9.33 N/A 1 - - - - 1 1
Total for non-aligned others 103,334 4.81 3.71 0 15,613 9.33 7.78 1 - - - - 1 1
Total 2,167,411 100.00 35 167,257 100.00 30 1,909,968 100.00 5 70 -
Valid votes 2,167,411 98.42 0.04 167,257 96.78 2.81 1,909,968 96.31 1.15
Invalid votes 34,872 1.53 0.04 5,563 3.22 2.81 73,081 3.72 1.15
Votes cast / turnout 2,202,283 58.28 4.97 172,820 74.33 4.68 1,983,049 57.09 5.14
Registered voters 3,779,085 100.00 9.03 232,498 100.00 7.15 3,473,792 100.00 7.89

The four main political parties are as follows. Each holds a significant portion of LegCo. Thirteen members are registered as affiliated with the DAB, eight with the Democratic Party, five with the Civic Party, three with the Liberal Party and three with the League of Social Democrats.

There are also many unofficial party members: politicians who are members of political parties but have not registered such status in their election applications. There are two major blocs: the pro-democracy camp (opposition camp) and the pro-Beijing camp (pro-establishment camp).


China Unveils Pilot Program to Woo Big Tech Names to Trade Back Home

China is launching a pilot program to entice foreign-listed Chinese tech giants to also trade at home through a new option of share issuance.

The State Council on Friday unveiled the trial program of Chinese depositary receipts (CDRs) for qualified innovative companies to list their shares at the domestic A-share markets.

Companies eligible for the pilot program include those in high-tech or strategic emerging industries, such as the internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing and biotechnology, according to a document issued by the China Securities Regulatory Commission (CSRC) posted on the State Council’s website late Friday.

The program, modeled after U.S.-listed American Depositary Receipts, will allow overseas-listed Chinese companies to transfer part of their shares to banks and trade the shares on domestic market.

By trading via the new CDRs, innovative companies will be able to speed around barriers that discourage initial public offerings (IPOs) on the A-share market. These barriers include restrictions on weighted voting rights — which tech and family-owned companies favor to keep control — and requirements on profitability.

China is trying to juice up its stock markets with blockbuster names as well as unicorns — rapidly growing startups valued at $1 billion or more that may have yet to turn a profit. It is acting as Hong Kong is moving quickly to change its listing rules to make it easier to attract high tech and other innovative companies.

Under the pilot program, overseas-listed Chinese companies looking at making secondary listings on the mainland market will need a market value of more than 200 billion yuan ($31.8 billion).

For first-time listings, companies can qualify if they are valued at no less than 20 billion yuan and posted revenue of at least 3 billion yuan in the past year.

Fast-growing companies that have developed their own world-class technology and have an advantage in their sector will also be eligible, the document said.

The CSRC will set up a consultation committee made up of industry experts, prominent entrepreneurs and investors to select the first companies to participate in the pilot project.

According to the criteria, seven overseas-listed Chinese companies are currently eligible for a secondary listing back home, including Alibaba Group Holding Ltd., JD.com Inc., Baidu Inc., NetEase, China Mobile, China Telecom and Tencent Holdings Ltd.

Caixin reported earlier that Alibaba and JD.com are expected to become the first companies to make secondary listings on the mainland market through the issue of CDRs as early as June.

Alibaba, which is traded on the New York Stock Exchange, has picked Citic Securities, China’s largest brokerage firm, as one of its sponsors for the CDR issuance, a person close to Alibaba told Caixin.

JD.com, which trades on the Nasdaq Stock Market, has sponsors that include Huajing Securities and China Securities. Huatai United Securities will work as JD.com’s financial adviser, Caixin has learned.

Another big name expected to take part in the CDR program is leading smartphone-maker Xiaomi Inc. Xiaomi, which is preparing to do an IPO in Hong Kong this year, has agreed to list some of its shares on the mainland market through CDRs, sources told Caixin. But a Xiaomi executive said its CDR issuance is likely to come later than Alibaba and JD.com due to its focus on its Hong Kong IPO.

The State Council didn’t say when the trial program will begin. The regulator will issue related implementation rules soon, CSRC spokesperson Chang Depeng said at a news conference on Friday.

Chang said the regulator is making it a priority to revise the IPO rules for listings on the main board and the Nasdaq-like ChiNext market.

A person close to the regulator told Caixin that the revisions aim to loosen restrictions on profit requirements and introduce mixed financial measurements such as revenue and market value, an effort to pave the way “for more unicorns to list on the home market.”

CDRs were a hot topic at this year’s National People’s Congress in Beijing. At a press conference last week, Chinese Premier Li Keqiang called for the regulators to take measures to create favorable conditions for some overseas-listed companies to list on the A-share markets.


The reality-television business: Entertainers to the world

NOT many Britons watch “Who Wants to be a Millionaire?” these days. The quiz show, which routinely drew more than 15m viewers in the late 1990s, now attracts fewer than 5m. While “Millionaire” is fading in the country that invented it, though, it is thriving elsewhere. This week Sushil Kumar won the top prize on the Indian version of the programme. Côte d'Ivoire is to make a series. Afghanistan is getting a second one. In all, 84 different versions of the show have been made, shown in 117 countries.

Hollywood may create the world's best TV dramas, but Britain dominates the global trade in unscripted programmes—quiz shows, singing competitions and other forms of reality television. “Britain's Got Talent”, a format created in 2006, has mutated into 44 national versions, including “China's Got Talent” and “Das Supertalent”. There are 22 different versions of “Wife Swap” and 32 of “Masterchef”. In the first half of this year, Britain supplied 43% of global entertainment formats—more than any other country (see chart).

London crawls with programme scouts. If a show is a hit in Britain—or even if it performs unusually well in its time slot—phones start ringing in production companies' offices. Foreign broadcasters, hungry for proven fare, may hire the producers of a British show to make a version for them. Or they may buy a “bible” that tells them how to clone it for themselves. “The risk of putting prime-time entertainment on your schedule has been outsourced to the UK,” says Tony Cohen, chief executive of FremantleMedia, which makes “Got Talent”, “Idol” and “X Factor”.

Like financial services, television production took off in London as a result of government action. In the early 1990s broadcasters were told to commission at least one-quarter of their programmes from independent producers. In 2004 trade regulations ensured that most rights to television shows are retained by those who make them, not those who broadcast them. Production companies began aggressively hawking their wares overseas.

They are becoming more aggressive, in part because British broadcasters are becoming stingier. PACT, a producers' group, and Oliver & Ohlbaum, a consultancy, estimate that domestic broadcasters spent £1.51 billion ($2.4 billion) on shows from independent outfits in 2008, but only £1.36 billion in 2010. International revenues have soared from £342m to £590m in the same period. Claire Hungate, chief executive of Shed Media, says that 70-80% of that company's profits now come from intellectual property—that is, selling formats and tapes of shows that have already been broadcast, mostly to other countries.

Alex Mahon, president of Shine Group, points to another reason for British creativity. Many domestic television executives do not prize commercial success. The BBC is funded almost entirely by a licence fee on television-owning households. Channel 4 is funded by advertising but is publicly owned. At such outfits, success is measured largely in terms of creativity and innovation—putting on the show that everyone talks about. In practice, that means they favour short series. British television churns out a lot of ideas.

Yet the country's status as the world's pre-eminent inventor of unscripted entertainment is not assured. Other countries have learned how to create reality television formats and are selling them hard. In early October programme buyers at MIPCOM, a huge television convention held in France, crowded into a theatre to watch clips of dozens of reality programmes. A Norwegian show followed urban single women as they toured rural villages in search of love. From India came “Crunch”, a show in which the walls of a house gradually closed in on contestants.

Ever-shrinking commissioning budgets at home are a problem, too. The BBC, which provides a showcase for independent productions as well as creating many of its own, will trim its overall budget by 16% in real terms over the next few years. The rather tacky BBC3 will be pruned hard—not a great loss to national culture, maybe, but a problem for producers, since many shows are launched on the channel. Perhaps most dangerously for the independents, ITV, Britain's biggest free-to-air commercial broadcaster, aims to produce more of its own programming.

Meanwhile commissioners' tastes are changing. Programmes like “Wife Swap”, which involve putting people in contrived situations (and are fairly easy to clone), are falling from favour. The vogue is for gritty, fly-on-the-wall documentaries like “One Born Every Minute” and “24 Hours in A&E”. There is a countervailing trend towards what are known as “soft-scripted” shows, which mix acting with real behaviour. “Made in Chelsea” and “The Only Way is Essex” blaze that peculiar trail.

These trends do not greatly threaten the largest production companies. Although they are based in London, their operations are increasingly global. Several have been acquired by media conglomerates like Sony and Time Warner, making them even more so. Producers with operations in many countries have more opportunities to test new shows and refine old ones. FremantleMedia's new talent show, “Hidden Stars”, was created by the firm's Danish production arm. Britain is still the most-watched market—the crucible of reality formats. But preliminary tests may take place elsewhere.

There is, in any case, a way round the problem of British commissioners leaning against conventional reality shows. Producers are turning documentaries and soft-scripted shows into formats, and exporting them. Shine Group's “One Born Every Minute”, which began in 2010 as a documentary about a labour ward in Southampton, has already been sold as a format to America, France, Spain and Sweden. In such cases the producers are selling sophisticated technical and editing skills rather than a brand and a formula. With soft-scripted shows, the trick is in casting.

The companies that produce and export television formats are scattered around London, in odd places like King's Cross and Primrose Hill. They are less rich than financial-services firms and less appealing to politicians than technology companies. But they have a huge influence on how the world entertains itself. And, in a slow-moving economy, Britain will take all the national champions it can get.


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