ReportWire

Tag: trade and development finance

  • China relaxes capital controls to entice badly needed foreign investment | CNN Business

    China relaxes capital controls to entice badly needed foreign investment | CNN Business

    Editor’s Note: Sign up for CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world.


    Hong Kong
    CNN
     — 

    China is allowing foreigners in Shanghai and Beijing to move their money freely into and out of the country, in a significant move toward relaxing its strict capital controls as it tries to woo overseas investors.

    The news was announced just weeks after official data showed foreign direct investment (FDI) in the country had hit a record quarterly low amid a slump in business confidence.

    Foreign investors — either individuals or companies — at the Shanghai pilot free trade zone, where tens of thousands of firms are located, can remit their funds without any restriction or delay, according to a statement from the city government posted Thursday.

    The funds need be “real and [legally] compliant” and related to their investments in China, it said. The rules, which do not apply to mainland Chinese nationals, took effect on September 1.

    Shanghai’s free trade zone is one of China’s largest and is slightly bigger than the city of Seattle.

    It’s home to Tesla’s Gigafactory as well as the country headquarters of hundreds of multinationals, including HP, AstraZeneca and BlackRock.

    On the same day, the Beijing city government proposed similar regulations, pledging to facilitate cross-border fund flows for foreign businesses. It’s seeking public feedback on the proposal.

    The policies are aimed at attracting foreign investment to build an open economy, the government said.

    China maintains a “closed” capital account, which means companies and individuals can’t move money in or out of the country except in accordance with strict rules.

    The Chinese currency has weakened more than 6% against the US dollar since the start of April, as economic growth lost momentum and its central bank eased monetary policy more aggressively than its Western peers. A weak currency could further reduce a country’s investment appeal and accelerate the outflow of capital.

    Thursday’s measures are the latest effort by Chinese leader Xi Jinping’s government to woo foreign capital and stabilize ties with the West.

    A gauge of FDI in China plunged in the second quarter, hitting its lowest level since 1998, when records began, according to data published by the State Administration of Foreign Exchange last month.

    Separate statistics published by the commerce ministry Sunday showed that its measure of FDI dropped more than 5% during the first eight months of 2023, compared with a year earlier.

    Business confidence among American firms in China appears to have plummeted.

    On Tuesday, a survey by the American Chamber of Commerce in Shanghai showed that only 52% of respondents were optimistic about their five-year business outlook, the lowest level since the survey began in 1999. That compares with 55% in 2022 and 78% in 2021.

    Foreign companies and investors have grown wary of rising risks in the world’s second largest economy, including a slowdown marked by weak domestic demand and a housing crisis, Beijing’s desire to prioritize national security over economic growth and deteriorating relations between China and many Western countries.

    China has made a series of moves recently to stabilize foreign trade and investment, including cutting a tax on stock trading for the first time since 2008.

    On Monday, the People’s Bank of China met with a number of top Western companies, including JP Morgan, Tesla and HSBC, pledging to further open up the financial industry and “optimize” the operating environment for overseas companies.

    The latest relaxation in capital controls is part of a policy package announced by Beijing and Shanghai, the country’s two biggest cities, to facilitate foreign trade and investment.

    Expatriates working at foreign enterprises in the Shanghai free trade zone — including employees from Hong Kong, Macao and Taiwan — can transfer their income abroad without restriction, according to the rules.

    Beijing’s policy contains similar measures. It also promised to make it easier for foreign companies to transfer data overseas with “fast-track” channels and encouraged them to invest in the city’s high-end manufacturing, services and green industries.

    Source link

  • Asia Pacific stocks rise as investor worries about global banking turmoil ease | CNN Business

    Asia Pacific stocks rise as investor worries about global banking turmoil ease | CNN Business


    Hong Kong
    CNN
     — 

    Stocks in the Asia Pacific region rose Tuesday as concerns about the global banking sector eased in response to a whirlwind of intervention by policymakers and industry players.

    The S&P/ASX 200 in Australia jumped 1.3%, boosted by its AXFJ index, a measure of banking stocks, which surged 1.7%.

    In Hong Kong, the Hang Seng Index

    (HSI)     opened up 0.8%. China’s Shanghai Composite was 0.3% higher at the start of its trading session.

    South Korea’s Kospi ticked up 0.8%. Japanese markets were closed for a public holiday. Singapore’s Straits Times Index gained 1.1%.

    US stock futures were flat in Asian trade Tuesday, with Dow futures, S&P 500 futures and Nasdaq futures little changed.

    That followed a sunnier day on Wall Street, as investors became more confident in the outlook for the general banking sector, sending shares up.

    On Monday, central banks across Asia Pacific moved to quell concerns about the finance industry, with authorities in Australia, Hong Kong, Singapore and the Philippines assuring the public that their money was safe following the emergency bailout of Credit Suisse over the weekend.

    That did little to stop stocks from slumping initially, though analysts had predicted global markets could see calm later on Monday as investor nerves settled and relief set in. The landmark rescue of Credit Suisse

    (CS)     by bigger Swiss rival UBS

    (UBS)     on Sunday was followed by a coordinated move by major central banks to boost the flow of US dollars through financial markets.

    Shares of UBS rose about 3.3% in an intraday reversal on Monday, following a drop of as much as 15% earlier in the session.

    Still, recession fears continue to dog investors ahead of the US Federal Reserve’s meeting, which is set to conclude Wednesday. Traders see about a 73% probability of the central bank raising interest rates by 25 basis points.

    US regional banks also aren’t out of the woods yet. Shares of First Republic

    (FRC)    , the struggling California bank bailed out by a consortium of banks last week, fell to an intraday record low Monday before ending the session down about 47% in another day of steep losses for the company.

    The Dow

    (INDU)     closed 1.2% higher, while the S&P 500

    (SPX)     gained about 0.9%. The Nasdaq Composite

    (COMP)     climbed 0.4%.

    — CNN’s Krystal Hur contributed to this report.

    Source link

  • Opinion: ‘Africa’s COP’ made some big promises. Here’s how to deliver | CNN

    Opinion: ‘Africa’s COP’ made some big promises. Here’s how to deliver | CNN

    Editor’s Note: Adjoa Adjei-Twum. She is the Founder & CEO of the Africa-focused and UK-based advisory firm Emerging Business Intelligence and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
    The opinions expressed in this article are solely hers.



    CNN
     — 

    The recently-concluded COP27 was dubbed the “African COP” – with the continent center stage in the global effort to fight the causes and effects of climate change.

    As negotiations in the Egyptian resort of Sharm el-Sheikh spilled over into the weekend, there was a significant breakthrough on one of the most fractious elements – creating a fund to help the most vulnerable developing nations hit by climate disasters.

    The backdrop for COP27 was a series of catastrophic global weather events including record-breaking floods in Pakistan and Nigeria, the worst droughts in four decades in the Horn of Africa, and severe European heatwaves and hurricanes in the US.

    The loss and damage fund – to pay for the sudden impacts of climate change which are not avoided by mitigation and adaptation – has been a major obstacle in COP talks.

    The richest, most polluting nations have been reluctant to agree to a deal, worried that it could put them on the hook for costly legal claims for climate disasters.

    I welcome progress here, as African nations are bearing the brunt of climate change. The continent contributes around 3% of global greenhouse gas emissions, according to the UN Environment Programme and the International Energy Agency (IEA).

    Climate change is estimated to cost the continent between $7bn and $15bn a year in lost economic output or GDP, rising to $50bn a year by 2030, according to the African Development Bank (AfDB).

    But my joy is muted – the devil is in the detail, as ever. As an African diaspora entrepreneur whose work focuses significantly on the impact of climate change on the risk profile of African financial institutions and nations, I am concerned about the lack of detail about how the fund would work, when it will be implemented, and the timescale. I fear these could take years.

    During a recent visit to the US, I discussed reparation money with US Democrat Congresswoman Rep. Ilhan Omar. She said it was important for the US and other countries to make heavy investments, which could come in the form of reparations.

    She spoke about the importance of consulting impacted communities in Africa to avoid exploitation and the need for countries such as the US and China to end fossil fuel expansion and phase out existing oil, gas, and coal in a way that is “fair and equitable.”

    Adaptation is Africa’s big challenge – the AFDB estimates that the continent needs between $1.3 to $1.6 trillion by 2030 to adapt to climate change.

    The bank’s Africa Adaptation Acceleration Program, in partnership with the Global Center on Adaptation (GCA), aims to mobilize $25bn in finance for Africa, for projects such as weather forecasting apps for farmers and drought-resistant crops.

    It is now time for African nations to levy a climate export tax on commodities, such as cocoa and rubber, to help pay for climate adaptation. But it still falls short of the money Africa needs.

    Adaptation is all about building resilience and capacity, and I believe our governments, banks, and businesses must also adapt.

    I am calling on our governments, institutions, and companies to boost efforts to attract green finance and make Africa more resilient by improving governance, tax systems, anti-corruption efforts, and legal compliance.

    Sustainability is not a business tax, it is essential for business survival. Only companies focused on the changing world around us – from regulation to consumer and investor attitudes – will survive the climate crisis.

    Businesses that ignore this can expect fines, boycotts, and limited access to funding. Banks will suffer too. So the financial sector must be better prepared and more agile.

    This message will be reinforced when I meet CEOs, banking executives, and Nigeria’s central bank at the 13th Annual Bankers’ Committee Retreat, organized by the Nigerian Bankers Committee, in Lagos next month. The aim is to support the country’s biggest banks as they navigate new international sustainability rules.

    Increasingly, investment funds must conform to green taxonomies – a system that highlights which investments are sustainable and which are not. In other words, banks will only support investments by institutions in G20 countries if they conform to national or supranational rules, such as the European Union’s Green Taxonomy.

    This will not only help tackle greenwashing but also help companies and investors make more informed green choices. Additionally, G20 countries are asking their banks to forecast how risky their loans are due to climate change.

    African nations must implement robust systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure they have an enabling environment for increased green investments.

    Regulators must strengthen their capacity to develop and effectively enforce climate-related rules. Companies, especially banks, should strengthen climate risk management teams, regulatory compliance expertise, and preparation of bankable projects for international climate finance. This is the foundation for a successful transition to a low–carbon economy.

    Looking ahead, there are other actions we can take. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade area and single market of almost 1.3bn people – could protect Africa from the adverse impacts of climate change, such as food insecurity, conflict, and economic vulnerability.

    It could lead to the development of regional and continental value chains, inter-Africa trade deals, job creation, security, and peace. A single market could drive less energy-intensive economic growth while keeping emissions low, for example by developing regional energy markets and manufacturing hubs.

    But we need much better pan-Africa coordination, like the European Union, to accelerate the AfCFTA. I urge our governments to work together and take swift and concrete actions to ensure the full and effective implementation of the AfCFTA. There is no time to waste.

    This will not be popular with some African regimes because they will be forced to be more transparent and accountable with their public finances.

    This year’s COP may have been marred by chaos, rows between rich and poorer nations, and broken multi-billion-dollar pledges by developed countries who created the climate crisis.

    Many observers point out the final deal did not include commitments to phase down or reduce the use of fossil fuels.

    But, the deal to create a pooled fund for countries most affected by climate change is significant, and as UN secretary general António Guterres warned, it was no time for finger-pointing.

    It is also no time for the blame game. It is a wake-up call for African governments, banks, institutions, and companies to unite, step up, and adapt to a new climate reality.

    Source link

  • Global investors are bullish again on China as Beijing switches to damage control | CNN Business

    Global investors are bullish again on China as Beijing switches to damage control | CNN Business


    Hong Kong
    CNN Business
     — 

    Market sentiment on Chinese stocks hit rock bottom just weeks ago after President Xi Jinping secured a historic third term in power and stacked his top team with loyalists in a clean sweep not seen since the Mao era.

    But in the past week, a series of unexpected steps by Beijing — the easing of draconian zero-Covid restrictions, moves to salvage the ailing property sector and Xi’s personal return to the world stage -— have triggered a huge rally.

    Hong Kong’s benchmark Hang Seng

    (HSI)     Index has gained 14% since last Friday, putting it squarely into bull market territory, or more than 20% above its recent low. A key index of Chinese stocks in New York jumped 15% during the same period.

    On the tightly controlled mainland markets, Shanghai and Shenzhen stocks have also advanced more than 2%.

    “China continued to see a barrage of upside activity… as reopening measures are a clear buy signal,” said Stephen Innes, managing partner for SPI Asset Management. “We are in a sea change after China’s more progressive policy evolution arrived unexpectedly.”

    Investors now have a “tactically constructive” view on China after key concerns were addressed by credible policy actions, according to Bank of America’s monthly survey of Asian fund managers released on Wednesday.

    Some investment banks even upgraded their China growth forecasts following the policy changes. On Wednesday, ANZ Research hiked its China GDP forecast to 5.4% for 2023 from 4.2% previously.

    “The changes reflect the party leadership’s intention to stop losses. They want to correct the market’s perception of China’s economic outlook, as President Xi Jinping interacts with global leaders at G20,” it said.

    Investors sold off China stocks in October due to fears that Xi’s tightening grip on power would lead to the continuation of existing policies, such as zero-Covid and the common prosperity campaign, that have dragged down the economy and battered financial markets.

    A leadership team loyal to Xi also suggested that China may continue to prioritize ideology over the kind of pragmatic decision-making that had enabled the country’s swift economic rise over the past four decades.

    But the latest policy shifts, although not a full-throated economic opening, have been enough to excite investors and analysts waiting for any sign of China easing its rules.

    From Bali to Bangkok, Xi returned to the world stage after a near three-year absence. There were encouraging signs, in particular, coming from the historic meeting between Xi and US President Joe Biden on Monday, which fueled expectations for stronger economic ties between the two major world powers.

    “The US’s willingness to set a ‘floor’ on US-China relations likely means the US is keen to find common ground with China to prevent extreme outcomes,” said Jefferies analysts in a research note earlier this week.

    Chinese companies on Wall Street have been hammered by delisting risks since last year because of a simmering spat between the two countries over audits. In December, US regulators finalized rules to ban trading in shares of Chinese companies if they can’t access their audit papers, a request that had been denied by Beijing on national security grounds.

    “We believe the Xi-Biden meeting could reduce the risk of Chinese ADRs being delisted,” the Jefferies analysts added.

    In August, the two countries reached an agreement to allow US officials to inspect the audit papers of those firms, taking a first step toward resolving the dispute.

    Reuters also reported Wednesday that US regulators gained “good access” in their review of auditing work done on New York-listed Chinese firms during a seven-week inspection in Hong Kong.

    Despite this week’s rally, some analysts remain cautious. Qi Wang, CEO of MegaTrust Investment in Hong Kong, said the recovery may be driven by a lot of buying to close out previous short positions and money chasing quick returns.

    “I don’t think the long-term appetite for China and Hong Kong shares will return so quickly. Right or wrong, there were some fatal blows to global investor confidence earlier this year,” Wang said.

    “There is some good news recently, but the big institutional money still need time to assess the situation, including the economic prospect for next year,” he added.

    Including the recent surge, the Hang Seng index is still down 23% this year, making it one of the world’s worst performing indices. The Nasdaq Golden China Index, a popular index tracking Chinese companies in New York, has plunged more than 33% so far in 2022.

    “This week’s rally is a strong over-reaction to mildly positive news,” said Brock Silvers, Hong Kong-based chief investment officer at Kaiyuan Capital, a private equity investment firm. “The market was desperate for good news, but it’s foolish to think that once Covid is behind us we’ll return to the go-go days of high octane growth.”

    Silvers added that the economic factors and political risks that made China “uninvestable” a month ago are still prevalent and are likely to reassert themselves before long.

    China is still dealing with Covid outbreaks and remains firmly committed to measures long abandoned by most other nations. Even more serious is the real estate crisis and the risks that poses for the banking sector, he said, adding that the 16-point rescue plan Beijing announced last Friday did not go far enough.

    Hao Hong, chief economist for Grow Investment Group, described the rally as sentiment-driven and technical in nature, because the market was previously oversold to an epic level.

    But as winter is coming, Covid cases are set to rise.

    “Whether we could deal with the resurgence with adequate medical facilities and without panic remains to be seen,” he said, adding it also remains uncertain how effective the new property support measures are and whether the developers can “rise from ashes.”

    If China re-tightens Covid restrictions or US-China tension flares up again, market sentiment could plummet once more, he said.

    Source link

  • Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business

    Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business


    Hong Kong
    CNN Business
     — 

    Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.

    Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

    Hong Kong’s benchmark Hang Seng

    (HSI)     Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.

    The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.

    The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

    A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.

    “It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.

    The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.

    “The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.

    “There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.

    Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.

    Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.

    Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.

    The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.

    “With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.

    Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.

    “The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.

    Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.

    “The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.

    On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.

    The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.

    Shares of Alibaba

    (BABA)     and Tencent

    (TCEHY)     — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.

    The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio

    (NIO)     and Xpeng, Alibaba rivals JD.com

    (JD)     and Pinduoduo

    (PDD)     and search engine Baidu

    (BIDU)    , were all down sharply Thursday afternoon.

    Source link