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China’s mom-and-pop investors, builders and homebuyers caught in Evergrande debt crisis

China's mom-and-pop investors, builders and homebuyers caught in Evergrande debt crisis

China’s mom-and-pop investors, builders and homebuyers caught in Evergrande debt crisis

 
Evergrande Cultural Tourism City in Suzhou’s Taicang
 
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By Josh Horwitz and David Kirton

SUZHOU/SHENZHEN, China (Reuters) – At an eerily quiet construction site in eastern China’s Suzhou, worker Li Hongjun says property developer Evergrande’s debt crisis means he will soon run out of food. Christina Xie, who works in export in the bustling southern city of Shenzhen, fears Evergrande has swallowed her life savings.

The pair, united like legions of others by their connections to the vast China Evergrande Group, show the scale of the challenge facing the Chinese government in managing its financial woes, although economists downplay the risk of a “Lehman moment” style collapse.

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Evergrande, with outstanding debts of $305 billion, recently stopped repaying some investors and suppliers and halted building work at projects across the country, setting off global alarm bells over upcoming interest payments.

Li, who says he has not been paid since August, is doing minimal maintenance among half finished apartment blocs whose outer shells hide rubble-filled interiors. Sand and concrete slabs cover a just-finished marble floor in one future home.

“In the past two days I’ve been planning to go to the government,” he said. “What can I do? Soon I’ll have no food to eat. If I have no food to eat I’ll have to go to the government to eat.”

Xie put 380,000 yuan ($58,770) of savings into a wealth management product sold by Evergrande and says she did not receive a payout of 30,000 yuan due to her earlier this month.

“It’s all my savings. I was planning to use it for me and my partner’s old age. I worked day and night saving, now it’s game over,” said Xie, who was told that the wealth management product that she bought would yield 7.5% a year.

“Evergrande is one of China’s biggest real estate companies … my consultant told me the product was guaranteed.”

Xie still hopes to be able to redeem her investment, one of billions of yuan in wealth management products https://www.reuters.com/business/finance/with-gucci-bags-dyson-appliances-evergrande-wooed-retail-investors-2021-09-21 (WMPs) sold by Evergrande, but she is not satisfied with any of the options suggested so far, which include the offer of property.

Evergrande did not immediately reply to a request for comment, but chairman Hui Ka Yan told a late-night meeting on Wednesday that the top priority is to help investors redeem their products and that home deliveries should be ensured.

PROTESTS

Angry homebuyers and retail investors launched protests in several cities in recent weeks – anathema to China’s stability-obsessed ruling Communist Party.

Property accounts for 40% of assets owned by Chinese households, according to Macquarie, which means contagion from a potentially messy Evergrande collapse could reverberate beyond households and investors to suppliers and construction workers.

A crackdown on debt in the sector has ended a freewheeling era of building with borrowed money which became infamous for ghost cities and roads to nowhere. [L4N2QP0VF]

“It is important from a social stability standpoint to make sure that Chinese retail investors get their money back and that homebuyers get their homes delivered,” said Carlos Casanova, senior economist for Asia at Union Bancaire Privee.

Analysts at Capital Economics estimated that as of end-June, Evergrande still had to complete around 1.4 million properties, around 1.3 trillion yuan ($202 billion) in pre-sale liabilities.

One woman who bought an Evergrande property in the northeastern city of Shenyang and asked not to be identified has been waiting since April 2020.

She said she is spending 3,000 yuan a month on mortgage repayments on the 600,000 yuan she has already put down but that the building site is now closed and she doubts Evergrande will make its latest delivery deadline of Dec. 30.

Meanwhile, roughly 40 billion yuan of the group’s WMPs are outstanding, a sales manager at Evergrande Wealth told Reuters previously.

More than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties – bought WMPs that raised more than 100 billion yuan in the past five years, the sales manager told Reuters, lured by the promise of yields approaching 12%.

Regulators summoned Evergrande’s executives last month and issued a rare warning that the company needs to reduce its debt risks and prioritise stability.

($1 = 6.4659 Chinese yuan renminbi)

(This story refiles to fix typo in first paragraph)

(Additional reporting by Clare Jim, Tom Westbrook, and Andrew Galbraith; writing by Gabriel Crossley; editing by Tony Munroe and Philippa Fletcher)

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Lithuania urges people to throw away Chinese phones

Lithuania urges people to throw away Chinese phones

Lithuania urges people to throw away Chinese phones

Published
The Xiaomi 10T Pro advert wiht two women in front.IMAGE SOURCE,GETTY IMAGES
image captionThe Xiaomi 10T Pro was found to have censorship capabilities, the report said

Consumers should throw away their Chinese phones and avoid buying new ones, Lithuania’s Defence Ministry has warned.

A report by its National Cyber Security Centre tested 5G mobiles from Chinese manufacturers.

It claimed that one Xiaomi phone had built-in censorship tools while another Huawei model had security flaws.

Huawei said no user data is sent externally and Xiaomi said it does not censor communications.

“Our recommendation is to not buy new Chinese phones, and to get rid of those already purchased as fast as reasonably possible,” said Defence Deputy Minister Margiris Abukevicius.

Censorship

Xiaomi’s flagship Mi 10T 5G phone was found to have software that could detect and censor terms including “Free Tibet”, “Long live Taiwan independence” or “democracy movement”, the report said.

It highlighted more than 449 terms that could be censored by the Xiaomi phone’s system apps, including the default internet browser.

In Europe, this capability had been switched off on these models, but the report argued it could be remotely activated at any time.

“Xiaomi’s devices do not censor communications to or from its users,” a spokeswoman told the BBC. “Xiaomi has never and will never restrict or block any personal behaviours of our smartphone users, such as searching, calling, web browsing or the use of third-party communication software.”

The firm is fully GDPR compliant, she added.

media captionChina’s smartphone giant: In 60 secs

The research also found the Xiaomi device was transferring encrypted phone usage data to a server in Singapore.

“This is important not only to Lithuania but to all countries which use Xiaomi equipment,” the Centre said.

 

The smartphone maker has soared in popularity with affordable models, seeing a 64% rise in revenue in its second quarter compared to a year earlier.

Huawei P40

The report also highlighted a flaw in Huawei’s P40 5G phone, which put users at risk of cyber-security breaches.

“The official Huawei application store AppGallery directs users to third-party e-stores where some of the applications have been assessed by anti-virus programs as malicious or infected with viruses,” a joint statement by the Lithuanian Ministry of Defence and its National Cyber Security Centre said.

The BBC is not responsible for the content of external sites.View original tweet on Twitter

A Huawei spokesman told the BBC it abides by the laws and regulations of the countries where it operates, and prioritises cyber-security and privacy.

“Data is never processed outside the Huawei device,” he added.

“AppGallery only collects and processes the data necessary to allow its customers to search, install and manage third-party apps, in the same way as other app stores.”

 

Huawei also performs security checks to ensure the user only downloads “apps which are safe,” he said.

A further 5G model by OnePlus was also examined by the team, but was found to have no issues.

The report comes as tensions between Lithuania and China are rising.

Last month, China demanded that Lithuania remove its ambassador from Beijing and said it would withdraw its envoy from Vilnius.

The row began when Taiwan announced its missions in Lithuania would be called the Taiwanese Representative Office.

Other Taiwanese embassies in Europe and the United States use the name of the country’s capital city, Taipei, to avoid a reference to the island itself, which China claims as its own territory.

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USTR says Tai, UK trade chief to continue efforts to curb China’s non-market practices

USTR says Tai, UK trade chief to continue efforts to curb China's non-market practices

USTR says Tai, UK trade chief to continue efforts to curb China’s non-market practices

 
 
·1 min read
 
 

WASHINGTON (Reuters) – U.S. Trade Representative Katherine Tai and her new British counterpart agreed to continue U.S.-UK discussions aimed at addressing the market-distorting practices of China and other non-market economies, Tai’s office said on Monday.

Tai, meeting virtually with UK Trade secretary Anne-Marie Trevelyan, “emphasized her commitment to deepening bilateral trade and investment ties” between the allied countries, USTR said.

She discussed USTR’s ongoing review of past U.S.-UK trade agreement talks, but the statement gave no indication of a path forward.

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Amazon says it’s permanently banned 600 Chinese brands for review fraud

Amazon says it’s permanently banned 600 Chinese brands for review fraud

Illustration by Alex Castro / The Verge

Remember when gadget vendors Aukey, MpowRavPowerVava, TaoTronics and Choetech started mysteriously disappearing from Amazon’s online storefront, and it turned out Amazon had intentionally yanked them while vaguely gesturing to the sanctity of its user reviews? Turns out they were just the tip of the iceberg. Amazon has now permanently banned over 600 Chinese brands across 3,000 different seller accounts, the company confirms to The Verge.

Amazon says that’s the grand tally after five months of its global crackdown, and it’s no longer being shy about why: a spokesperson tells us these 600 brands were banned for knowingly, repeatedly and significantly violating Amazon’s policies, especially the ones around review abuse.

The South China Morning Post reported the numbers earlier, citing an interview with an Amazon Asia VP on state-owned television.

Amazon’s crackdown began amidst reporting by The Wall Street Journal’s Nicole Ngyuen about how companies like RavPower offered gift cards in exchange for reviews.

I’ve been collecting cards like this as well. Amazon banned the practice of incentivized reviews in 2016, but it’s a tricky business: some of these offers are disguised as a VIP testing program or an extended warranty. Other companies only offer incentives after you’ve left a bad review — they’ll give you a free product or offer a “refund” of free money, no return required, as long as you’ll delete your negative review.

It’s not clear which other Chinese brands might be included in Amazon’s latest crackdown — and it’s quite possible some of their products will escape Amazon’s net. Even though Aukey was one of the first high-profile companies to get banned in May, the company was still selling earbuds under a sub-brand as of July, and you can still buy a pair of them on Amazon even today. I also found a Choetech wireless charging pad, and a RavPower battery. We’ve asked Amazon to explain its policies around ban dodging, and we’ll let you know what we hear.

In early July, the parent company of Shenzhen Youkeshu Technology (more commonly known as YKS) reported that Amazon had closed 340 of YKS’s online stores and frozen over $20 million worth of its assets, according to the South China Morning Post. The publication described YKS as one of the platform’s largest Chinese retailers.

Here’s Amazon’s full statement:

Amazon works hard to build a great experience in our store so that customers can shop with confidence and sellers have the opportunity to grow their business amid healthy competition. Customers rely on the accuracy and authenticity of product reviews to make informed purchasing decisions and we have clear policies for both reviewers and selling partners that prohibit abuse of our community features. We suspend, ban, and take legal action against those who violate these policies, wherever they are in the world.

We will continue to improve abuse detection and take enforcement action against bad actors, including those that knowingly engage in multiple and repeated policy violations, including review abuse. We are confident that the steps we take are in the best interests of our customers as well as the honest businesses that make up the vast majority of our global selling community.

Probe finds World Bank changed data to boost China ranking

Probe finds World Bank changed data to boost China ranking

Probe finds World Bank changed data to boost China ranking

Investigators found that World Bank staff changed data to boost China’s ranking in the 2018 and 2020 ‘Doing Business’ report which gauges business conditions around the world.

The changes in the World Bank's 2018 'Doing Business' report followed lobbying by China for a better ranking and came ahead of a campaign by the World Bank to raise capital in which Beijing was expected to play a 'key role', investigators found [File: Thomas Peter/Reuters]
The changes in the World Bank’s 2018 ‘Doing Business’ report followed lobbying by China for a better ranking and came ahead of a campaign by the World Bank to raise capital in which Beijing was expected to play a ‘key role’, investigators found [File: Thomas Peter/Reuters]

The World Bank is cancelling a prominent report on business conditions around the world after investigators found staff members were pressured by the bank’s leaders to alter data about China and some other governments.

The bank said on Thursday it would discontinue “Doing Business” following an investigation prompted by internal reports of “data irregularities” in its 2018 and 2020 editions and possible “ethical matters” involving bank staff.

Staff members changed data on China to improve its ranking under pressure from the office of then-World Bank President Jim Yong Kim and from then-Chief Executive Kristalina Georgieva and one of her advisers, an investigation conducted by Washington law firm WilmerHale for the bank concluded.

Georgieva, now director of the International Monetary Fund, said she disagreed with the findings.

“I disagree fundamentally with the findings and interpretations of the Investigation of Data Irregularities as it relates to my role in the World Bank’s Doing Business report of 2018,” Georgieva said in a statement.

Staff members changed data on China to improve its ranking under pressure from the office of then-World Bank President Jim Yong Kim and from then-Chief Executive Kristalina Georgieva (pictured) and one of her advisers, an investigation conducted by Washington law firm WilmerHale for the bank concluded [File: Remo Casilli/Reuters]

The World Bank, headquartered in Washington, is one of the world’s biggest sources of development funding. Doing Business, which looks at taxes, red tape, regulation and other business conditions, is cited by some governments in trying to attract investment. It ranks countries on factors such as how straightforward or burdensome it is to register a business, legally enforce a contract, resolve a bankruptcy, get an electrical connection or obtain construction permits.

Timothy Ash, senior emerging market sovereign strategy strategist at fixed income manager BlueBay Asset Management, said he “cannot overestimate” the importance of the Doing Business report for banks and businesses trying to assess risk in a particular country.

“Any quantitative model of country risk has built this in to ratings,” he said. “Money and investments are allocated on the back of this series.”

 

He added that if an analyst at a bank or rating agency had done what is alleged, “I wager they would be fired and would be subject to regulatory investigation.”

China has tried over the past two decades to increase its influence over international institutions including the IMF, World Health Organization and their policies.

The changes in the 2018 report followed lobbying by China for a better ranking and came ahead of a campaign by the World Bank to raise capital in which Beijing was expected to play a “key role,” the report said. China is the bank’s third-largest shareholder after the United States and Japan.

Changes by analysts who prepared the 2018 report raised China’s ranking by seven places to No 78, according to the report. Other changes affected rankings of Azerbaijan, the United Arab Emirates and Saudi Arabia.

A World Bank senior director acknowledged the Doing Business leadership made changes to “push the data in a certain direction to accommodate geopolitical considerations,” the report said. It said Georgieva thanked him for doing his “bit for multilateralism”. The senior director interpreted that to mean “not angering China” during the capital increase negotiations, the report said.

The World Bank researchers knew the changes “were inappropriate,” but they “expressed a fear of retaliation” by Georgieva’s aide, Simeon Djankov, according to the report.

The Chinese foreign ministry expressed hope the World Bank would “conduct a comprehensive investigation” to “better maintain the professionalism and credibility” of Doing Business.

“The Chinese government attaches great importance to optimising the business environment,” said a ministry spokesperson, Zhao Lijian.

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China’s factory inflation hits 13-year high

China's factory inflation hits 13-year high

China’s factory inflation hits 13-year high

 
 
 

China’s factory gate inflation hit a 13-year high in August, driven by blistering gains for raw materials prices.

And despite Beijing’s attempts to cool costs, pressure is mounting on manufacturers in the world’s second-largest economy.

The producer price index rose 9.5% from a year earlier for the month, the fastest pace since 2008.

China’s economy has recovered strongly from last year’s slump.

But has been losing steam due to domestic outbreaks and high raw material prices.

As well as tighter property curbs and a campaign to reduce carbon emissions.

Commodity prices have been on a tear in recent months.

And that’s hurting the bottom lines of many mid- and downstream factories.

China’s coal prices hit a record high this week over supply concerns, as major coal regions started fresh rounds of safety checks..

Prices in the coal sector grew over 57% in August from a year earlier.

Earnings at China’s industrial firms have now slowed for five straight months.

Some economist though expect coal and metals prices will likely drop back as construction activity falls amid restrictions on the sector.

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Traders Rush to Dump China Tech Stocks as Gaming Targeted Again

Traders Rush to Dump China Tech Stocks as Gaming Targeted Again

Traders Rush to Dump China Tech Stocks as Gaming Targeted Again

 
Traders Rush to Dump China Tech Stocks as Gaming Targeted Again
 
·2 min read
 
 

(Bloomberg) — Technology stocks led Chinese shares lower on Thursday after Beijing took aim at gaming companies for focusing solely on profit, underscoring the risk of calling a bottom to the market.

The Hang Seng Tech Index tumbled 4.5%, the most in six weeks, with Tencent Holdings Ltd. dropping by almost twice that amount in its worst day in more than a month. NetEase Inc. slumped 11% in a decline that accelerated after a report that China would halt approvals for new online games.

Thursday’s pullback was triggered by regulators summoning officials from companies including Tencent and NetEase to remind them of their social obligations and the harm caused by putting profits first. The news was a sharp blow to a tentative rebound that had investors eyeing the return of bull market for Hong Kong-listed tech stocks.

 

“This demonstrates the risk for those attempting to call the bottom with so much uncertainty still hanging,” said Bloomberg Intelligence analyst Matthew Kanterman. “I don’t think the overnight news is a big departure from that which we already knew, but the reaction clearly signifies the skittishness of investors around any regulatory news.”

Investors remain torn between enticing valuations and China’s long-term economic prospects on the one hand, and on the other the difficulty of predicting how much further the government will go in its crackdown on private enterprise.

The risks and rewards of investing in the nation’s stocks is dividing some of the biggest names in global investing. Billionaire George Soros recently penned an op-ed in a Wall Street Journal with warnings of a “tragic mistake” while huge money managers like BlackRock Inc. are pushing to scale up their mutual fund businesses in China.

After edging toward a bull market, the Hang Seng Tech Index is now has 11% up from its Aug. 20 low, and around 40% below its February peak.

“We can see the negative news on the gaming sector also dragging down other tech names, with investors starting to consider the regulatory risks again rather than bottom fishing,” said Bu Jiajie, an analyst at China Galaxy International Securities. “Some tech stocks have had a good rebound in recent days and there is profit taking at the moment.”

Onshore, China’s CSI 300 Index closed little changed while the Shanghai Composite gained 0.5%.

(Updates throughout)

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Soros calls on Congress to block BlackRock China investment

Soros calls on Congress to block BlackRock China investment

Soros calls on Congress to block BlackRock China investment

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Billionaire and liberal political philanthropist George Soros is panning Blackrock’s China investment foray as a “tragic mistake” and calling on Congress to take action against it.

Soros argued in an opinion piece for the Wall Street Journal that the investment management giant’s dealings in the Chinese economy will not only lose money for its clients in the long run but will also inflict damage on the national security of the United States and other democracies.

CHINA THREATENS FIGHTER JET ACTION IF BIDEN INVITES TAIWAN’S PRESIDENT TO DEMOCRACY SUMMIT

Soros, who is seen as a sort of bogeyman by some on the Right, appealed to bipartisanship in combating China’s growing influence. He said that the two countries are embroiled in a “life and death conflict” between democracy and repression and said that BlackRock money invested in China would help the Chinese by propping up General Secretary Xi Jinping’s regime.

“Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support,” Soros said.

Last month, BlackRock, which is the world’s largest asset manager, began tapping into the Chinese market by offering mutual funds and investment products to Chinese investors, becoming the first foreign-owned firm to be permitted to do so. The research arm of the company, which is run by CEO Larry Fink, also recently encouraged investors to triple their exposure to Chinese assets.

In the op-ed, Soros takes aim at Xi and asserts that BlackRock misunderstands the nature of China’s economy and the grip that the communist regime has over it.

“The firm seems to have taken the statements of Mr. Xi’s regime at face value,” Soros wrote. “It has drawn a distinction between state-owned enterprises and privately owned companies, but that is far from reality. The regime regards all Chinese companies as instruments of the one-party state.”

He hit at China’s recent regulatory clampdown over some of its biggest companies and said that there is an “enormous crisis brewing in China’s real-estate market.” Soros noted that China’s “Common Prosperity” program to redistribute wealth “does not augur well with foreign investors” and highlighted speculation that Xi may attempt to make himself ruler for life next year.

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“He is bound to have enemies, whom he must prevent from uniting against him. Thus, he needs to bring to heel any entity rich enough to exercise independent power,” he said, highlighting Xi’s crackdown.

The Washington Examiner contacted BlackRock for comment about Soros’s opinion piece but did not immediately receive a response.

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China’s economy under pressure, growth slows

China's economy under pressure, growth slows

China’s economy under pressure, growth slows

China’s businesses and the broader economy came under increasing pressure in August.

Factory activity expanded at a slower pace.

While the services sector slumped into contraction.

The data raises the likelihood of more near-term policy support to boost growth.

The world’s second-biggest economy staged an impressive recovery from the global health crisis.

But momentum has weakened recently due to fresh outbreaks and high raw material prices.

Slowing exports and tighter measures to tame hot property prices and a campaign to reduce carbon emissions have also weighed.

The official manufacturing Purchasing Manager’s Index fell to 50.1 in August, from 50.4 in July.

It held just above the 50-point mark that separates growth from contraction.

The manufacturing PMI showed demand slipped sharply, with new orders contracting.

Some analysts expect most of the weakness to reverse with relaxing of restrictions.

But warn that tight credit conditions and weakening foreign demand will continue to weigh on China’s economy.

Higher raw material prices, especially of metals and semiconductors, have also pressured profits.

Earnings at China’s industrial firms in July slowed for the fifth straight month.

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U.S. Treasury says China private equity’s Magnachip purchase poses security risks

U.S. Treasury says China private equity's Magnachip purchase poses security risks

U.S. Treasury says China private equity’s Magnachip purchase poses security risks

 
FILE PHOTO: The U.S. Treasury building is seen in Washington
 
 
·1 min read
 
 

SEOUL (Reuters) – The U.S. Treasury Department said the acquisition of Magnachip Semiconductor Corp by a Chinese private equity firm posed “risks to national security”, in another hurdle for Chinese companies trying to invest abroad in critical tech industries.

In March, Chinese private equity firm Wise Road Capital agreed to acquire system chip manufacturer Magnachip in a deal valued at $1.4 billion.

Since then, regulatory authorities in countries including the United States and South Korea have been reviewing the deal. Magnachip, which produces display and power chips, has production and R&D facilities based in South Korea.

 

Magnachip said in a SEC filing on Monday the U.S. Department of Treasury, in a letter to the company’s legal counsel last Friday, said the acquisition posed “risks to the national security of the United States,” and expects to seek President Joe Biden’s decision on the matter.

CFIUS, a committee under the U.S. Department of Treasury, had ordered the deal to be put on hold in June.

The filing to the U.S. Securities and Exchange Commission did not specify the nature of the risks.

Magnachip was assessing its next steps, but cannot give assurance that it would agree to proposals that would facilitate clearance by CFIUS, the filing said. A spokesperson for Magnachip declined further comment.

A global shortage of chips has slowed production in the automobile and tech industries, fuelling calls for the United States to rely less on China and leading to efforts such as the U.S. Senate passing the “U.S. Innovation and Competition Act” which authorised about $190 billion for provisions to strengthen U.S. technology and research.

(Reporting by Joyce Lee; Editing by Jacqueline Wong)

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