China Digest

Economics and policy from China’s newspapers

Tuesday January 3, 2017

Yuan plunge unlikely in 2017, Xinhua says

A yuan plunge is unlikely to happen in 2017, state Xinhua News agency said on Monday evening, in a report highlighting six areas “experts” are paying attention to. Also on the list was stable economic growth, deepening “supply-side structural reform”, prudent monetary policy, stabilizing the property market and making China the world’s economic growth “engine”.

Preventing risk more of a priority than growth, says PBOC’s Zhou

Monetary policy will be “prudent and neutral” in 2017, the governor of the People’s Bank of China, Zhou Xiaochuan, said in his new year address, as reported by Xinhua. Zhou also said his policy this year would prioritise prevention of systematic risk over support for growth, and that it would continue with “supply-side structural reform” of financial services. Such reform will include cutting down excess capacity, deleveraging, lowering corporate debt and improving weak links.

SAFE stresses Forex quota for individuals is unchanged amid rumors

Rumors about a tightened Forex quota for individuals spread, Xinhua says, after the State Administration of Foreign Exchange requested banks report more closely on “large or questionable transactions”. The new rule announced last Friday, effective from July 2017, requires banks and other financial institutions in China report all domestic and overseas cash transactions of more than 50,000 yuan, compared with 200,000 yuan previously.

The authority has reiterated, however, that individuals can still buy up to US$50,000 each year in foreign currency. The quota resets at the beginning of each year. The demand for better reporting, Xinhua added, is intended to combat money laundering.

Chinese domestic M&A down in 2016; but average transaction value is up

Domestic M&A activity in China dropped 11.94% in 2016 to 788.9 billion yuan (US$113.52 billion) from a year earlier (895.9 billion yuan), according to figures from Dongxing Securities, as reported by Yicai on Monday evening. Average transaction value, however, increased by 11.21% from 2.82 billion yuan in 2015 to 3.14 billion yuan, the report said. A total of 24 transactions were not approved by regulators, a slight increase from 22 transactions in 2015. The report also added that regulators gave four key reasons for not approving domestic M&As. These include doubts over continued profitability, insufficient information disclosure on value and pricing, unclear stock ownership structures and companies breaking promises previously made.

Farm product processing industry to be boosted

The State Council said on December 28, as reported by Xinhua, that the ratio of farm product processing output value to agricultural output value should be 2.4:1. Most developed nations have a ratio of between 3:1 and 4:1 for the standard to measure modern agriculture, according to another reportby the State Council. By 2025, the processing rate of agricultural products should be 75%, up from a target of 68% in 2020, the report said.