China

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Looks like the bulls are back in the China shop, pushing stocks up for the first quarter of the year on the back of stronger economic data and better-than-expected corporate earnings. The benchmark MSCI China Index gained 13 percent in the first three months of 2017, while the Shanghai Composite added 3.8 percent. Over the last year, mainland-traded stocks have posted a pretty steady ascent — markets in Shanghai and Shenzhen have added 7 percent and 4.5 percent, respectively.

The bulls are back after China kicks off 2017 with strength

China's middle class is booming. And with that explosion of wealth comes the opportunity for the Chinese to try and experience new things, including traveling abroad. While only about 6% of Chinese citizens have passports, their overseas spending is the highest in the world, amounting to about $200 billion over the last three years, or about the size of Greece's economy. Their spending has gotten so crazy that Japan even created a new word, bakugai, to explain their "explosive buying."

Chinese tourism is one of the most compelling growth stories - Business Insider

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China is planning the development of a new area, called Xiongan, in its northern Hebei province — and, according to The Guardian, it's set to be almost three times as big as New York. The region, which was announced by leaders of China's Communist Party on Saturday, will "spur economic growth," "take over Beijing's noncapital roles," and "serve as another economic engine and advance the coordinated development of the Beijing-Tianjin-Hebei region," according to China Daily. Xiongan will also explore a new way of developing densely populated areas, and could help with the likes of traffic congestion and air pollution.

China's Xiongan set to be almost three times as big as New York - Business Insider

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China’s shadow banking is back in full swing, an unintended side effect of the government’s campaign against financial leverage, which has curbed traditional lending and squeezed bond financing. Data from the central bank Friday showed that off-balance sheet lending surged 754 billion yuan ($109 billion) in March, taking the first quarter’s total increase to a record 2.05 trillion yuan. Efforts by the People’s Bank of China to curb fresh lending may have prompted borrowers, especially real estate developers, to resort to alternative forms of financing, said Xu Gao, chief economist at Everbright Securities Co.

China's $8.5 Trillion Shadow Bank Industry Is Back in Full Swing - Bloomberg

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China increased its holdings of U.S. Treasuries by the most in two years, a sign that the world’s second-biggest economy is stabilizing and stricter capital controls have helped to stem capital flight. The nation raised its ownership of U.S. government bonds, notes and bills by $27.9 billion to $1.09 trillion in March, the biggest increase since March 2015, according to a monthly Treasury Department report released on Monday. That means China remains the second-largest foreign holder of American debt.

China Increases U.S. Treasury Holdings by Most in Two Years - Bloomberg

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China defended its yuan exchange-rate policy and its interventions in the foreign exchange market on Thursday, saying it hasn’t manipulated its currency but instead sacrificed some of China’s interests to help the world, including the US.

China says its currency policy is actually doing the US a favor - Business Insider

Almost every day, China’s central bank pushes up the yuan and traders push it down. Officials have used the daily fixing to guide the currency higher against the dollar for eight of the past nine days, surprising market watchers with its strength. That’s failed to inspire confidence in the yuan, which has closed lower than the reference rate on all but one of those days. On Thursday last week, the yuan ended 0.4 percent weaker than the fixing, the biggest discount since January’s bout of volatility.

China's Yuan Is Locked in a Tussle Between PBOC and Traders - Bloomberg

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For the first time ever, China is facing a dreaded prospect: the inverted bond yield curve. The phenomenon, in which long-term interest rates sink below short-term interest rates, has caused some consternation among market-watchers, who know it's traditionally a harbinger of recession. The inversion suggests markets expect interest rates to fall eventually as monetary authorities move to stimulate economic activity.

Is China Headed for a Recession? - Bloomberg

Forget the "copycat China" stereotype: The world's second-largest economy is quickly shedding that image as domestic firms innovate rapidly. By 2020, 60 percent of European companies in China expect Chinese firms to have closed the innovation gap, according to the EU Chamber of Commerce in China's annual business confidence survey. "This should serve as a wake-up call for European companies," the report said. "While this catching up is most likely to occur in services, with breakthroughs in industrial goods taking longer, European business needs to plan accordingly."

China is rapidly closing the innovation gap, European firms say

It looks like China is finally getting real about risks lurking in its financial system. Stock markets on the mainland slumped in April and government bond yields spiked as regulators overseeing banking, insurance and securities trading issued a flurry of directives, coming down on everything from excessive borrowing to speculation in equities. While de-risking has been the government’s mantra since 2015 -- when whiplash moves in Chinese shares ignited global turmoil -- the country’s most powerful politicians are now weighing in, ordering a comprehensive check of financial markets..

China Ups the Ante in Bid to Quash Financial Risk: QuickTake Q&A - Bloomberg

In 2017, China has been a rewarding place to be among emerging markets, but a truly rewarding slice of the China economic pie has been internet stocks. Just look at the KraneShares CSI China Internet ETF (KWEB KrSh CSI Ch Int Shs KWEB 49.79 +0.85% ). KWEB has been on a torrid pace this year. Tuesday's gain of 3.2 percent, accrued on triple the average daily volume, brings the China internet ETF's one-month gain to over 16 percent and its year-to-date gain to nearly 42 percent. When KWEB's year-to-date performance is put into context, the ETF's ascent is all the more stunning. For example, KWEB has outpaced the largest China ETF, a fund with scant exposure to internet stocks, by a three-to-one margin. Additionally, the returns of the two largest U.S.-focused internet ETFs would have to be combined to exceed KWEB's year-to-date performance.

This China ETF Is On Fire (KWEB, BABA) | Investopedia

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China innovating

Parked in a big open square on campus was a vehicle resembling a bus. Through its floor-to-ceiling glass front, shelves could be seen stacked with red boxes. At the entrance, Wei Li scanned a QR code using his iPhone. A glass door slid open, and he stepped inside a store with no checkout and no staff. A holographic human face with a calm expression and neatly cut bangs greeted him. There was no sound, just a move of the face from one side to another. Li said he was impressed by the range of products sold there: fruits, potato chips, coffee, magazines, and even sneakers, each with a bar code on the package. He liked the ease with which he could buy things: all he needed to do was scan the bar code using a smartphone app with his banking card information registered in it. As he approached the exit, another glass door slid open automatically to let him out. This was Moby Store, launched by Wheelys, a Stockholm-headquartered crowdfunded startup. Originally focused on making cafés that can be moved from one spot to the next by bike, the company is now testing out a model of a 24-hour store run entirely by technology.

In China, a Store of the Future—No Checkout, No Staff - MIT Technology Review

The dream of a space-based nigh-unhackable quantum Internet may now be closer to reality thanks to new experiments with Chinese and European satellites, two new studies find. Quantum physics makes a strange phenomenon known as entanglement possible. Essentially, two or more particles such as photons that get linked or “entangled”can in theory influence each other simultaneously no matter how far apart they are. Entanglement is key to the workings of quantum computers, the networks that would connect them,and the most sophisticated kinds of quantum cryptography a theoretically unhackable means of information exchange.

Quantum Networks in Space Closer to Reality - IEEE Spectrum

Biotech once looked to China for cheap labor. It may soon find mounting competition instead. Thanks to bountiful investments and loosening regulations, China has become a nascent biotech powerhouse that investors and entrepreneurs say could one day rival the industry’s Western incumbents. Fueled by a sudden influx of foreign-trained talent, a new generation of Chinese startups is racing to treat the world with medicines invented at home. China’s rapid rise came into relief earlier this month at the annual meeting of the American Society of Clinical Oncology, often called the Super Bowl for biotech stocks because companies race to put out data on experimental drugs and pharmaceutical giants stalk the floor looking for promising assets. The gala became a coming-out party for Nanjing Legend Biotech, a boldly named but little-known Chinese firm that managed to snag a coveted spot among the meeting’s late-breaking presentations and unveiled head-turning early results from a complicated new approach to cancer immunotherapy.

China rises as a biotech powerhouse, developing drugs to treat the world

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“If you look back at the last six, seven years, investors were always concerned about China,” said June Chua, a Hong Kong-based fund manager and head of Asian equities with Harvest Global Investments Ltd. "We’ve always had earnings that were on a constant downgrade. This time, this year, we’ve actually seen an upgrade cycle happening in China." Chua said she recently increased the weighting of Chinese shares in the international portfolios she helps manage. Harvest, with $114 billion in assets under management, is one of the largest Chinese asset managers, though capital controls mean its overseas holdings are mainly for non-mainland China resident clients.

China's Debt Crackdown Gets a Big Shrug From Global Investors - Bloomberg

Chinese executives were riding an historic credit expansion that the country’s financial authorities turned on after the global financial crisis—and never really turned off. Overall government, household, and corporate debt clocks in at more than $28.8 trillion, or 258 percent of gross domestic product. The biggest share, some $17 trillion, is concentrated on corporate balance sheets, particularly those of lumbering state-owned enterprises producing everything from steel to coal, construction companies, and property developers. The longer China’s credit binge continues, the greater the risk of a wrenching downturn.

Can Xi Jinping Defuse China’s Debt Bomb? - Bloomberg

China’s much-vaunted campaign to tackle its leverage problem has captured headlines this year. But to understand why they’re taking on the challenge -- and the threat it could pose to the world’s second-largest economy -- you need to dig into the mountain. Characterized in state media as the “original sin” of China’s financial system, leverage has swelled over the past decade -- partly because policy makers were trying to cushion a slowdown in growth from the old normal of 10 percent plus. What’s fueled the leverage has been a rapid expansion in household and corporate wealth looking for higher returns in a system where bank interest rates have been held down.

China Is Taking on the ‘Original Sin’ of Its Mountain of Debt - Bloomberg

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The modernisation of monetary policy is in its own way a monumental project for China. Over the past two decades, the central bank’s conduct of policy had two defining features. It focused on the quantity, not the price, of money. And it relied on inflows of foreign cash to generate new money. Both features are now slowly changing, bringing China closer to the norm in developed markets, an essential transition for an increasingly complex economy.

China modernises its monetary policy

The International Monetary Fund has warned that China's credit growth is on a "dangerous trajectory". In a new report, the IMF says there is an increasing risk of a "disruptive adjustment" and/or a marked slowdown in economic growth". The agency calls for decisive action to deflate the credit boom smoothly. Without the boom, the report suggests, China's recent economic expansion would have been significantly slower. Since the global financial crisis, China's economic growth has slowed, from an average of 10% a year in the previous three decades to a rate of 6.7% last year. The Chinese government expected a slowdown, since the earlier double-digit rate was not sustainable over the long term.

IMF warns on China's credit boom - BBC News

President Donald Trump on Monday signed a memorandum that could lead to a trade investigation of alleged Chinese theft of intellectual property. The measure directs U.S. Trade Representative Robert Lighthizer to look into options to protect U.S. intellectual property. It does not take any specific action against China at this point.

Trump signs measure on Chinese trade practices, says it's 'just the beginning'

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China has tightened the purse strings on foreign investment, but the government's crackdown could completely backfire, hurting the very companies it's seeking to firm up. Chinese companies had been on a massive shopping spree — outbound deals hit a new record every year since 2009, soaring 500 percent to a whopping $200 billion last year. But authorities grew worried about economic and financial risks. Cash flying offshore added more pressure to an already weakening yuan, and it was unclear how much debt firms were taking on to buy everything from luxury resorts to soccer clubs.

Acquiring at significantly high prices reached a peak in 2015, the year the Fosun deal closed. The median value of China's overseas acquisitions hit 16 times EBITDA, versus the global median of 13 times, according to Dealogic data. That means Chinese companies were acquiring firms at much higher valuations than global peers.

China may be crippling some of its largest companies with a crackdown on investment