China Banking Research

In hope of a sustained stock market rally, U.S. President Donald Trump has been pushing for a rapid conclusion to the trade war he started with China almost nine months ago. Treasury Secretary Steven Mnuchin and National Economic Council Advisor Larry Kudlow, ever mindful of investors' concerns, reportedly have The Donald's ear. Trump's patience with the hardline approach of U.S. Trade Representative Robert Lighthizer may be wearing thin, people close to the White House say.

In the late 20th century, Hong Kong became the undisputed financial center of the Far East. Tokyo might have had a larger stock exchange, but the city never saw itself as a global financial hub. It was Hong Kong that attracted large global banks, PE firms and hedge funds to establish regional headquarters.

China led global fintech funding in 2018 as its tech giants stepped up their bid for global expansion. Data from a new Accenture report show that China raised $25.5 billion of $55.3 billion in fintech funding last year. $14 billion of that cash came from the mammoth Ant Financial fundraising round that closed in June 2018.

U.S. President Donald Trump is at the core of the Sino-U.S. trade war, just like he was the company boss and host of the reality-TV series The Apprentice. Trump fired many a contestant on the show. His White House staff has seen its fair share of defections too. The trade war with China has the air of reality TV, like much of The Donald's presidency, with even more twists, turns and quips. Trump became famous on The Apprentice for telling contestants, "You're fired!" In the trade war (show), his one-liners are even better: "Trade wars are good and easy to win" and "I am a Tariff Man."

If at first you don't succeed in buying a money-transfer company, try again. Just make sure you go shopping in a friendly jurisdiction. That strategy paid off for the Alibaba affiliate Ant Financial as it acquired the UK's WorldFirst for $700 million in mid February.

February 15 2019

Wither China's P2P Lenders

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Peer-to-peer lending in China is cratering amidst a heavy-handed government crackdown aimed at stamping out fraud in the once-booming online loan sector. Nationwide, authorities are tightening the screws on the $176 billion industry. By some analysts' estimates, the crackdown could wipe out up to 70% of China's P2P firms. Among the most recent major firms to call it quits is Shanghai-based Yidai, who kicked off 2019 by announcing it was exiting P2P lending. Its 32,000 lenders (with a principal balance of RMB 4 billion) would be repaid within five years, the company said.

Germany is pressing China to follow through on nearly two-decade-old promises to open its financial sector to foreign competition. In a January 18 dialogue in Beijing, the two countries vowed to open their respective markets wider to each other's banks and insurers. Reportedly, Beijing and Berlin signed three agreements: one between the two central banks, one regarding cooperation in securities and futures trading, and one to examine banking regulations together.

In 2018, Chinese banks lent a record $2.4 trillion in loans. That the credit spigot opened is no surprise: The banks had the full backing of Beijing, who looked on nervously as the Chinese economy limped - by its standards, anyway - to the finish line with just 6.5% annual growth, its worst performance since 1990. It wasn't so long ago that China could expect 9% annual growth.

All things considered, the U.S. and China had amicable trade discussions this week. With the clock ticking on the 90-day trade-war ceasefire, both sides have impetus to resolve the trade tiff. The Chinese economy likely grew at its slowest pace in 30 years - 6.5% - in 2018 as U.S. tariffs battered exports. The U.S. economy remains resilient for now, but U.S. President Donald Trump is watching the mercurial stock market nervously. People close to the administration say that he hopes to reach a trade deal with China to rally investors.

At first blush, Didi Chuxing doesn't seem in dire need of a new business model. As China's top ride-hailing app, the Beijing-based firm boasts more than half a billion users and millions of drivers. Granted, it has been burning money for years, but that's par for the course among unicorns - tech startups valued at US$1 billion or more - and some analysts believe Didi could raise up to US$80 billion in an expected 2019 IPO.

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