More credit for private companies in China


It is an attempt to bolster an economy struggling and a campaign to curb financial risks
Chief Investment Office23 Aug 2019
Photo credit: AFP Photo


CHINA & HONG KONG SAR

China’s high-profile campaign to funnel more credit to private companies has stalled according to a number of private surveys and reports, adding to concerns over the nation’s decelerating growth.

The credit confidence of small and medium-sized enterprises (SMEs) began to tumble in April and is now below its level in October, when President Xi Jinping proclaimed his “unwavering support” for private companies, according to a survey.

Xi championed the effort to funnel credit to more efficient private companies in an attempt to bolster an economy struggling amid the trade war with the US and a campaign to curb financial risks, especially in the USD9t shadow banking system. Its lack of traction is a setback for policymakers striving to rev up new growth engines, with borrowing costs stubbornly high even after the government set a goal of lowering them by one-percentage-point this year.

The campaign to channel more lending to private companies started well and the Standard Chartered SME Confidence sub-index for credit reached a 16-month high in March. But since then, attempts to funnel more credit to the private sector have collided with banks’ reluctance to lend to higher risk private companies amid a decelerating economy that is headed for its slowest growth in almost 30 years.

SMEs’ borrowing costs have also risen since the second quarter, according to the same survey. That is likely because the big five state-owned banks met their lending targets in the first half of the year, leaving smaller banks with higher funding costs to take up the slack, according to an economist. – Bloomberg News.

The Hang Seng Index fell 0.84% to 26,048.72 on Thursday (22 August) while the Shanghai Composite Index gained 0.11% to 2,883.44.

 

REST OF ASIA

South Korea said it would withdraw from an intelligence-sharing agreement with Japan, extending their feud over trade measures and historical grievances into security cooperation and raising alarm in the US, their shared ally.

South Korea notified Japan of plans to withdraw from the three-year-old framework for exchanging classified military information, Deputy National Security Director Kim You-geun said Thursday (22 August) in Seoul. The move came despite the urging of US officials including US President Donald Trump for the two allies to work together amid shared security challenges from China and North Korea.

Kim cited Japan’s recent decision to remove South Korea from a list of trusted export countries, saying it “brought about a significant change to the environment of defence cooperation”.

The decision shows the growing stakes for the unprecedented feud between Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in, escalating from diplomatic sniping to trade measures that could threaten global supply chains. While the impact of withdrawing from the intelligence pact was not clear, it underscored the hurdles that Washington faces in getting the countries to work together on regional security initiatives. – Bloomberg News.

Australia’s S&P/ASX 200 Index gained 0.22% to 6,516.30 at the open on Friday (23 August). It gained 0.29% to 6,501.81 on Thursday.

South Korea’s Kospi Index slipped 0.20% to 1,947.15 early-Friday morning. It fell 0.69% to 1,951.01 the previous session.

The Taiwan Stock Exchange Weighted Index gained 0.04% to 10,529.78.


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