Shanghai Daily Business
Updated: 2 months 1 week ago
International and Dutch unions filed a complaint with a global trade body yesterday accusing Chevron Corp of funneling billions of euros through letter box companies in the Netherlands to avoid taxation.In a rare step, the federation of Dutch trade unions, the International Transport Workers’ Federation and Public Services International lodged the complaint with the Organisation for Economic Cooperation and Development in The Hague.“Chevron fully complies with all tax laws in the jurisdictions in which the company operates,” Chevron spokeswoman Sally Jones said.The trade unions said tax avoidance deprived workers they represented of basic government services and pressured their wages.“The workers and communities we represent suffer when government-provided services such as health care, education, infrastructure, water, energy, and public safety decline,” the complaint said.“Unfortunately, multinationals’ practice of avoiding paying taxes in the countries in which their wealth is earned deepens global wealth inequality and empowers multinationals against workers and governments.”Scores of multinationals use the Netherlands, which has a network of tax treaties with roughly 100 countries, to shift dividends, interest and royalties untaxed through Dutch shell companies to tax havens overseas.In their 35-page complaint the unions alleged Chevron had used its Dutch subsidiaries to breach OECD disclosure guidelines in respect of their operations with Chevron’s Nigerian, Argentinian, and Venezuelan businesses. In those examples, the complaint states that Chevron specifically failed to meet requirements to pay tax in the country of extraction and to adhere to Dutch financial disclosure requirements.The unions said Chevron’s Dutch subsidiaries, through intra-group operations whose main purpose was the avoidance of taxes in multiple jurisdictions, breached the spirit of Dutch corporation tax law.“The American company is carrying out tax avoidance on a massive scale,” the groups said in a statement. “The Netherlands is already a tax haven which encourages companies to pay less.”The Dutch government, which says it wants to help stop tax avoidance, has come under pressure from the OECD and the European Commission to take more measures.
German firms would face extra tariffs of more than 3 billion euros (US$3.4 billion) a year if Britain quits the European Union without a trade deal, and their exports to Britain might drop by up to 57 percent, Germany’s IW institute said yesterday.Talks on ending four decades of Britain’s membership in the European Union have entered their final stage more than two years after Britons voted for Brexit. A hard Brexit would mean Britain leaving the bloc with no trade deal.The BDI industry association — one of Germany’s most influential lobby groups — said a breakthrough in Brexit negotiations was needed at an October 17-18 summit in Brussels.“Otherwise there is the risk that Europe slides into a disorderly Brexit and that would cause a huge crisis,” said managing director Joachim Lang, adding a hard Brexit would cause huge difficulties for tens of thousands of companies in Europe and hundreds of thousands of employees in Britain and the European Union.Many companies were preparing for a hard Brexit and some wanted to suspend production in Britain from April as delivery routes could not be secured and some were moving their headquarters from Britain, adjusting their legal frameworks and looking for new transport routes.Some individual pharmaceutical and chemical companies have spent up to 100 million pounds (US$130 million) preparing for Brexit.
German vehicle manufacturer Daimler AG is in talks with China’s Geely Holding Group Co to set up a joint venture to offer ride-hailing and car-sharing services in China, Bloomberg reported, citing sources.The 50-50 venture is yet to be finalized, and Daimler is planning to take on industry leader Didi Chuxing on its home turf, Bloomberg reported citing people familiar with the matter.“We have a constructive dialogue with our Chinese counterparts. I believe there is potential for both and there are more opportunities than risks. The situation is promising,” Daimler Chief Executive Dieter Zetsche said at the Paris Motor Show last week.Geely holds a stake in Daimler and has sought an alliance in the areas of electric and autonomous vehicle technologies.
THE China (Shanghai) Pilot Free Trade Zone yesterday for the first time released a negative list for the services sector, a major institutional innovation to further liberalize market access for foreign participation in areas such as transportation, insurance and communication.
The move means overseas services and service providers investing in areas not listed will now be treated the same as domestic companies, reducing red tape and other restrictions.
Special regulations governing investment by foreign entities, such as requiring a Chinese joint venture partner, will continue to apply to those sectors on the negative list.
The reform by the Shanghai FTZ is the first such move in the country.
The negative list covers a total of 159 special administrative measures involving 31 industries in 13 sectors, among which cross-border financial services is a major aspect.
“Among the 159 special management measures, 31 belong to the financial sector, which include monetary and financial services, capital market services, insurance and other financial services,” said Li Jun, deputy director of the Shanghai Financial Service Office.
Others involve postal and courier services, culture, sports and entertainment, scientific research and technological services, leasing and commercial services, telecommunications, software and information technology services, wholesale and distribution services, water conservancy, environment and public facilities management, education, agriculture, forestry, animal husbandry, fisheries and residential services, construction, health and social services.
“The replacement of the traditional ‘case-by-case approval’ model with the ‘pre-establishment of a national treatment + negative list’ approach is a meaningful institutional innovation which is based in Shanghai but will benefit the whole country,” said Wu Qing, vice mayor of Shanghai.
Wu said the debut of the negative list is conducive to China’s active role in coping with changes in the international economic and trade pattern and its further integration into the global value chain.
“It is also conducive to the implementation of measures for China’s further opening-up and leading the innovation and development of trade in services. Last, but not the least; it is conducive to deepening the reform and further opening-up of the Shanghai Free Trade Zone and improving the international competitiveness of trade in services.
“It is of great significance to make full use of the brand of ‘Shanghai Service,’ improve service quality, enhance international competitiveness and optimize service environment.”
Trade in services has become a new engine for global trade growth. China’s trade in services totaled US$695.7 billion last year, the largest after the United States.
Shanghai’s trade in services totaled US$195.5 billion last year, making it the leader in the sector in the world’s second largest economy.
Services accounted for nearly 30 percent of the city’s foreign trade — 14.6 percentage points higher than the national level.
CHINA’S stock markets trod water yesterday after steep losses on Monday, partially helped by gains in the oil sector and gold manufacturing.
The A-share market showed signs of rebounding during the morning session, but they were later wiped out. The benchmark Shanghai Composite Index edged up 0.17 percent, or 4.50 points, to finish at 2,721.01 and the Shenzhen Component Index ended at 8,046.39 from Monday’s close of 8,060.83.
The Nasdaq-style ChiNext enterprise board hit a four-year intra-day low at about 1,338 points before it narrowed the losses to close 0.57 percent down at 1,345.95, from Monday’s close of 1,353.67.
Mining service providers, oil and coal companies and gold firms led the gains, while military industry, domestic software and pharmaceuticals stocks fell heavily.
Shares in Zhongjin Gold Corp Ltd, a Beijing-based enterprise primarily engaged in the mining, processing, and smelting of gold, surged 6.32 percent to close at 7.23 yuan.
Sinolink Securities suggested investors focus on local enterprises as Shanghai prepares to host next month’s China International Import Expo.
THE International Monetary Fund cut its global growth forecasts yesterday for the first time since July 2016, as trade tensions between the United States and its trading partners have started to hit economic activity worldwide.
In an update to its World Economic Outlook, the IMF said it was now predicting 3.7 percent global growth in both 2018 and 2019, down from its July forecast of 3.9 percent growth for both years.
The IMF kept its growth forecast for China at 6.6 percent this year, while shaving its projection for next year to 6.2 percent, down 0.2 percentage points from three months ago, as the trade frictions with the US drag down the world’s second-largest economy.
“Our forecast for China’s 2019 growth has been downgraded due to the tariffs that we have actually seen on the US$200 billion of imports into the US, and that is an impact on China of 0.7 percent of GDP relative to our baseline forecast,” said Maurice Obstfeld, chief economist of the IMF.
“We assume, however, that the 0.5 percentage point of that is offset by the Chinese authorities’ stabilization of the domestic economy, leading to a net fall of 0.2 percent. That set of actions, by the way, also reduces our forecast of US growth for next year because we factor in China’s retaliation,” he added.
As the US unilaterally imposed additional tariffs on some of its main trade partners in the past several months, the IMF warned that “escalating trade tensions and the potential shift away from a multilateral, rules-based trading system” are key threats to the global outlook.
“An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade,” the report said.
“Higher trade barriers would disrupt global supply chains and slow the spread of new technologies, ultimately lowering global productivity and welfare,” the report argued, adding that more import restrictions would push up the prices of consumer goods, thus harming low-income households disproportionately.
The IMF expects the US economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.
But it predicts that US growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as US President Donald Trump’s trade war with China takes a toll.
Obstfeld also said the possibility that China and the US resolve their disagreements would be a significant upside to the forecast.
“We are more tentative in our optimism than we were six months ago because, if you have the world’s two largest economies at odds, that is a situation in which everyone, everyone is going to suffer. So, it would be great if the talks could lead to an accommodation in which disruptions to trade were put aside,” he said.
The IMF maintained its growth forecast of 2.4 percent for advanced economies in 2018, while downgrading its forecast for those economies in 2019 to 2.1 percent, 0.1 percentage points lower than its July forecast.
Growth in emerging markets and developing economies is projected to reach 4.7 percent in 2018 and 2019, 0.2 percentage points and 0.4 percentage points lower than the previous forecasts in July respectively.
The outlook for world trade overall also darkened: The fund expects global trade to grow 4.2 percent this year, down from 5.2 percent in 2017 and from the 4.8 percent it expected in July.
DESPITE new challenges and changes in the external environment, the Chinese economy is on a solid footing to maintain a stable and positive outlook, said Ning Jizhe, deputy head of the National Development and Reform Commission and head of the National Bureau of Statistics.
Responding to concerns about the downward pressure on the Chinese economy, Ning said the focus should be on the overall trend instead of specific indicators, and current fluctuations in the economic index were within a reasonable range.
The Chinese economy has maintained stable and sound growth so far this year, laying a solid foundation for achieving the annual goal of economic and social development, Ning said.
The first half of this year saw a 6.8 percent growth of China’s GDP, which had stayed within the range of 6.7 percent to 6.9 percent for 12 consecutive quarters. China had also maintained stability in the employment, price and balance of international payments to facilitate stable and positive economic growth.
Ning also noted China’s economic structure had been improved, with consumption becoming a more fundamental driver of economic growth. While the profits and development quality of the Chinese economy improved, the per capita disposable income of Chinese people kept growing.
He emphasized that investment, a key factor in economic development, played a crucial role in maintaining stable and sound growth and coping with external risks.
China’s investment structure continued to improve, and private investment maintained rapid growth. Meanwhile, the growth of investment in the manufacturing sector kept accelerating.
China would be devoted to strengthening environmental protection, poverty alleviation and the development of rural areas and agriculture. China would also eliminate all types of unnecessary investment barriers and promote private investment, Ning said.
He highlighted the relationship between stable growth and risk prevention, adding that the economy should grow within a reasonable range to avoid risks.
China was unavoidably affected by the trade frictions due to the growing interdependence between the Chinese economy and global economy in the process of China’s reform and opening-up, but the stable and positive trend of China’s economy would not stop, Ning said.
Despite the complicated domestic and external environment, the rise of trade protectionism and unilateralism and the fluctuations in the global financial market, China’s economy was resilient and flexible enough to cope with any risks and China would achieve the annual goal of economic and social development.
China should continue to advance the supply-side structural reform, pursue high-quality development and facilitate rational growth to maintain the stability of the economy, he added.
Apart from creating more jobs and expanding domestic demand, China should strive for greater levels of reform and opening-up, and facilitate international cooperation in trade and investment, Ning added.
On trade frictions with the US, Ning said that whether direct or indirect, short-term or long-term, they were all controllable. With the transformation of the Chinese economy, domestic demand has played an increasingly important role in economic growth. China has been capable of reducing the effects of trade frictions to a controllable range by maximizing the momentum of domestic consumption and investment.
Factories completely operated by robots may be the popular vision for the future of manufacturing, but the human factor cannot be ignored, according to Xiao Weirong, head of B&R China, an arm of the Austrian-based company committed to industrial automation.“In plain words, smart manufacturing means the efficient cooperation between humans and machines in the production process, with humans doing things suitable for humans and machines doing things suitable for machines,” said Xiao.“Smart manufacturing” is the big buzz word in global industry nowadays, reflected in development strategies such as Germany’s Industry 4.0 plan and China’s Made in China 2025 initiative. However, many people tend to equate the term with complete automation. Xiao disputes that, arguing that smart manufacturing means efficient cooperation between man and machine. Human beings, he said, will always be essential to smart manufacturing, no matter to what extent it develops. Xiao admitted that he, too, once equated smart manufacturing with unmanned automation.“I believed that automation meant machines did everything and humans were not essential when I was an engineer in Germany,” he said. “In working on my first project, I made the software completely unmanned, but later I saw that if the machine goes wrong, humans cannot intercede with its unmanned functions. The co-existence of humans and machines is the basis for industrial automation. Smart manufacturing means humans and machines cooperating harmoniously.”How to improve that cooperation has been the focus of B&R. Last April, Switzerland-based ABB, a giant in the robotics field, acquired B&R and incorporated its technology and expertise into its own industrial automation unit.“Many people think that smart manufacturing means adding a lot of algorithms to software, but, in fact, algorithms eat up a good deal of computing resources and slow down machines,” Xiao said. “That means, in the end, that machine efficiency is reduced and costs increased. Time cost is part of total cost.”An emphasis on the value of humans in smart manufacturing has driven B&R to undertake the training of professionals in automation, in tandem with developing automation technologies.Xiao’s years as a student in Germany gave him an opportunity to learn the value of vocational education. He said he wants to apply that experience to training professional technicians, whose numbers in China fall below those of academic experts.B&R’s automation school was established to address that gap. It offers training classes to customers and employees, in cooperation with technical colleges and universities. Among its academic allies are Shandong University, Northwestern Polytechnical University and Donghua University. By building joint labs with B&R, universities and colleges can offer the latest automation technologies to students, shorten the distance between books and technical development, and enhance the practical abilities of students.
Walmart Inc said it will partner with US movie studio Metro Goldwyn Mayer to create content for its Vudu video-on-demand service, which the retailer bought eight years ago.Walmart has been trying to prop up Vudu’s monthly viewership that remains well below that of competitors like Netflix Inc and Hulu LLC, which is controlled by Walt Disney Co, Comcast Corp and Twenty-First Century Fox Inc.Media outlets have reported that Bentonville, Arkansas-based Walmart was looking to launch a subscription streaming video service to rival Netflix and make a foray into producing television shows to attract customers.But company sources have told Reuters that Walmart is not planning such a move and the company does not intend to spend billions of dollars on producing or acquiring exclusive content as of now. The retailer continues, however, to look at options to boost its video-on-demand business and offer programs that target customers who live outside of big cities.Walmart and MGM will make the announcement at the NewFronts conference in Los Angeles on Wednesday and unveil the name of the first production under the partnership, which Walmart will license from MGM.“Under this partnership, MGM will create exclusive content based on their extensive library of iconic IP (intellectual property), and that content will premiere exclusively on the Vudu platform,” Walmart spokesman Justin Rushing told Reuters.The focus will be on family-friendly content that Walmart customers prefer, Rushing said.These shows will be exclusively licensed for a period of time to Vudu for North America, and available on Vudu’s free, ad-supported service Movies On Us. Vudu will also commission and license original shows from other sources.The first MGM-produced short-form original series for Vudu is likely to debut in the first quarter of 2019 on Movies On Us.The financial terms of the deal were not disclosed.Licensing content is a cost-effective strategy at a time when producing original content has become costly. As of July, Netflix said it was spending US$8 billion a year on original and acquired content. Amazon.com Inc’s programming budget for Prime Video was more than US$4 billion, while US broadcaster HBO, owned by AT&T Inc, said it will spend US$2.7 billion this year.Walmart also plans to roll out a new video ad format for Movies On Us, which will allow viewers to make purchases from Walmart.com.Walmart acquired Vudu in 2010 to safeguard against declining in-store sales of DVDs. Walmart bet customers would continue to buy and rent movies and move their titles to a digital library, which Vudu would create and maintain for viewers.But the video site has not posed a significant challenge to rivals that dominate the segment even though it is preloaded or can be downloaded to millions of smart televisions and video-game consoles.Vudu offers 150,000 titles to buy or rent, while Movies On Us includes 5,000 movies and TV shows.There are currently more than 200 video services that bypass cable providers and stream content directly to a TV, laptop, phone or game console. That is up from 68 services five years ago, according to market researcher Parks Associates.
CHINA has decided to improve its export tax rebate policy to reduce the business burden and bolster foreign trade, according to a State Council executive meeting chaired by Premier Li Keqiang yesterday.
The current seven tax brackets will be cut to five, and some rates will be raised according to international common practice, according to a statement released after the conference.
Effective from November 1, the 15 percent bracket and part of the 13 percent bracket will be lifted to 16 percent. The 9 percent notch will be adjusted to 10 percent or 13 percent, and the 5 percent tier to 6 or 10 percent.
However, export rebate rates of high energy consumption and seriously polluting goods as well as those involved in industrial capacity cuts will remain unchanged.
The government expects the policy to facilitate supply-side structural reform, ease burdens on the real economy, and stabilize foreign trade growth amid complicated global circumstances.
Tax refund procedures will also be simplified, with the year-end goal of shortening the average time needed from 13 work days to 10. Businesses with a good record will see an even faster and easier process.
Paperless applications will be promoted, and service businesses will be encouraged to help tax refunds for small and medium-sized enterprises.
China has also decided to speed up renovation of its shantytowns to improve the living conditions of people with housing difficulties. The meeting vowed to speed up revamping shantytowns and ancillary facilities, and tighten supervision over construction quality and safety in accordance with the requirements of the 2018 government work report.
Chinese business activity expanded modestly last month, with sharp differences between a strong expansion in services and the weakest growth in manufacturing in almost a year, the latest Caixin business report released yesterday shows.And the combined data of both sectors showed a contraction in total employment in September to its lowest level in more than two years, which analysts said could test policy-makers’ commitment to continued reform.The seasonally adjusted Caixin China General Services Business Activity Index — or services purchasing managers’ index — looking at small and medium private companies, rose to 53.1 last month from 51.5 in August — the largest increase in three months — according to the survey conducted by financial information service provider Markit for Caixin Media.In contrast, the rise in manufacturing production was the weakest since October 2017.“The data indicated that an improved services sector performance was broadly offset by softer manufacturing growth,” Caixin said.The Composite Output Index was little changed at 52.1 from August’s 52.0, signaling that the rate of activity growth remained lackluster compared with earlier in the year.New business followed a similar trend, with services companies registering a stronger rise in new orders, the Caixin report said.Although modest, the latest increase in services sector sales was the fastest since June, with some firms linking growth to new product offerings and increased client bases.Meanwhile, new business broadly stagnated for manufacturing companies after a marginal rise in August. As a result, composite new order inflows continued to expand at a relatively subdued pace, with growth picking up only slightly from August’s 26-month low.Staffing levels fell across both the manufacturing and services sectors in September.“Employment in the services sector contracted abruptly and that sub-index fell to its lowest level since March 2016,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.For manufacturers, workforce numbers fell at a pace that, although modest, was the fastest for 14 months.Companies across both sectors said restructuring and the non-replacement of voluntary departures had contributed to lower employment levels. Combined headcounts fell at the fastest rate since August 2016.“What we should be wary of is that overall employment contracted in September, with the sub-index hitting its lowest since August 2016,” Zhong said. “The deterioration in employment will test policy-makers’ determination in pressing ahead with reforms.”Prices charged by service providers declined for the first time in 13 months, while input costs rose at their fastest since January. “Reflecting that, the sub-index of business expectations, which gauges service companies’ confidence over the next 12 months, edged down in September,” Zhong said.Companies are generally optimistic that output will increase over the next year. But optimism fell to a nine-month low among manufacturers on concerns of global trade tensions and tougher environmental policies. Confidence also fell across the services sector.
China’s Evergrande Health Industry Group Ltd shares slumped yesterday on news it was being sued by electric vehicle startup Faraday Future for failing to make a payment and that Faraday was looking to scrap a deal to sell a stake.Evergrande Health, a unit of property developer China Evergrande Group, had in June agreed to buy Season Smart, owner of 45 percent of Faraday Future, as part of plans to diversify into new technology.The Hong Kong-listed firm agreed to pay Faraday US$1.2 billion in two equal installments, due in 2019 and 2020, completing Season Smart’s obligations to Faraday Future, which was founded by entrepreneur Jia Yueting.Evergrande said it had also agreed in July to make an advance US$700 million payment, subject to some conditions, following a request from Faraday that was short on cash.Faraday is now using the US$700 million payment agreement as an excuse to seek arbitration, despite the payment obligations not being fulfilled, Evergrande said in a statement on Sunday.Faraday Future, in a statement posted on its official Weibo account yesterday, rejected Evergrande’s claims.The EV firm said Evergrande had initiated an agreement to make an additional payment to Faraday by the end of 2018.Faraday said the Chinese investment holdings company did not keep its promise even though both the startup and Jia had fulfilled all payment conditions.“Rather, Evergrande tried to acquire the control and ownership of all FF’s IP (Faraday Future’s intellectual property),” it said in the statement.Evergrande also stopped Faraday from getting any financing from other channels, it added.Faraday Future, which has ambitions of overtaking Tesla, said it will soon ensure mass production of its first high-end vehicle, FF91, and that it welcomes “investors with the same value as FF to pursue the dream together.”Faraday did not make any reference to a lawsuit against Evergrande in its statement.According to Evergrande’s statement filed with the Hong Kong Stock Exchange, Jia has started arbitration at the Hong Kong International Arbitration Centre against Evergrande.Evergrande said it would take all necessary steps to protect its rights.Jia is manipulating Faraday Future’s board through his majority seats and is seeking to deprive Evergrande of its right as a shareholder to approve plans by Faraday to raise financing in the future.Leshi Internet Information & Technology, which is the main listed unit of Jia’s debt-laden conglomerate LeEco, declined to comment. Leshi shares closed down 7.9 percent. Evergrande tumbled as much as 36.6 percent in yesterday’s morning session but closed down 16.5 percent.
Shanghai stocks registered their biggest daily loss in three and a half months yesterday, as China’s bourses fell heavily despite a move by the central bank over the weekend to reduce the reserve ratio for most lenders.Analysts say the move was not enough to calm nervousness over the trade conflict with the United States.The Shanghai Composite Index plunged 3.72 percent to close 104.84 points down at 2,716.51. The smaller Shenzhen Component Index fell 4.05 percent to 8,060.83 points and the Nasdaq-style ChiNext enterprise board lost 4.09 percent to close at 1,353.67 points.The A-share market opened lower on the first trading day post the National Day Holiday and showed no signs of rebounding — with more than 3,000 stocks falling heavily.Despite the central bank move, analysts said trade tensions with the US continue to weigh on the markets.“An RRR (reserve requirement ratio) cut is not enough to counter the impact of the trade war. The economy is quite weak, and I see a growing number of companies selling their assets,” said David Dai, general manager of Shanghai Wisdom Investment Co Ltd, a hedge fund.Market heavyweights were mainly negative. Liquor makers, insurance companies and carmakers were among the worst-performers. Shares of the SAIC Motor Corporation Limited, the largest auto company on China’s A-share market, slipped by the daily limit of 10 percent to close at 30.01 yuan (US$4.35).The People’s Bank of China, the central bank, announced on Sunday that it would cut the amount of cash that most banks must hold as reserves from October 15 to lower the financing cost for the country’s real economy.Reserve requirement ratios — 15.5 percent for large commercial lenders and 13.5 percent for smaller banks — will fall by 100 basis points, matching a similar-sized move in April. Economists expect further cuts.Sunday’s move will inject a net 750 billion yuan (US$109.2 billion) in cash into the banking system by releasing a total of 1.2 trillion yuan in liquidity, with 450 billion yuan of that to offset maturing medium-term lending facility loans.The PBOC’s latest move is designed at engineering a “credit impulse” to increase liquidity in the economy, said Raymond Yeung and Betty Wang, economists at ANZ Research.Shenwan Hongyuan Securities said that the market will not see too much downward pressure in the fourth quarter and there is already basis for the market’s gradual stabilization.The central bank said on Sunday it would continue to take necessary measures to stabilize market expectations, while maintaining a prudent and neutral monetary policy, ensuring reasonably ample liquidity to drive the reasonable growth of monetary credit and social financing. The RRR cut would not create pressure on the yuan, the PBOC said, adding it would keep foreign exchange markets stable.
NEW housing sales in Shanghai retreated during the weeklong National Day holiday, but the better performing high-end segment helped push average prices up to another record, the latest industry data shows.
Across the city, about 56,000 square meters of new residential property, excluding government-subsidized affordable housing, were sold during the seven days to Sunday, a week-over-week drop of 68.8 percent, Shanghai Centaline Property Consultants Co said in a report yesterday.
But that compared to about 22,000 square meters during last year’s National Day holiday.
The Pudong New Area, where about 25,000 square meters of new homes were sold, mainly fuelled by good supply released in previous weeks, emerged as the only area that saw weekly sales pass the 10,000-square-meter threshold. It was closely trailed by the outlying districts of Qingpu and Fengxian, although neither passed 9,000 square meters.
“Not a single unit of new homes was launched onto the local market last week and media reports on price cuts by some developers to boost sales at their residential projects were also heard,” said Lu Wenxi, senior manager of research at Centaline. “That will probably create a ripple effect and we therefore expect to see more such campaigns as developers face ever mounting capital pressure.”
The average cost of a new home rebounded sharply to 69,731 yuan (US$10,106) per square meter, a week-on-week surge of 29.2 percent.
Three of the top 10 most sought-after projects cost more than 100,000 yuan per square meter, recording sales of 20, 10 and 12 units.
Notably, two residential developments in Pudong’s Qiantan area, both with a price tag of more than 80,000 yuan per square meter, managed to grab the top two spots on last week’s list after selling 9,896 square meters and 8,010 square meters, respectively, during the holiday.
CHINA’S foreign exchange reserves edged down 0.7 percent, or US$22.7 billion from a month earlier, to US$3.087 trillion at the end of September, the central bank said yesterday.
Wang Chunying, spokeswoman for the State Administration of Foreign Exchange, attributed the contraction to a number of factors including exchange rate conversion and changing asset prices.
“Bonds usually take up a large portion of many countries’ forex reserves,” said Zhao Qingming, chief economist of derivatives institute of China Financial Futures Exchange. “The interest rate hike by the Federal Reserve has led to declines in bond prices across the world, which also influenced the asset reassessment of China’s forex reserves.”
In addition, Japanese yen weakened over 2 percent. According to Zhao, China’s forex reserves lost about US$10 billion in book value because of the weakening of yen.
CHINA’S central bank yesterday announced a cut in the amount of cash that banks must hold as reserves to lower the financing cost for the country’s real economy.
The People’s Bank of China said it will reduce the reserve requirement ratio by 100 basis points, effective from October 15.
The fourth cut of this year will cover the yuan deposits of large commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial banks and foreign banks.
The cut in reserve requirement ratios — currently 15.5 percent for large commercial lenders and 13.5 percent for smaller banks — will release a total of 1.2 trillion yuan (US$175 billion) in liquidity.
A statement of the central bank said some of the liquidity unleashed will be used to pay back the 450 billion yuan of the medium-term lending facility (MLF) that will mature on October 15.
The MLF is a liquidity tool introduced by the PBOC in 2014 in an aim to help the commercial and policy banks maintain liquidity by allowing them to borrow from the central bank by using securities as collateral.
This is the second time that the central bank has used reserve requirement cuts to replace MLF operation this year.
Wu Qing, chief economist of the China Orient Asset Management Co, said the move was consistent with market expectations, and in the future, the central bank might continue to use MLF and other tools to make fine adjustments on liquidity.
According to the central bank, the incremental capital of 750 billion yuan will be injected into the market to support small, micro and private enterprises, and innovative companies to enhance the vitality and resilience of the world’s second-largest economy, strengthen endogenous growth momentum and promote the healthy development of the real economy.
The move remains targeted at adjustment with a goal to optimize the liquidity structure of commercial banks and the financial market and to reduce financing costs, said the central bank.
The PBOC will continuously implement a prudent and neutral monetary policy, refrain from using a deluge of stimulus and focus on targeted adjustment to maintain sound and sufficient liquidity, facilitate rational growth in monetary credit and social financing, and create a proper monetary and financial environment for the country to pursue high-quality economic development and advance the supply-side structural reform, it said.
The move will fill in the liquidity gap of banks and put no downward pressure on the yuan as the country’s monetary policy is not eased, according to the PBOC statement.
There are sufficient conditions for the yuan exchange rate to remain stable at a reasonable and balanced level, it said.
“The PBOC will continue to take necessary measures to stabilize market expectations and keep the foreign exchange market running smoothly,” it said.
Dong Ximiao, a researcher with the Chongyang Institute for Financial Studies of the Renmin University of China, noted that the steadily growing Chinese economy also faced challenges.
Apart from ensuring reasonably sufficient liquidity, the government could also use fiscal and taxation policies to stimulate growth and enhance economic sustainability, Dong said.