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MNI: Growth Drag From Net Zero Carbon Goal Can Be Offset-OECD

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MNI China Press Digest Feb 27: Small Banks, LGFVs, REITs

MNI (Singapore)
MNI (Beijing)

MNI picks keys stories from today's China press

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Highlights from Chinese press reports on Tuesday:

  • Small and medium-sized commercial banks may need to lower their deposit interest rates further due to capital adequacy pressure, said Jia Dongxu, senior macro analyst at Shenwan Hongyuan. The capital adequacy ratios of city and rural commercial banks were 12.63% and 12.22% in Q4 2023, which were lower than the industry average of 15.06%. Meanwhile, banks’ profitability is under greater pressure with the average net interest margin falling 4 basis points to 1.69% in Q4, a new low since statistics were collected in 2010. Major state-owned banks lowered their deposit interest rates three times last year, but the rate reduction of smaller banks has largely lagged. (Source: Securities Daily)
  • Local government financing vehicles will continue to face tighter supervision as many provinces aim to reduce existing debt and the number of such instruments in 2024, 21st Century Business Herald reported. For instance, Guizhou province for the first time allowed a well-qualified financing platform to issue bonds to repay the principal of maturing transactions of a weaker financing vehicle. The market expects such cases to increase in future. Since 2017, Chongqing, Hunan, Shaanxi, Shandong and Gansu provinces have revealed plans to transform these financing vehicles.
  • China’s consumer infrastructure REIT market could reach CNY700 billion in future if the market follows international trends, according to calculations by Guo Xiangyu, research director of Tsinghua University School of Finance. Beijing will soon launch the first batch of consumer infrastructure REITs, with three of the six currently approved REITs ready for listing, totalling CNY8.9 billion. Authorities will issue consumer infrastructure REITs to increase household spending while improving consumption models and the quality of commercial projects, said Song Hongwei, research director at Tongce Research Institute. (Source: Securities Daily)
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Highlights from Chinese press reports on Tuesday:

  • Small and medium-sized commercial banks may need to lower their deposit interest rates further due to capital adequacy pressure, said Jia Dongxu, senior macro analyst at Shenwan Hongyuan. The capital adequacy ratios of city and rural commercial banks were 12.63% and 12.22% in Q4 2023, which were lower than the industry average of 15.06%. Meanwhile, banks’ profitability is under greater pressure with the average net interest margin falling 4 basis points to 1.69% in Q4, a new low since statistics were collected in 2010. Major state-owned banks lowered their deposit interest rates three times last year, but the rate reduction of smaller banks has largely lagged. (Source: Securities Daily)
  • Local government financing vehicles will continue to face tighter supervision as many provinces aim to reduce existing debt and the number of such instruments in 2024, 21st Century Business Herald reported. For instance, Guizhou province for the first time allowed a well-qualified financing platform to issue bonds to repay the principal of maturing transactions of a weaker financing vehicle. The market expects such cases to increase in future. Since 2017, Chongqing, Hunan, Shaanxi, Shandong and Gansu provinces have revealed plans to transform these financing vehicles.
  • China’s consumer infrastructure REIT market could reach CNY700 billion in future if the market follows international trends, according to calculations by Guo Xiangyu, research director of Tsinghua University School of Finance. Beijing will soon launch the first batch of consumer infrastructure REITs, with three of the six currently approved REITs ready for listing, totalling CNY8.9 billion. Authorities will issue consumer infrastructure REITs to increase household spending while improving consumption models and the quality of commercial projects, said Song Hongwei, research director at Tongce Research Institute. (Source: Securities Daily)