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CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit

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Bamboo Works wrote a column · Apr 7 03:02
CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit
CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit
CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit
CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit
CHINA BULLETIN: China-U.S. Rapprochement Continues with Xi-Biden Call, Yellen Visit
April 7, 2024


In this week’s issue Xi and Biden talk, car loans get easier and a major EV listing restarts. On a scale of 1 to 100, we give the week a 65 for offshore-listed China stocks.
Doug Young, Editor in Chief
You can to get China Bulletin weekly in your inbox.
MACRO

Last week was a short one for traders due to the Easter and Qing Ming holidays, but government officials from both China and the U.S. weren’t taking any breaks. Leading the list of major new dialogues taking place was between presidents Xi Jinping and Joe Biden. That was followed by later in the week by U.S. Treasury Secretary Janet Yellen.
The week also saw the of a commercial issues working group set up by the two sides last year. Most of the discussions were described as frank and constructive, with both sides raising issues they consider important. The use of positive words like “constructive,” and the fact that meetings are happening at all at such high levels, should be viewed as generally positive.

Back in China, other positive signs were emerging from both the manufacturing and services sector with the release of the latest Caixin purchasing managers index (PMI) figures for March. The Caixin manufacturing PMI for the month, marking its first month above the 50 level that connotes expansion after contracting for five straight months.
Meantime, the Caixin services PMI was also with a reading of 52.7, up from 52.5 in February. The numbers could point to a fledgling recovery in China’s economy. But after a post-pandemic rebound early last year quickly fizzled, many will want to see at least a few more months of positive data before declaring any recovery is underway.
Stocks Continue Long But Slow Upward March
Chinese stocks continued their upward ways in shortened trading for two holidays in Hong Kong last week, even as the U.S. was open all week. But the gains were hardly large. The Hang Seng China Enterprises rose 0.9% for the week, while the iShares MSCI China ETF finished up 0.6% and the broader Hang Seng Index rose by 1.1%.
The latest gains mean the China Enterprises Index is now up for the year and is actually up 17% from a low in late January. That means that if it can rise just a bit more it will officially enter bull territory that’s defined as a 20% rise. But most of the gains in recent weeks have been relatively small, indicating market sentiment may be improving but is still quite tentative.

Industry

Car buyers got some good news last week when the central bank that scrapped government-mandated minimum downpayments for new car loans. That means those buyers can now purchase cars completely on credit, which may come as welcome news to consumers who are becoming increasingly careful with their own money.
The new policy is part of an existing rule that was revised for the first time since 2018. The revisions also make it easier for people to trade in their used cars. The government has tried similar things with mortgages to stimulate the morbid home market, but with little effect. The same could be true for this policy since most consumers are shying away from buying big-ticket items these days.

New data from two of China’s leading online travel agents shows foreign travelers are slowly but surely . Bookings of inbound trips to China using leading travel agent Trip.com nearly tripled in the first three months of this year from year-ago levels, while hotel bookings by foreigners on Tongcheng were also up by 136% year to date.
From our position in Shanghai, we can say with relative certainty there are far more foreigners coming into China now than a year ago. Part of that may be due to China’s promotional efforts, including visa waivers for a growing number of countries. Then again, it’s not difficult to notch big gains when you’re coming off a base of nearly zero.

We’ve written quite a bit about Xi Jinping’s decade-old anti-corruption campaign, which has netted thousands of people from the government and state-owned enterprises, the big majority of them Communist Party members. But in an , a new media report says the dragnet has moved outside the Communist Party orbit with probes of officials from two smaller parties.
At first glance, the detention of senior officials from the Chinese Peasants and Workers Democratic Party and the Taiwan Democratic Self-Government League appears to hint that perhaps the corruption drive may be moving beyond the Communist Party. But these smaller parties are just window dressing designed by the Communist Party to make Chinese politics look more pluralistic.
Company

Agricultural company Syngenta is singing the blues after being its long-delayed plan for a massive Shanghai IPO to raise 65 billion yuan, or $9 billion. The company withdrew its application after failing to get clearance from China’s securities regulator, which is worried about the impact such a massive new offering would have on the weak stock market.
Syngenta is based in Switzerland but became Chinese-owned in 2017 when it was purchased by ChemChina in a mega-deal worth $43 billion. ChemChina has been hoping to separately list the company for several years now to raise funds to pay down some of the massive debt it took on to fund the purchase. But now it seems it will have to wait a bit longer.

While Syngenta and ChemChina were licking their wounds, another report said a separate major IPO plan by Zeekr, the new energy car maker owned by Geely, . Zeekr made its first public filing for the listing last November but hasn’t been heard from since then. But the company has quietly restarted the process and is already talking with some potential investors.
Previous reports said the company wanted to raise up to $1 billion, but the latest say that figure has been scaled back to $500 million due to weak market sentiment. Unlike the Syngenta deal, Zeekr is seeking to list in the U.S. where the securities regulator is more market-oriented. So, it won’t face the same kinds of pressure that delayed the Syngenta deal.

While Zeekr’s fundraising targets were shrinking, smartphone maker Xiaomi got a much better reception from investors with the of its own new electric vehicle, the SU7. The company’s stock shot up as much as 16% last Tuesday on strong publicity for the new vehicle, adding as much as $4 billion to Xiaomi’s market cap.
Xiaomi is quite late to the EV game, as is Zeekr. But both EV initiatives have very wealthy backers who can afford to plow lots of money into their latest forays in China’s crowded market. That could help both of these companies quickly catch their older rivals, drawing on their deeper pockets and also richer experience in product development and promotion.
AND FROM THE PAGES OF BAMBOO WORKS


Last week we brought you the in the story of Keep, China’s leading health app, as it sprints towards a finish line of profitability. The company is a bit like a Chinese edition of the better-known Peleton, having thrived during the pandemic as people purchased its equipment and exercise videos to stay fit over extended periods at home.

Now, Keep is having to make a major adjustment by adding more outdoor-oriented products and services to its offerings as people return to spending more of their exercise time outdoors. The company’s revenue contracted in the first half of last year as it made the adjustment but returned to growth in the second half of the year.


Much has been written about the woes plaguing the solar power sector, which is suffering from massive overcapacity built up during a recent sales boom as countries raced to install more green energy. But the wind power sector is also going through its own adjustment for similar reasons.

That adjustment was at the forefront of the from Goldwind, whose sales are rapidly slowing as demand for its turbines runs out of wind. The company previously raked in big bucks from a huge government-led buildup in China’s wind power market. But that buildup is rapidly slowing, leading Goldwind’s China sales to start contracting in the second half of last year.
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