1.Record number of real estate developers go bankrupt
The slowing economy and an increasingly restrictive financing environment is hurting developers (Guancha):
- 274 real estate developers have filed for bankruptcy so far this year – a 50% increase from last year.
The bigger picture: The number of bankrupt builders is almost negligible. It is estimated that there are more than 100,000 developers in China.
Buuuuut … the space for real estate borrowing is narrowing, no doubt.
Some context: It all started with the April Politburo meeting, in which leaders decided to clamp down further on the real estate market.
The last few months have seen regulators squeeze several channels for developer financing. There are new restrictions on:
- Bank financing to real estate projects where capital is not fully in place
- Domestic bond issuance
- Overseas bond offerings
- Lending from trust companies
Get smart: Despite the slowing economy, regulators seem committed to reining in developers. It’s just one more reason that we don’t expect an uptick in growth any time soon.
2. Healthy China focuses on prevention
Yesterday, Premier Li Keqiang sent instructions to a conference on promoting the Healthy China initiative (Gov.cn).
- “The Premier called for efforts to publicize health knowledge and encourage people and families to participate in the initiative and develop healthier lifestyles.”
Thanks Premier! Sounds good.
Vice Premier Sun Chunlan, who is overseeing the initiative, laid out how the government’s approach to healthcare is changing.
The government is looking to take a more preventative approach:
- “[Sun] said, [the] focus should be switched from treatment to people’s health.”
- “Healthcare knowledge should be promoted in classes, families, communities and enterprises, she said.”
The increased focus on prevention does not mean that government will not also continue to focus on treatment:
- “The difficulties of access to medical services and expensive medical bills should also be solved.”
Get smart: Healthcare is a major quality of life issue for millions of Chinese. It’s alsogoing to be a major policy issue for the government as China’s aging population makes ever greater demands on the country’s healthcare system.
Get smarter: That’s why it behooves the state to focus on less expensive preventative care and hopefully reduce the need for costly treatments.
Gov.cn: Premier calls for increased efforts on Healthy China initiative
3.Honey, I shrunk the state
Yesterday, Executive Vice Premier Han Zheng chaired a meeting of the Coordinating Small Group on Promoting the Transformation of Government Functions and Reforms to Delegate Power, Streamline Administration, and Optimize Government Services,– otherwise known as the CSGPTGFRDPSAOGS.
Top of the agenda: Shrinking the government.
Han used some vivid language to tell everybody that reforms would be painful:
- “Promoting the transformation of government functions is like turning a knife blade on oneself.”
Han said the public should have more oversight, urging officials to:
- “Make every effort to improve the transparency of reform and enhance the participation of the masses.”
- “We should take…the people’s evaluation as a criterion for judging [policies], be fast to solve problems, and focus on solving them so that reform initiatives can work on a practical level.”
So what exactly should officials focus on? Han wants them to cut red tape for businesses:
- “[We] mustpromote the reform to separate permits from business licenses in an orderly manner.”
- “[We must] reduce the number of licenses required for industrial production.”
Get smart: Han faces an uphill battle trying to convince officials to give up power.
Xinhua: Vice premier stresses efforts on cutting red tape, improving services
4.FedEx’s China problem just got bigger
This morning, Xinhua decided to give everyone an update on the government’s investigation into FedEx.
In case you forgot: Back in June, FedEx drew China’s ire for rerouting several of Huawei’s packages to the US (see June 3 Tip sheet).
The investigation is still ongoing, but here are the government’s interim findings:
- The rerouting was not an “honest mistake,” as FedEx claimed.
- FedEx had held more than 100 Huawei-related shipments.
- Unspecified additional legal violations on FedEx’s part have been discovered.
Get smart: It’s not often that Chinese authorities give the public an update on the status of an ongoing investigation.
Get smarter: The timing of this update is no coincidence. China wants to use the investigation as another bargaining chip in the upcoming trade negotiations with the US.
Reuters: China finds clues of additional Fedex violations: Xinhua
5. To infinity… and beyond!
Yesterday, Interstellar Glory Space Technology (iSpace) successfully launched a rocket into orbit – a first for a private Chinese space company.
The rocket launched from state-operated Jiuquan Satellite Launch Center in Gansu.
Why it matters: Rockets is that rare strategic industry in China where private companies are booming.
Some context: Failed launches by competitors LandSpace in October and OneSpace in March triggered worries about the state of China’s commercial space industry.
According to iSpace, it was nothing short of a “complete success.”
- “This launch has opened a new chapter in China’s private commercial spaceflight.”
The Hyperbola-1 carrier rocket brought two satellites with it into orbit, belonging to:
- Beijing Institute of Technology
- CASIC Space, an affiliate of state-owned China Aerospace Science and Industry Corp
Get smart: China’s private space industry has been encouraged by the government to help facilitate its ambitious long-term space goals. These include establishing a permanent presence on the moon, space mining, solar power stations, and – of course – an extensive military space program.
What to watch: Parameters for further private sector participation in the aerospace sector will be determined by the upcoming Aviation Law (set to be drafted by 2020). Stay tuned.
Caixin: First Private Chinese Company Launches Rocket Into Orbit