1. Foreign holdings of Chinese bonds jump in July
Foreign investors piled into Chinese bond markets in July, according to the latest data released on Tuesday.
21st Century Business Herald has the details:
- “Bond custody volumes in July, released by the China Central Depository and Clearing Company, showed…[the holdings of] overseas institutions reached RMB 234.1 billion – a sharp increase of RMB 148.1 billion from June [and] the largest monthly increase this year.”
The reasons behind the significant jump were two-fold:
- Search for yield
- An appreciating RMB (thanks to a tanking USD)
The search for yield is real:
- “The latest data released by ICE Data Services, a data service provider, showed that as of June 30, [thanks to] central banks’ continued aggressive monetary easing, more than 60% of the USD 60 trillion global bond market was yielding less than 1%.”
It’s no wonder relatively safe Chinese Government Bonds (CGBs), yielding close to 3%, seem like a steal.
Get smart: A strengthening CNY only adds to the case to hold Chinese fixed income.
Go deeper: For more detail, check out today’s China Markets Dispatch.
21st Cent Biz:海外资本7月加仓人民币债券1481亿元 创年内最大单月增幅
2. Smash and grab
On Monday, we told you the Trump administration had givenChinese tech company ByteDance 45 days to sell its popular video platform TikTok or be banned from the US (seeAugust 3 Tip Sheet).
Now China, has (rhetorically) struck back:
The English-language state media outletChina Dailyran an editorial which calledWashington out:
- “As TikTok’s experience shows, no matter how unfounded the claims against them are, as long as they remain Chinese companies, they will be presented as being a ‘Red threat’ by the administration.”
- “But China will by no means accept the ‘theft’ of a Chinese technology company, and it has plenty of ways to respond if the administration carries out its planned smash and grab.”
Get smart:We’re not sure what countermeasures Beijing is contemplating, but we suspect they will be cautious rather than escalatory.
Meanwhile ByteDance CEO Zhang Yiming has come under fire from nationalistic Chinese netizens who are accusing him of capitulating to American bullying.
On Tuesday, Zhang addressed the controversy in a letter to his employees claiming that the Trump administration’s goal was to destroy TikTok – but that the sale would thwart Washington’s purpose.
- He also asked for understanding as ByteDance navigated these uncharted waters.
Get smarter:Sometimes, you can’t win for losing.
China Daily: US administration’s smash and grab of TikTok will not be taken lying down: China Daily editorial
Bloomberg: China Brands Trump’s Demands on TikTok Sale a ‘Smash and Grab’
36Kr:最前线 | 张一鸣最新内部信：字节跳动需要接受一段时间内的误解
Business Insider:The CEO of TikTok’s parent firm says Trump’s ‘real objective’ is to ban TikTok, not force a sale to Microsoft
3. When the chips are down…
Yesterday, the State Council updated its policy on supporting two strategically important sectors: integrated circuits and software.
Some context: The central government has had policies in place to support these two sectors since 2000 and updates its support policies once every decade or so. This is the second update.
More context: These support policies apply to all companies registered in China, regardless of nationality.
Government support comes in the form of:
- Tax breaks
- Favorable financing
- Support for RD, import and export, and talent development
- IP protection
- Commercialization policies
- Support for International cooperation
The new update will allow chip companies to enjoy even more tax exemptions.
The bottom line: Amid an intensifying tech war with the US, senior Chinese officials have made it clear that they will continue to pursue a state-led support system to develop these two key sectors.
But, but, but:The update added a new section on international cooperation, saying:
- Chinese companies are encouraged to cooperate with overseas research institutes.
- Foreign companies are welcometo build RD centers in China.
Get smart:Government support forstrategically important sectors will only increase in the years to come.
4. Governor switcheroo
Get excited: It’s been a busy week on the provincial personnel front.
The latest:Zhao Yide hasbeenappointed governor of Shaanxi.
A little about Zhao:
- Zhao is taking over fromLiu Guozhong, who was appointed Shaanxi Party secretary earlier thisweek (seeyesterday’s Tip Sheet).
- Zhao has worked in his native Zhejiang for most of his career, including as Party secretary of Hangzhou (from September 2015 to March 2018).
- Most recently, Zhao served as the deputy Party secretary of Hebei (since March 2018).
- At 55 years old, Zhao is currently the youngest of China’s governors.
The Xi connection:Zhao is sometimes touted as a “Xi Jinping guy,” due to his time working in Zhejiang province when Xi was Party boss there. We think this “evidence” of their personal connection looks pretty thin, though.
But that’s not all of the provincial personnel fun.
Qinghai also got a new governor – Xin Zhangxin.
A little about Xin:
- Xin is taking over after Liu Ning, who was appointed governor of Liaoning last month.
- Xin has worked most of his career at the Ministry of Human Resources and Social Security (and its predecessor ministries), ultimately making vice minister in September 2010.
- Most recently, Xin served as the deputy Party secretary of Anhui (since September 2016).
Get smart:We’ve officially passedthe halfway mark to the next Party Congress in 2022. Expect an uptick in provincial and other high-level appointments going forward.
5. Global public good
This morning, the National Health Commission (NHC) dropped the latest COVID-19 stats.
On Tuesday, China reported 27 newly confirmed cases – down from 36 on Monday (NHC):
- Five were imported from abroad – down from six on Monday.
- The other 22 were transmitteddomestically – down from 30 on Monday.
- The 22 domestically-transmitted cases were all reported in Urumqi, Xinjiang – down from the city’s28 new cases on Monday.
Some context: These numbers are the lowest in the past 11 days.
In addition, on Tuesday (NHC):
- China reported 24 new asymptomatic cases – 10 of which were imported from abroad.
As they get a handle on the virus, Chinese leaders have not forgotten about the wider international community still suffering from the pandemic (SCMP):
- Xi Jinping has pledged to make any future vaccine developed by China a global public good.
- Foreign MinisterWang Yi said China will provide loans for other countries to purchase any future vaccine from China.
Get smart:By developing a vaccine and supplying it to the world, Beijing wants to positionChina as a benevolent great power and a responsible global stakeholder.
Get smarter: China’s leadersarealso keen on having the world forget about theinitial botched handling of the virus.