CiCM 21st November 2023

NEWS IN CHINA

Currency swap agreement signed between Saudi Arabia and China: The People's Bank of China and the Saudi Central Bank signed a local currency swap agreement worth 50 billion yuan ($6.93 billion) or 26 billion Saudi riyals. The agreement is valid for three years and can be renewed later. China and Saudi Arabia have taken their economic ties beyond energy deals with the recent signing of a local currency swap agreement. The agreement underscores China's growing economic influence and comes at a time when the high value of the US dollar has prompted some economies to seek cheaper yuan-denominated transactions. It is crucial to note that this marks the 30th swap signed by the People's Bank of China (PBOC) in the past decade, emphasizing the nation's commitment to fostering financial cooperation. Beyond promoting trade and investment, the swap will aid China in pricing transactions of oil derivatives in its own currency, aligning with its practice since 2018. Additionally, the agreement serves Saudi Arabia's ambitions outlined in its Vision 2030 program, aiming to diversify its economy away from oil dependence by attracting investments in other sectors. This deal represents another step in the global push to expand the use of non-Dollar currencies and signifies the ongoing strengthening of bilateral relations between China and Saudi Arabia.

Pandemic hospitals converted into houses: In a response to the evolving needs of its citizens, Beijing's Chaoyang district has transformed a former pandemic makeshift hospital into affordable rental housing. The facility, now named Jinzhan Qicai Jiayuan community, offers 4,910 rooms, each spanning 18 square meters, to the public at a monthly rate of 1,200 yuan ($167), eliminating the need for a down payment or typical rental requirements. Positioned between the Fifth and Sixth Ring Roads, the complex comprises nine vibrant zones and features essential amenities like a canteen, supermarket, laundry facilities, and charging stations. Despite its advantages, these converted facilities do have limitations. Cooking and high-power electrical appliances are prohibited in the rooms, and charges for tap water and electricity are based on commercial rates, which are much higher than residential rates. This innovative approach to repurpose pandemic infrastructure for affordable housing reflects a dynamic response to the changing needs of the population. Other regions in China, such as Jinan in Shandong province, have also embarked on similar initiatives, repurposing makeshift hospitals into practical and accessible accommodation options.

Xi emphasizes on two-state solution in BRICS meeting on Israel-Palestine conflict: Chinese President Xi Jinping, participating in the BRICS extraordinary virtual summit on the Palestinian-Israeli issue, stressed the urgent need for an immediate cessation of hostilities and the attainment of a ceasefire. In his opening address, Xi outlined three needs: ending hostilities and achieving a ceasefire, halting all forms of violence against civilians and releasing captives, and establishing humanitarian corridors while discontinuing collective punishments on Gaza. Emphasizing the importance of a two-state solution, Xi reiterated the necessity of restoring the legitimate national rights of Palestine and establishing an independent State of Palestine to stop the conflict. The virtual summit, chaired by South Africa, included leaders from new BRICS members such as Saudi Arabia, Argentina, Egypt, Ethiopia, Iran, and the United Arab Emirates. China, having provided significant humanitarian assistance, including $2 million through the Palestinian National Authority and UN agencies, and emergency supplies worth $2.1 million to Gaza, called for concrete measures in line with UN resolutions. Xi highlighted that the root cause of the conflict lies in neglecting the rights of the Palestinian people, asserting that sustainable peace in the Middle East depends on addressing the just solution to the question of Palestine.

Henan discloses plan to Issue Special Refinancing Bonds: Henan Province recently unveiled plans for a second issuance of special refinancing bonds, totaling 9.212 billion yuan, marking a cumulative issuance of 34.8 billion yuan by Henan. These special refinancing bonds are designed to repay hidden local debts. According to documents from the China Bond Information Network, the proposed issuance includes 2.476 billion yuan in refinancing general bonds and 6.725 billion yuan in refinancing special bonds. The Ministry of Finance had approved Henan's debt limit at 1,643.4 billion yuan in 2022, with the provincial government debt balance reaching 1,513.04 billion yuan by year-end. This follows Henan's earlier disclosure on October 24, announcing a plan to issue 25.599 million yuan of special refinancing bonds. Across China, 28 regions have issued a total of 1,365.716 billion yuan in special refinancing bonds from October 6 to November 21, with Guizhou alone surpassing 200 billion yuan. Analysts Zhou Guannan and Song Qi suggest that the funds allocated for repaying high-interest loans in the stock market may impact credit performance in the coming months. They highlight that the current debt refinancing methods include special refinancing bonds and large-bank debt replacement, with potential implications for credit dynamics based on the balance between these instruments.

Regulatory authorities draw up a white list of real estate enterprises: In response to the recent challenges facing the real estate sector, the Central Bank, the General Administration of Financial Supervision, and the Securities and Futures Commission hosted a seminar on financial institutions. It focused on real estate finance, credit, and debt risk resolution concerning financing platforms. Highlighting the need to address the financing needs of diverse ownership real estate enterprises without discrimination. The joint three-sector symposium called for increased financial support from institutions for credit, debt, and equity financing of enterprises, without imposing rigid requirements. It was attended by major officials from 18 commercial banks nationwide, five nationwide financial asset management companies, and four large securities firms. Chinese regulators are taking proactive measures to address the property crisis by drafting a list of 50 eligible developers. Notable companies like China Vanke Co., Seazen Group Ltd., and Longfor Group Holdings Ltd. have reportedly been named in the draft, signaling the inclusion of both private and state-owned developers. The list is intended to guide financial institutions in providing support to the industry through bank loans, debt, and equity financing. The move reflects Beijing's growing anxiety over the turmoil in real estate sector, especially in the wake of defaults, an abundance of unfinished apartments, and a significant contraction in real estate investment.

SOCIAL MEDIA CHATTER IN CHINA

Shanghai Halloween celebrations followed by crackdown: The recent Halloween celebration in Shanghai, marked by a diverse parade of costumes with Chinese characteristics, initially received positive attention in state media as a display of "Chinese public’s cultural confidence and openness." However, this apparent cultural expression was short-lived, as a crackdown followed. Several Chinese youths have been detained for their political expressions during the Halloween parade. A Weibo post captured the moment when police officers intervened to disperse a man dressed in a cosplay outfit portraying the late Chinese writer Lu Xun. While many have taken to social media to share, how their friends, are being targeted and detained by the police, many noted in the comments that revolutions won’t take place by just writing, praising the unique and creative style of the youth to protest and express their agony on many social problems faced by them.

INDIA WATCH

China, through an extensive network of bilateral currency swap agreements, has positioned the RMB as a prominent currency for cross-border payments. India has also taken steps to promote the use of the INR, in cross-border payments. A recent 35 billion rupees currency swap agreement between UAE and India shows the ascending role of India in promoting trade in local currencies. Moreover, historical initiatives like the SAARC Currency Swap Facility and the upcoming Asian Clearing Union showcase India's efforts to facilitate settlements in INR. During the 24th SAARCFINANCE3 Governors’ meeting in 2012, RBI Governor Duvvuri Subbarao unveiled a swap framework offering up to USD 2 billion in Indian rupees (INR), US dollars, and euros to member countries of the SAARC region, this aimed at "strengthening regional financial and economic cooperation," received approval from the Indian Union Cabinet. While India's share in world trade is lesser than China's, the establishment of Special Vostro Rupee Accounts (SVRCs) for banks from 22 countries enhances India's cross-border payment capabilities. Thus, although India still has a long way to go in internationalizing its currency through swap agreements, it has adopted a regional approach of first expanding its economic influence in its neighborhood.

Prepared By

Riddhima Singh

Riddhima Singh is a final year student at Jawaharlal Nehru University Delhi, pursuing Chinese Honours course. Through her degree she has had the opportunity to dive into culture, history and contemporary issues in Chinese society through language and research. Her research area surrounds the economic and fiscal policies of Communist Party of China and China's development model.