Chinese Economics Thread

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Chinese companies take record 50% of global equity raising in first half of 2020

HONG KONG (Reuters) - Firms in China brought in half of equity capital raised globally this year so far, setting a record that highlights the economy's earlier revival from the COVID-19 pandemic, plus the degree to which soured U.S. relations are turning Chinese firms homeward.

China-based companies sold shares worth $32.1 billion in January-June including multi-billion-dollar secondary listings in Hong Kong, equivalent to 49.8% of worldwide offerings, showed data from Refinitiv. The total for U.S. firms was $15.8 billion.

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Urged by Trump to Decouple, U.S. Companies Want More China Faster

Just as the U.S. president urges American companies to ditch China, many of them can’t get more of China fast enough.

Consider the voyage of the container ship Melina, which set sail Wednesday from a Chinese port near Shenzhen with products bound for U.S. households, a hulking symbol of how the flow of goods is adapting in a global economy crippled by a pandemic.

Capable of carrying almost 4,300 containers, she’s downright petite in an industry where the biggest can handle more than 20,000. The Melina is part of a budding fleet of smaller vessels that Covid-19 has thrust into service between the world’s biggest economies. Smaller means faster. She’ll dock in Los Angeles on July 6 after a 12-day nonstop journey — a week ahead of a larger ship doing the same route.

With the extra speed comes a price that’s as much as double the cost of standard transpacific service, which is already skyrocketing because the world’s biggest shipping companies have scaled back capacity by about 25% this quarter and may cut it 10% in the third quarter, according to industry observers. They’re downshifting because broadly they see demand recovering only slowly and plenty of fog on the global economic horizon.


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The great Frederic Bastiat said that "Trade barriers constitute isolation; isolation gives rise to hatred, hatred to war..." This is the path that should be avoided. If America is unattractive to entrepreneurs, and is falling behind competitively because it is saddled with the biggest government on earth, perhaps the focus should be setting the American entrepreneur free from the bureaucracy. For obvious reasons, American politicians do not want to decrease their power. They would much rather point the finger outwards.
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Europe Finds It’s Not So Easy to Say Goodbye to Low-Cost China

“Chinese workers have a better hand with gym shoes,” said the chairman of Baldinini, founded by his family in 1910 in northern Italy, where it still has the main production hub for the top segment of his goods. To produce sports shoes, the company relies on a Chinese plant in the Shenzhen area.

“Production costs over there are 75% lower than in Italy. I can’t consider cutting them off and reshoring that particular production line,” he said. “Simply, there’s no other way, unless the Italian government decides to cut tax and labor costs dramatically.”

Evidence suggests a massive shift back to Europe is unlikely because of the ever-growing importance of China. The Asian superpower already accounts for about 40% of global vehicle deliveries for leading German carmaker Volkswagen AG. In May, the German auto giant increased its exposure to the country by buying stakes in battery company Guoxuan High-Tech Co. and in its electric-vehicle partner.

Read More: Volkswagen Expands in China, U.S. as Labor Clash Hits Home

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June PMI data points to accelerating recovery of Chinese economy amid policy stimulus

The purchasing managers' index for China's manufacturing sector ticked up to 50.9 in June from 50.6 in May, the National Bureau of Statistics said.

The PMI for 14 of the 21 surveyed manufacturing sectors registered a reading above 50, an increase of five from last month, the data showed.

The sub-index for production edged up 0.7 points to 53.9 in June. The sub-index for new orders picked up 0.5 points to 51.4, rising for two consecutive months.

The PMI for large- and medium-sized enterprises stood at 52.1 and 50.2, respectively, while that for small firms slid 1.9 points to 48.9, indicating that for the time being smaller businesses are encountering difficulties, Wen said.

As major global economies resumed business successively, external demand recovered but remained sluggish, with the sub-index measuring new export orders increasing 7.3 points to 42.6.

Although the sub-index gauging firms' expectations for business activities slightly declined to 57.5, manufacturing firms remained sanguine about the market recovery in the near future, said NBS senior statistician Zhao Qinghe.

Tuesday's data also showed that the PMI for the non-manufacturing sector rose 0.8 points to 54.4 in June, growing for the fourth straight month.

In breakdown, the sub-index for business activities in the construction sector came in at 59.8, above 59 for three months in a row, and that for the service sector rose 1.1 points to 53.4.