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The Daily Brief for Friday, 13 January 2017

US Secretary of State nominee Rex Tillerson has already sparked a flurry of reaction and he isn’t even in office yet, reports Asia Times. During his confirmation hearing before the US Senate Foreign Relations Committee, Tillerson said China’s occupation and militarization of the islands in the South China Sea was akin to “Russia taking Crimea from Ukraine.” On Friday, China state-run newspaper Global Times called the comments “astonishing” and a threat of war in an editorial. It also said that if the US blocks China’s access to those islands, then “the two sides had better prepare for a military clash.”

Tillerson’s comments appeared to spark an immediate reaction in the Taiwan dollar, with the market pricing in an increase in risk as seen in the divergence of implied volatility – or the projected variance in future prices – and the current or observed volatility (see chart).

Oddly, while the fiery rhetoric and pulpit thumping on the South China Sea rattled investors, they seemed unfazed by the growing chatter about a possible military strike against North Korean nuclear facilities. South Korea’s government squeezed off a US$1 billion sale of 10-year bonds at a lower yield than the guidance given by the sale’s arrangers thanks to strong demand from investors.

The Catholic Church is wary of criticizing Philippine President Rodrigo Duterte’s controversial war on drugs that has seen the death toll rise to 6,000, writes David Hutt. The Philippines is one of the most Catholic countries in the world, but Duterte has arguably given the church hierarchy pause for thought, witnessed in its tepid opposition to his state-sponsored killing spree prosecuted in the name of law and order.

China’s trade picture is looking gloomy as the national customs agency released data showing the biggest drop in exports last year since 2009, a downtrend that may continue based on World Bank forecasts and the potential for trade friction with the US, Benny Kung reports. And Reuters reports that a customs agency official says China will be the biggest loser if US president-elect Donald trump imposes greater trade protectionist measures.

Posted inChinaChongqingShanghai

China Digest for Friday, 13 January 2017

China Resources Group to sell entire Vanke stake for US$5.4 billion

China Resources Group, the second-largest shareholder of property developer China Vanke, said on Thursday that it will sell its entire 15.31% stake to Shenzhen Metro Group for 37.2 billion yuan (US$5.4 billion), the Securities Daily reported. The move is expected to end a power tussle between Vanke’s management and its shareholders for over a year, the report added.

Reducing land supply in high inventory cities will ease pressure

Land supply must be reduced to ease pressures in third and fourth-tier cities with a high inventory of unsold homes, Sina Finance reported on Thursday citing the Ministry of Land and Resources, which said this would create a healthier market.

State-owned firms, taxation among areas targeted for 2017 reforms

Reforms this year will focus on state-owned enterprises, finance and taxation said Zhao Chenxi, the spokesman of the National Development and Reform Commission on Thursday. Reforms in intellectual property protection, urbanization and ecological protection were also mentioned.

Cutting overcapacity expands to more industries in 2017

Overcapacity in non-ferrous, shipbuilding, refining, constructional materials and electricity industries will actively be reduced in 2017, said Xiao Yaqing, the director of State-owned Assets Supervision and Administration Commission on Thursday. State-owned enterprises should meet the target of cutting steel capacity by 5.95 million metric tonnes and coal capacity by 24.73 million metric tonnes in 2017, Xiao added.

Chongqing to clamp down on speculation in housing market

The Housing Fund Management Centre and 12 banks in Chongqing released a joint statement on Thursday, saying they will follow housing regulatory policies and take measures to combat market speculation, the 21st Century Business Herald reported on Friday. The 13 institutions will stop issuing housing loans to companies who bid up property price, the statement said.

Harbin’s medium and small private enterprises can defer tax

Medium and small private enterprises in Harbin can apply to defer tax payment for three months if there are special reasons or difficulties, Xinhua reported on Thursday morning, citing new measures to boost business development in the city.

Global financial clearing group CCP12 opens Shanghai office

The Global Association of Central Counterparties (CCP12) has started operating in Shanghai on Thursday, Sina Finance said on Thursday night. The group of 35 international clearing and settlement organizations plays an important role in enhancing global standards in the industry and coordinates cross-border financial supervision. Central counterparty clearing is a process where financial transactions are approved after netting them at the end of the day to reduce systematic risks.

Chongqing sets up second national oil and gas trading center

Chongqing has established an oil and gas trading center to strengthen cooperation on energy with other countries and deepen reforms on prices within China, Xinhua reported on Thursday citing the National Development and Reform Commission. Shanghai started the first national oil and gas trading center in 2015, the report added.