The Changing Face of the Chinese Economy

The Changing Face of the Chinese Economy

The Changing Face of the Chinese Economy

As of Monday, 1,796 Chinese listed companies have released their preliminary half-year results, with 63 percent of them reporting net profit growth, while 449 seeing profits go up by at least 50 percent, according to data given by financial service provider Wind.

Performances were split. Emerging industries such as new energy vehicles, film and media reported robust growth, while traditional sectors such as mining saw business falter.

54 of 64 companies in the film and media sector reported profit growth in the first half year, thanks to investment, mergers and acquisitions (M&A).

Buoyed by sales growth in new energy vehicles and demand for lithium batteries, Tianqi Lithium forecast net profits would increase 17-fold while Beijing Easpring Material Technology Co., Ltd. expects a 37-fold increase.

In contrast, the picture for traditional industries is bleak. Two thirds of companies in the mining sector reported losses.

The ongoing reform has helped out iron and steel companies and real estate ventures with reduced supply glut. Wind data showed 63.2 percent of iron and steel companies and 52 percent of real estate firms reporting profit gains.

HEFFX remains bullish on some parts of the Chinese economy.

RMB Gets IMF Approval

The International Monetary Fund (IMF) on Monday announced its board decision to amend the rounding methodology for determining currency accounts in the Special Drawing Right (SDR) basket, in order to make technical preparations for the inclusion of the Chinese currency, Renminbi, in the SDR basket.

The amended methodology allows final currency amounts to produce currency weights that are very close to the weights adopted by the IMF, said the IMF, adding that it also makes the currency amount calculations easier to replicate for SDR users and market participants.

According to the IMF, currency amounts are the number of units of each currency in the SDR basket. Currency amounts play a central role in the daily valuation of the SDR, as the value of the SDR is the sum of these amounts, valued at daily exchange rates of the currencies against the U.S. dollar.

Currency amounts are determined on the last business day before a new SDR basket becomes effective and remain fixed over the SDR valuation period.

Last year, the IMF decided to include the RMB in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the pound sterling, effective Oct. 1, 2016.

Final currency amounts for the new valuation period will be determined and published on Sept. 30 this year and will be fixed for five years.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.