Financial Services Talking Points | 24/05/2017

In today’s talking points: China’s Debt Rating Downgraded by Moody’s; China encouraging foreign investment by loosening restrictions; China’s investment in Australia at all time high since GFC; Chinese Market Exchange Rate Update


China’s Debt Rating Downgraded

Moody’s has downgraded China’s debt rating to A1 from Aa3 amidst concerns that a rise in economy-wide debt will put further pressure on the country’s finances. The downward revision in China’s debt rating, which was announced this Wednesday, caused the offshore yuan to weaken and the Australian dollar to fall 0.31%. As one of Australia’s largest trading partners, the downgrade will have negative flow on effects for the Australian economy. However, Christopher Balding of the HSBC School of Business at Peking University said that the effects of this downgrade are minimised by the fact that much of China’s debt is “held by state or quasi-state actors and minimal amounts are international investors.”

Read More at Bloomberg


China to Ease Restrictions on Foreign Investment

In an effort boost foreign investment into China, the Chinese Government will implement a series of reforms to ease restrictions on foreign investment in an effort to increase foreign investment in services, manufacturing and mining sectors. Such an initiative is likely to encourage and attract incoming foreign investment into China, in order to continue to boost economic growth. This move was declared at a key CPC Party meeting on Tuesday, where environmental policy plans were also discussed, including a plan to set up trans regional environmental protection bodies to tackle air quality and pollution concerns.

Read more at China Daily


Chinese Investment in Australia at All Time High Since GFC

A report jointly authored by KPMG and Sydney University has found that Chinese investment in Australia has reached the highest level since the GFC in 2008/09. The study shows that Chinese investment in Australia is up 12% from 2015 to $15.4 billion last year. Report findings have shown that over one third of Chinese direct investment in Australia during 2016 was in commercial real estate, however, investments in residential and hotel assets are also high. The report, titled ‘Demystifying Chinese Investment in Australia, cautions that Chinese investment may be looking towards Europe and the USA. Moreover, Chinese investment will undergo increased oversight and supervision in order to minimise excessive capital outflows and inefficiency. Nevertheless, robust overseas direct investment is likely to continue into the long term.

Read more at ABC News


Market exchange rates in China

Market makers base a weighted average of prices for the central parity rate of the yuan. At 9 a.m, on the same business day, international foreign exchange market firmly bases the central parity rate of the yuan against the exchange rate of the Hong Kong dollar against the U.S. dollar. Before the opening of the interbank exchange market, 21 currencies are found of the central parity rates of the yuan and then based on average prices offered by market makers.

Read more at Xinhua News