China to tighten oversight of company debt, bank assets

China has relied on rapidly increasing credit to fuel economic growth in recent years, but policymakers have begun to point to the threat of asset bubbles forming. (Reuters)
Updated 17 February 2017
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China to tighten oversight of company debt, bank assets

BEIJING: China’s central bank said on Friday it plans to tighten up its oversight in a range of areas including corporate debt and bank assets, as policymakers fret over fast-rising leverage and the risk of asset bubbles in the rapidly growing economy.
The People’s Bank of China (PBoC) also said it will keep the yuan currency basically stable while maintaining a prudent and neutral monetary policy.
“We will increase monitoring of corporate debt risk, bank asset quality and liquidity, abnormal stock market fluctuations, use of insurance funds, property bubble risks...and cross-border capital flows,” the central bank said in its fourth-quarter monetary policy implementation report.
China has relied on rapidly increasing credit to fuel economic growth in recent years, but policymakers have begun to point to the threat of asset bubbles forming.
Home prices rose rapidly in many Chinese cities last year, leading to new restrictions on purchases and lending in dozens of cities since October.
The central bank said on Friday that China should restrict lending for property market speculation and build a long-term mechanism for the healthy development of the housing market.
Top leaders in December vowed to focus on controlling financial risks this year, and the central bank has moved to a tightening bias in recent months, including raising the rate on the unofficial policy rate on Feb. 3.
The PBoC on Friday also said it will increase two-way flexibility of the yuan while keeping the currency basically stable.
China’s yuan fell 6.5 percent last year against the dollar and is expected to weaken further this year, as policymakers respond with tighter restrictions on capital outflows.
FX sales slow
China’s central bank sold the least amount of foreign exchange in five months in January, reinforcing views that capital outflows have eased.
Net foreign exchange sales by the (PBoC) amounted to 208.8 billion yuan ($30.42 billion) last month, according to Reuters calculations based on central bank data released on Friday.
China’s foreign exchange regulator said on Friday that pressure from capital outflows has eased in 2017 and that cross-border flows were becoming more balanced. Government efforts to prop up the yuan currency pushed China’s foreign exchange reserves below the $3 trillion level in January for the first time in nearly six years. But the drop moderated from recent months, suggesting tighter controls are slowing capital flight.
A recent stumble in the rising US dollar has also helped lift pressure on the yuan and other emerging market currencies. The yuan has gained 1.2 percent against the dollar so far this year, after sliding 6.6 percent in 2016. Currency strategists surveyed by Reuters, however, expect the yuan to come under renewed pressure in coming months on expectations that the US central bank will raise interest rates two to three times this year.


Global wind capacity to rise by more than half in next five years

Updated 13 min 38 sec ago
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Global wind capacity to rise by more than half in next five years

  • Around 52.5 gigawatts of new wind power capacity was added worldwide last year, down slightly from 54.6 GW in 2016
  • China continues to be the biggest wind market in the world, adding nearly 19.7 GW of new capacity in 2017

LONDON: Global wind energy capacity could increase by more than half over the next five years, as costs continue to fall and the market returns to growth at the end of this decade, a report by the Global Wind Energy Council shows.
In its annual report on the status of the global wind industry, the GWEC said cumulative wind energy capacity stood at 539 gigawatts (GW) at the end of last year, 11 percent higher than the previous year.
That should increase by 56 percent to 840 GW by the end of 2022 as countries develop more renewable energy to meet emissions cut targets and prices continue to fall, the wind industry association said.
Around 52.5 gigawatts (GW) of new wind power capacity was added worldwide last year, down slightly from 54.6 GW in 2016. The GWEC expects the market to be flat this year but start growing again from 2019.
“The annual market will return to growth in 2019 and 2020, breaching the 60 GW barrier once again and continue to grow, albeit at a slower pace, in the beginning of the new decade,” the GWEC said in its report.
“We expect to see total cumulative installations reach 840 GW by the end of 2022,” it added.
Wind power has become more competitive over the past few years, with a move from government subsidies to auctions which has brought costs down further.
“Overall, offshore prices for projects to be completed in the next five years or so are half of what they were for the last five years and this trend is likely to continue,” the report said.
China continues to be the biggest wind market in the world, adding nearly 19.7 GW of new capacity in 2017, though this was 15.9 percent lower than the previous year.
The pace of China’s wind development is gradually slowing down and growth is expected to be flat to 2020.
India experienced record wind installations last year, adding over 4 GW, but GWEC expects this to slow this year due to a transition period between old market incentives and moving toward an auction-based system, the GWEC said.
The EU also had a record year in 2017 with 15.6 GW added. The bloc is expected to install around 76 GW of new wind power by the end of 2022, reaching a cumulative total of 254 GW.
The US added 7 GW of new wind capacity last year. Despite attempts to change the structure of tax credits last year, the provisions remained intact and continue to support the industry.