Archives March 2014

Chinese woman become youngest billionaire: Forbes

A Chinese young woman has become the youngest billionaire in Forbes magazine’s latest annual billionaire list 2014 which was unveiled on Monday (US Time).

Twenty four-year-old Perenna Kei Hoi Ting is a newcomer to the list, replacing former Facebook co-founder Dustin Moskovitz as the youngest billionaire.

Hailing from Hong Kong, Kei owns an 85 percent stake in Shenzhen-based Logan Property Holdings through various companies and a family trust.

Her father, Ji Haipeng, is chairman and CEO of the Hong Kong Stock Exchange-listed company, which went public in December 2013.

China signals move to regulate Internet finance

China will not ban web-based financial products like Yu’E Bao, but will strengthen regulation to guide the healthy growth of Internet finance, China’s central bank officials said Tuesday.[Special coverage]

With this reassurance, made four times in one day on different occasions by three top central bankers, the dust seemed to have settled following months-long debate about the fate of popular Internet financial products.

The emergence of Yu’E Bao and its peers has brought joy for millions but also unnerved many. Whether authorities should step in to regulate the burgeoning Internet finance has been a widely watched topic as China’s lawmakers and political advisors gather this week in Beijing to discuss the country’s social and economic policies.

DAVID VS.GOLIATH

Internet financial products like money market fund Yu’E Bao, created by e-commerce giant Alibaba, have been instant hits among the Chinese public.

Chinese people have pulled money from traditional banks, which offer a maximum 3.3 percent interest rate for one-year deposits, and moved it to web-based money market funds like Yu’E Bao, which offers a seven-day annualized yield of nearly 6 percent.

The better interest rate enabled Yu’E Bao to attract 81 million users with aggregate deposits estimated at around 500 billion yuan (81 billion U.S. dollars) in just eight months.

Big banks are not happy. At a time when China’s liquidity is generally tight, such a big migration of money has eaten up much of their profits.

Yu’E Bao and its peers have quickly been labeled “blood suckers” by commentators, while the public has seen the banks and their low rates as miserly.

Rounds of tit-for-tat between the two sides showed no signs of abating until the authorities weighed in on Tuesday.

China will not ban Internet finance, but will improve regulations in the area, said Zhou Xiaochuan, governor of the central bank.

“China encourages technological applications in the financial sphere,” he said.

“Improvements must be made in existing policies, supervision and regulation as they cannot cope with new things such as Internet finance and guide its healthy development,” said Zhou.

Internet finance encourages innovation and development, and what it needs is improved and coordinated supervision, said Pan Gongsheng, a vice governor of the central bank.

Despite being supportive of innovative financial products like Yu’E Bao, the central bank will take “appropriate measures” to prevent possible risks arising from the sector, said Yi Gang, another vice governor of the central bank.

Yi said the central bank will closely watch market changes to prevent possible risks while warning investors to be more cautious in their choices.

It seems that David has gotten the better of Goliath again, at least for now.

PROFITS VS. RISKS

Financial innovations like Yu’E Bao are nimble and attractive, but economic pundits have warned that they are not risk-free and should be regulated to avoid any adverse effect on the general economy.

China International Capital Corporation, China’s largest investment bank, said in its latest research note that Yu’E Bao has placed 92 percent of its assets in interbank deposits and used the different terms of maturity between investors to reap high interests.

However, such Web-based money funds may face huge risks, warned Lyu Suiqi, deputy dean of the finance department at Peking University.

“As the assets of Internet finance products like Yu’e Bao increase, so will their liquidity management pressure,” Lyu said, adding that such money funds rely too much on interbank deposits for high interest.

Their ability to bargain with traditional banks will weaken as market liquidity improves and more competitors enter the race, he said.

Millions of investors woke up on Tuesday to find the seven-day annualized interest of Yu’e Bao eased to 5.93 percent, the lowest level since December.

“The biggest problem for the development of Internet finance is default risks that might inflate within a short period of time,” said Li Daokui, an economist and member of the National Committee of the Chinese People’s Political Consultative Congress, the top political advisory body.

That said, there is no reason to throw the golden baby out with the bath water if a little amount of regulation will nurture financial innovations for maximum benefit to the Chinese economy.

Not only do these new products offer a sign of hope for individual savers, but they have assisted micro businesses and spurred China’s interest rate reform.

“The public is more concerned about what real changes Yu’e Bao could bring to the financial monopoly,” said Xu Xuelan, secretary-general of the Chinese Institute of Electronics. “We are expecting much more reform resolve and action in this regard.”

Housing market shows signs of cooling after decade of growth

Higher mortgage rates, concern over impact of tax reduce volume of transactions as year gets underway

Experts say there are signs of cooling in the Chinese property market after a decade of growth, with the transaction volume starting to fall and mortgage rates rising nationwide.

Jia Kang, head of the Institute for Fiscal Science Research under the Ministry of Finance, said China’s housing market also showed signs of a differentiation in prices in January, which may lead to a price slump in second- and third-tier cities, although prices in Beijing and Shanghai are likely to maintain their current level.

“Although precisely how the trend in differentiation will develop is yet to be seen, second- and third-tier cities will be more vulnerable than Beijing and Shanghai during this round of market fluctuation,” he said on the sidelines of a news conference of the Hainan-based China Institute for Reform and Development in Beijing on Friday.

Jia advised investors to take care when making investment decisions.

China’s real estate sector showed signs of cooling at the beginning of 2014, with most of the nation’s cities recording falling transactions on both a yearly and monthly basis. Prior to that, the Chinese property market witnessed 12 years of sustained growth.

According to the real estate research institute China Real Estate Information Corp, shrinking supply and tightened mortgages played important parts in the drop in the number of transactions.

Li Wei, head of the Development Research Center of the State Council, said in a recent speech on the Chinese economy that new home construction may be slashed given the high stockpiles of homes in third- and fourth-tier cities, where supply has exceeded demand.

Li’s team previously concluded in a report that housing demand will increase at a much slower pace after 2012 and demand will continue to slide under raised mortgage rates and an upcoming property tax.

Li warned about an “important change” expected to take place in China’s property market after its breathtaking growth of more than a decade.

A declining market outlook was also linked by some experts to rising mortgage rates, with nearly 90 percent of 69 bank branches in 22 Chinese cities no longer offering preferential mortgage rates to first-home buyers, according to the China Real Estate Information Corp.

“We have to watch closely the trend of price differentiation in different cities, take precautions and note the role of the government in real estate control,” he said, adding he believes it is highly unlikely China’s property market can maintain the rises it witnessed in previous years because the environment for industrial development and the inner drive for expansion have both been altered.

Jia, from the finance institute, suggested speeding up legislation regarding property tax because more people are looking forward to the government expanding its trial to regulate the market.

In the two cities where property tax has been levied as a pilot program since 2011, individuals in Shanghai are taxed at a rate of 0.4 percent or 0.6 percent of the total price of their property annually if the housing area for each person exceeds 60 square meters. In Chongqing – the other trial city – the tax is levied only on high-end properties, such as villas, at a rate between 0.5 percent to 1.2 percent of the property price on an annual basis.

“We have to be prudent about bringing more cities into the trial and be especially cautious when drawing a watershed between homes where a tax is beneficial and those in which it isn’t. Any expansion of the trial should be aimed at regulating the high-end property market, instead of levying taxes on all properties alike,” he said.

Police relax entry rules on recruitment of Chinese

Police have relaxed several conditions pertaining to recruitment to encourage more Chinese to join the force (PDRM).

Deputy IGP Datuk Seri Bakri Zinin said aspects related to salary, promotion opportunities and others to entice the participation of the Chinese might be reviewed.

“We are targeting about 5,000 Chinese in stages because we need to look at the capacity and our need to provide basic training and courses,” he told reporters.

He said the number of Chinese police personnel made up only 1.87 per cent of the total police strength.

Bakri said the force had also formed a special team to ensure the participation of the Chinese could be implemented as soon as possible.

“They will explain to society, especially the Chinese community, on joining the PDRM. We are doing that, this is our initiative, to ensure we get suitable candidates in the PDRM,” he said.

Bukit Aman Management Department director Datuk Seri Fuzi Harun said the police viewed the participation by the Chinese seriously as the community made up 30 per cent of the population.

“So, less than two per cent have joined the PDRM, it does not look good, so we have to improve this figure…to ensure this programme is successful, we will relax the entry conditions,” he said.

Bukit Aman Personnel (Recruitment) assistant director ACP Saiful Azly Kamaruddin said the exercise for the recruitment of new police constables for the first session this year, would be carried out on Monday.

He said the relaxation of conditions included a pass in Bahasa Malaysia in SPM apart from passing a vision test or by using glasses or contact lenses by obtaining V/6/9.

“We understand the entry requirements, which prior to this were too stringent for the Chinese community, namely, credit in Bahasa Malaysia while there are those among them who are not fluent at all.

“So, we consider this situation a special one for the Chinese community,” he said.

Based on statistics, as of Dec 31 last year, Malays (90,156 people) dominated the force, followed by Indians (3,659 people) and Chinese (1,974 people), while the rest were from other communities, he said.

He said the lack of Chinese staff was due to several reasons, including salary, which was regarded as still low, while parents did not encourage their children to join the PDRM.

“According to a study, most of them do not realise a constable can bring home RM3,000 a month, if all the allowances are included,” he said.

For the recruitment on Monday, the Chinese were encouraged to download the application form from the PDRM website at www.rmp.gov.my.

The form should send it to the nearest police station or to the Personnel Recruitment Unit at the federal police headquarters in Bukit Aman.