The World Bank Group‘s decision to discontinue publication of the Doing Business ranking report has exposed China’s fraud and would lead to shifting of manufacturing bases to India, a government source said on Friday. The World Bank Group has decided to discontinue publication of the report on country investment climates following allegations of irregularities.
The decision was taken after data irregularities allegedly due to pressure by some top bank officials to boost China’s ranking in 2017 came to light.
“No irregularities were found in Indian data. India remains the preferred investment destination for the world and a reliable, trustworthy destination while China slipping in attractiveness.
The World Bank Group on Thursday said it ended publication of its “Doing Business” report on country investment climates after a probe of data irregularities cited “undue pressure” by top bank officials, including then-Chief Executive Kristalina Georgieva, to boost China‘s ranking in 2017.
The World Bank said in a statement said that the decision came after internal audit reports had raised “ethical matters, including the conduct of former Board officials as well as current and/or former Bank staff” and a board investigation conducted by the law firm Wilmer Hale.
The Wilmer Hale report cited “direct and indirect pressure” from senior staff in the office of then-World Bank President Jim Yong Kim to change the report’s methodology to boost China’s score, and said it likely occurred at his direction.
It also said that Georgieva, now the managing director of the International Monetary Fund, and a key adviser pressured staff to “make specific changes to China’s data points” and boost its ranking at a time when the bank was seeking China’s support for a big capital increase.
China’s ranking in the “Doing Business 2018” report published in October 2017, rose seven places to 78th after the data methodology changes were made, compared with the initial draft report.
The Doing Business report assesses regulatory environments, ease of business startups, infrastructure and other business climate measures.
“I disagree fundamentally with the findings and interpretations of the investigation of data irregularities as it relates to my role in the World Bank’s Doing Business report of 2018,” Georgieva said in a statement issued by the IMF. She added that she had met with the IMF’s executive board to discuss the matter.
The WilmerHale report also cited irregularities in the data used to determine rankings for Saudi Arabia and Azerbaijan in the “Doing Business 2020” report published in 2019, but found no evidence that any members of the bank’s Office of the President or executive board were involved in these changes.
“Going forward, we will be working on a new approach to assessing the business and investment climate,” the World Bank said in a statement.
BEIJING, Sept 7 – China‘s banking watchdog said on Tuesday that banks ought to offer financial support for home buyers with so-called “rigid” demand, referring to purchasing or renting from those recently married or seeking low-cost housing.
Banks should implement differentiated mortgage polices and down-payment requirements, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement, avoiding inflexible rules that penalise non-speculative, legitimate home buyers.
Speculators have stoked Chinese real estate prices in recent years, prompting authorities to roll out restrictions including curbs on borrowing, seeking to control a build-up in financial risks in the property sector.
The curbs have slowed property purchases while some developers have been hit hard by a squeeze in liquidity.
Overall, bank loans in the real estate sector have continued to slow, CBIRC said in the statement.
Sector-wide growth of property loans hit its lowest pace in eight months, while the outstanding size of banks’ investment in the sector via special vehicles fell for the 18th straight month, it said.
As of end-July, individual mortgages for first-home purchases accounted for 92% of banks’ total mortgage loans, while outstanding loans used to rent homes rose 29% from a year earlier, the CBIRC said. (Reporting by Cheng Leng, Zhang Yan and Ryan Woo;)
NEW YORK – Chinese cryptocurrency addresses sent more than $2.2 billion worth of digital tokens to addresses tied to illegal activity such as scams and darknet operations between April 2019 and June 2021, according to a report from blockchain data platform Chainalysis released on Tuesday.
These addresses received $2 billion in cryptocurrency from illicit sources as well, making China a large player in digital-currency related crime, it added. The report analyzes China’s cryptocurrency activity amid government crackdowns.
However, China’s transaction volume with illicit addresses has fallen drastically over the two-year period in terms of absolute value and relative to other countries, Chainalysis said. The big reason is the absence of large-scale Ponzi schemes such as the 2019 scam involving crypto wallet and exchange PlusToken that originated in China, it noted.
Users and customers lost an estimated $3 billion to $4 billion from the PlusToken scam.
The vast majority of China’s illegal fund movements in crypto has been related to scams, although that has declined as well, the Chainalysis report said.
“This is most likely because of both the awareness raised by PlusToken, as well as the crackdowns in the area,” said Gurvais Grigg, global public sector chief technology officer at Chainalysis, in an email to Reuters.
The report also cited trafficking out of China in fentanyl, a very potent narcotic pain medication prescribed for severe pain or pain after surgery.
Chainalysis described China as the hub of the global fentanyl trade, with many Chinese producers of the drug using cryptocurrency to carry out transactions.
Money laundering is another notable form of crypto-based crime disproportionately carried out in China, Chainalysis said.
Most cryptocurrency-based money laundering involves mainstream digital currency exchanges, often through over-the-counter desks whose businesses are built on top of these platforms.
Chainalysis noted that China appears to be taking action against businesses and individuals facilitating this activity.
It cited Zhao Dong, founder of several Chinese OTC businesses, pleading guilty in May to money laundering charges after being arrested last year.
China’s central bank vowed to maintain heavy regulatory pressure on cryptocurrency trading and speculation after escalating its clampdown in the sector earlier this year.
The People’s Bank of China will also supervise financial platform companies to rectify their practices according to regulations, it said in a statement on Saturday. Policy makers met on Friday to discuss work priorities for the second half of the year.
China launched its most intense crackdown on crypto trading and mining since 2017 in recent months, after a surge in Bitcoin and other tokens heightened authorities’ concerns over risks of fraud, money laundering and excessive energy usage. It also imposed a series of regulatory actions targeting monopolistic behavior at online payment platforms such as Ant Group Co. over the past year.
The central bank will act to prevent major financial risks and push to lower the number of high-risk financial institutions in key provinces, according to the statement. It will also accelerate its work to create a financial stability law, which was proposed by Deputy Governor Liu Guiping in March.
The PBOC reiterated that its prudent monetary policy will be flexible, targeted, reasonable and appropriate. It vowed to implement a good “cross-cyclical” policy design, a term widely interpreted to mean authorities will use a longer time frame when considering policy support and will avoid overstimulating the economy.
MUMBAI: The Reserve Bank of India (RBI) has said that it is working towards a phased implementation strategy for its digital currency and examining use cases where it can be deployed with little disruption. Making a strong argument in favour of a central bank digital currency (CBDC) for India, the RBI has said that it would reduce currency costs for the government and would help offset the threat of virtual currencies.
“Developing our own CBDC could provide the public with uses that any private virtual currency can provide and to that extent might retain the public preference for the rupee. It could also protect the public from the abnormal level of volatility some of these virtual currencies experience,” RBI deputy governor T Rabi Sankar said on Thursday at a webinar organised by the Vidhi Centre for Legal Policy. Sankar added that conducting pilots on CBDC in wholesale and retail segments may be a possibility in the near future. “As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh,” he said.
On the consequences of digital currencies on banks, Sankar said that while it could reduce the need for maintaining deposits, the impact would be limited as they cannot pay interest. “Thus, potential costs of disintermediation mean it is important to design and implement CBDC in a way that makes the demand for CBDC, vis-a-vis bank deposits, manageable,” said Sankar.
The key issues examined by the RBI include whether these should be used in retail payments or also in wholesale payments, whether it should be a distributed ledger or a centralised ledger, whether it should be token-based or account-based, whether it should be directly issuance by the RBI or through banks and the degree of anonymity.
In a strong attack against virtual currencies (cryptocurrencies), Sankar said, “Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value, some claims that they are akin to gold clearly seem opportunistic. For the most popular ones now, they do not represent any person’s debt or liabilities. There is no issuer. They are not money.”
The deputy governor said 86% of central banks were actively researching the potential for virtual currencies and 60% were already experimenting with the technology, and 14% are deploying pilot projects. He said that interest had spiked to replace paper and avoid the more damaging consequences of private currencies.
The deputy governor’s statement comes at a time when the RBI has been forced by a Supreme Court order to withdraw a ban on bank services to cryptocurrencies. Although the RBI has earlier spoken about plans to launch a digital currency, this is the first time that the central bank has gone into so much detail. Central banks across the world have drawn up plans to launch their digital currency to battle cryptocurrencies. China has said that its e-CNY has been tested in 70 million transactions.
It’s raining IPOs in the market and pipeline for the remainder of the year is only robust. By all counts, this fiscal should see IPO fund-raise of at least $10 billion (without including mega LIC IPO) if the current trend is anything to go by, says V Jayasankar, Senior Executive Director and Head-ECM, Kotak Mahindra Capital Company (KMCC). He would know better with KMCC having managed the top three (₹10,200 crore) of the total six IPOs (₹12,423 crore) that hit market in April-June 2021. July itself is going to see IPOs worth ₹24,000 crore. Edited excerpts:
What explains this IPO rush? Is there a good pipeline and will this momentum continue?
Last fiscal was a record year for Equity Capital Market (ECM) business. Overall, ₹2.45-lakh crore was raised and about ₹25,000-30,000 crore was initial public offering (IPO) business in the country. IPO was about 15 per cent of ECM activity which was very robust.
I expect this year to be a record one for IPO market and my estimate is that in excess of $10 billion (without including the mega LIC IPO) will be raised. Even if the overall ECM activity remains similar to last year, there would be better proportion of IPOs in the equity raise.
So what is creating this shift?
There are five sectoral themes playing out in the market though the investor appetite stretched beyond them. These are the new age or consumer tech start-ups, financial services, speciality chemicals, consumer and healthcare sectors. The Indian start-up system has matured and become very robust. We see good number of listings in the coming years.
Can you elaborate on the other four trends?
We expect to see large number of well-managed companies in the financial services space to tap the market for listing across the spectrum of lending, insurance and others. A number of speciality chemical companies will continue going public as they have the scale and become more export-oriented. Also, benefiting from China plus one strategy. Similarly, there are numerous consumer and healthcare companies that we expect to go public as the addressable market has been growing.
Do you think Internet-based tech companies can garner better valuation by listing in overseas market like the US?
Indian equity markets have matured over the years and have depth of institutional investors’ participation. Investor universe is similar for well-run and well-managed tech companies, whether you list in India or abroad. You have the added advantage of Indian MFs and insurance companies participating in India listing.
The valuation peers, benchmark and methodology are similar irrespective of listing destination. Often we see institutional investors pay better value for Indian companies factoring in higher growth prospects that India may provide. You are likely to see several Indian digital and new age companies list here in the coming years reflecting the strong appetite.
Importantly, consumer brands benefit from retail participation. A successful listing can enhance the power and visibility of a brand.
It seems like a slew of negative stories have led to crypto currencies in a slump. According to a report by CNBC, the trading values at some of the largest exchanges have dropped 40% in June. The report cites data from CryptoCompare, a crypto market data provider, that suggests trading volumes at Binance, Kraken, Coinbase and Bitstamp have reduced due to lower prices and lower volatility.
The report says that the price of Bitcoin was down by 6% and hit a monthly low of $28,908.
As per a report by Reuters, China has been making an attempt to crackdown on the crypto industry. And it seems like it has finally made an impact. The fear of a Chinese crackdown may have led to fear in the market, which is why it has gone in a slump like situation.
China is gearing up to launch its own state-backed digital currency. This has led to mining operations in the country to close down. Almost 50% of bitcoin’s mining power was hosted by these operators in China.
The Chinese government had announced tougher restrictions on cryptocurrency in May. A report by Nikkei says that mining is an energy-intensive process which is not in tune with China’s pledge to achieve carbon neutrality by 2060.
The Chinese crackdown on bitcoin as well as crypto mining has forced many using high-powered computers to secure the bitcoin network and validate transactions out of the country to other locations like Kazakhstan among others. Bitcoin’s hash rate — a measure to check how much computing power is being used by bitcoin network — has fallen down to a 13-month low over the last few weeks, according to a report by Forbes.
It’s not just the bitcoin network which has seen a crash. The ethereum — other most popular crypto network — has seen its hash rate drop by 20% in the last two months.
When the coronavirus jammed up China’s economy last year, Rao Yong needed cash to tide over his online handicrafts business. But he dreaded the idea of spending long, dull hours at the bank.
The outbreak had snarled delivery services and made customers slow on their payments, so Rao, 33, used an app called Alipay to receive early payment on his invoices. Because his Alipay account was already tied to his digital storefront on Alibaba’s Taobao bazaar, getting the money was quick and painless.
Alipay had helped Rao a few years before as well, when his business was just starting to expand and he needed $50,000 to set up a supply chain.
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“If I’d gone to a bank at that point, they would have ignored me,” he said.
China was a trailblazer in figuring out novel ways of getting money to underserved people like Rao. Tech companies like Alipay’s owner, an Alibaba spinoff called Ant Group, turned finance into a kind of digital plumbing: something embedded so thoroughly and invisibly in people’s lives that they barely thought about it. And they did so at colossal scale, turning tech giants into influential lenders and money managers in a country where smartphones became ubiquitous before credit cards.
But for much of the past year, Beijing has been putting up new regulatory walls around so-called fintech, or financial technology, as part of a widening effort to rein in the country’s internet industry.
The campaign has ensnared Alibaba, which was fined $2.8 billion in April for monopolistic behavior. It has tripped up Didi, the ride-hailing giant, which was hit with an official inquiry into its data security practices just days after listing its shares on Wall Street last month.
This time last year, Ant was also preparing to hold the world’s biggest initial public offering. The IPO never happened, and today Ant is overhauling its business so regulators can treat it more like what they believe it is: a financial institution, not a tech company.
In China, “the reason fintech grew that much is because of the lack of regulation,” said Zhiguo He, who studies Chinese finance at the University of Chicago. “That’s just so clear.”
Now the question is: What will regulation do to an industry that has thrived precisely because it offered services that China’s state-dominated banking system could not?
With Ant and other big platforms cornering the market, investment in Chinese fintech has fallen in recent years. So Ant’s chastening could make the sector more competitive for startups. But if running a big fintech company means being regulated like a bank, will the founders of future Ants even bother?
Zhiguo He said he was mostly confident that Chinese fintech entrepreneurs would keep trying. “Whether it’s hugely profitable,” he said, is another question.
For much of the past decade, if you wanted to see where smartphone technology was making China look most different from the rest of the world, you would have peered into people’s wallets. Or rather, the apps that had replaced them.
Rich and poor alike used Alipay and Tencent’s WeChat messaging app to buy snacks from street vendors, pay bills and zap money to their friends. State media hailed Alipay as one of China’s four great modern inventions, putting it and bicycle sharing, e-commerce and high-speed rail up there with the compass, gunpowder, papermaking and printing.
But the tech companies didn’t enter the finance business to make it easier to pay for coffee. They wanted to be where the real money was: extending credit and loans, managing investments, offering insurance. And with all their data on people’s spending, they believed they would be much better than old-fashioned banks at handling the risks.
With the blessing of China’s leaders, finance arms began sprouting out of internet companies of all kinds, including the search engine Baidu, the retailer JD.com and the food-delivery giant Meituan. Between 2014 and 2019, consumer credit from online lenders nearly quadrupled each year on average, by one estimate. Nearly three-quarters of such platforms’ users were under age 35, according to iiMedia Research.
Last year, when Ant filed to go public, the company said more than $260 billion in credit was being extended to consumers on Alipay. That meant Ant alone was responsible for more than 12% of all short-term consumer lending in China, according to the research firm GaveKal Dragonomics.
Then in November, officials torpedoed Ant’s IPO and got to work taking apart the plumbing that had connected Alipay with China’s banks.
They ordered Ant to make it less convenient for users to pay for purchases on credit — credit that was being largely funded by banks. They barred banks from offering deposits through online platforms and restricted how much banks could lend through them. At some banks, deposits offered through digital platforms accounted for 70% of their total deposits, a central bank official said in a speech.
In a news briefing last week, Fan Yifei, deputy governor at the central bank, said regulators would soon be applying the full Ant treatment to other platforms.
“On the one hand, the speed of development has been astonishing,” Fan said. “On the other hand, in the pursuit of growth, there have arisen monopolies, disorderly expansion of capital and other such behaviors.”
Ant declined to comment.
As Ant and Tencent scramble to meet regulators’ demands, they have pared credit services for some users.
One big hit to Ant’s bottom line could come from new requirements that it put up more of its own money for loans. Chinese regulators have for years disliked the idea of Alipay’s competing against banks. So Ant instead played up its role as a partner to banks, using its technology to find and assess borrowers while banks staked the funds.
Now, though, that model looks to Beijing like a handy way for Ant to place bets without being exposed to the downside risks.
“If problems arise, it would be safe, but its partner banks would take a hit,” said Xiaoxi Zhang, an analyst in Beijing with GaveKal Dragonomics.
When Chinese regulators think about such risks, it is people like Zhou Weiquan they have in mind.
Zhou, 21, makes about $600 a month at his desk job and wears his hair in a swooping, reddish-brown mullet. After he turned 18, Alipay and other apps began offering him thousands of dollars a month in credit. He took full advantage, traveling, buying gadgets and generally not thinking about how much he spent.
After Alipay slashed his credit limit in April, his first reaction was to call customer service in a panic. But he says he has since learned how to live within his means.
“For young people who really love spending to excess, this is a good thing,” Zhou said of the clampdown.
China’s brisk recent economic growth has most likely made officials more comfortable with reining in fintech, even at the expense of some innovation and consumer spending and borrowing.
“When you consider that household debt as share of household income is among the highest in the world right now” in China, “then more household debt is probably not a good idea,” said Michael Pettis, a finance professor at Peking University.
Qu Chaoqun, 52, was thrilled a few years ago to find he had access to $30,000 a month across several apps. But he wanted even more. He started buying lottery tickets.
Soon enough, Qu, a takeout-delivery driver in the megacity of Guangzhou, was borrowing on one app to pay his bills on another.
When his credit was cut by almost half in April, he fell into what he calls a “bottomless abyss” as he struggled to pay his outstanding debts.
“People inevitably have psychological fluctuations and impulses that can bring great harm and instability to themselves, to their families and even to society,” Qu said.
Risk currencies hovered above their recent lows against the dollar and the yen on Monday, as fears about slowdown in the global economic recovery appeared to have subsided for now.
The outlook for US inflation and the speed of the Federal Reserve‘s future policy tightening are back in focus ahead of Tuesday’s consumer price data and Fed Chair Jerome Powell’s testimony from Wednesday.
“If we see strong data, the Fed could bring forward their projection for their first rate hike further from their current forecast of 2023. That would also mean they have to finish tapering earlier,” said Shinichiro Kadota, senior FX strategist at Barclays.
The euro traded at $1.1873, edging back from its three-month low of $1.17815 set on Wednesday while against the yen the common currency stood at ¥130.87, off Thursday’s 2-1/2-month low of ¥129.63.
Sterling also ticked up to $1.3900, while the Australian dollar bounced back to $0.7487 from Friday’s seven-month low of $0.7410.
Risk currencies slipped earlier last week as investors curtailed their bets on them, in part as economic data from many countries fell short of the market’s expectations.
Concerns about the Delta variant of the novel coronavirus also added to the cautious mood although few investors thought the economic recovery would be derailed.
Chinese eonomy
Selling in risk currencies subsided by Friday, however, and sentiment was bolstered further after China cut banks’ reserve requirement ratio across the board, to underpin its economic recovery that is starting to lose momentum.
On Monday, the Chinese yuan was flat at 6.4785 per dollar, off Friday’s 2-1/2-month low of 6.5005.
A recovery in risk sentiment hampered the safe-haven yen on Monday. The Japanese currency stood at 110.17 yen per dollar, off Thursday’s one-month high of 109.535.
With the data calendar on Monday relatively bare, many investors are looking to Tuesday’s US consumer price data for June.
Economists polled by Reuters expect core CPI to have risen 0.4 per cent from May and 4 per cent from a year earlier after two straight months of sharp gains in prices.
Any signs that inflation could be more persistent than previously thought could fan expectations the Fed may exit from current stimulus earlier, supporting the dollar against other major currencies.
Conversely, more benign data could lead investors to think the US central bank can afford to maintain an easy policy framework for longer, encouraging more bets on risk assets,including risk-sensitive currencies.
Cryptocurrencies were little moved, with bitcoin at $34,267and ether at $2,137.
