In the news: The PBOC boosts liquidity, AgFeed settles an SEC fraud case and Dalian Wanda's property arm files for an IPO
September 19, 2014 | BY
clpstaff &clp articles &The PBOC injected Rmb500 billion into China's five largest banks, AgFeed agreed to pay US$18 million to settle SEC allegations of fake revenue reporting and Dalian Wanda Commercial Properties filed for an IPO with the Hong Kong Stock Exchange
China injects Rmb500 billion to address weak growth
The People's Bank of China (PBOC) has injected Rmb100 million in each of the nation's five largest banks to boost liquidity as it addresses slowing growth. China's three-month term injection follows the same path as the broad-based stimulus of the US after the global financial crisis and is designed to fuel demand for credit in a debt-ridden economy. Economists have called it “quantitative easing with Chinese characteristics” and said that further growth slowdowns will warrant more easing.
Source:
Bloomberg
This shows that China's monetary policy is leaning toward easing, although the stance may change next year. The lack of an official announcement regarding the policy shows that the PBOC does not want to send a strong signal of easing. Recent reports of weak industrial output expansion, slowing retail sales growth, pullback in manufacturing and a drop in imports all highlighted the risks of a deepening economic slowdown. This injection was the first clear response to the quarter's weak data and monetary conditions are expected to loosen up modestly. The policies to follow will depend on market performance.
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AgFeed pays SEC US$18 million for fraud
Chinese animal-feed and hog-production company AgFeed has agreed to pay US$18 million to settle SEC allegations of reporting false revenue to meet financial targets and increase its stock price. It inflated its revenue by US$239 million by creating fake invoices for sales of feed and hogs that didn't exist. The company, which is now in Chapter 11 bankruptcy, did not admit or deny the allegations. The settlement will be distributed between victims of the company's fraud.
Source:
The Wall Street Journal
Agfeed is now based in Tennessee but was based in China before a merger with a US company in 2010. According to the WSJ report, this case is one of over 20 that the SEC has filed against US-traded Chinese companies and their officials. Earlier this year Bloomberg News reported emails in which Agfeed company officials blatantly discussed their fraud, with one finance manager in China stating: “Sometimes I really want to work well on the real stuff, but the need to balance the falsified data often takes up my time”. Investors in this company will now be feeling far more upset than this finance manager, and this case provides an important warning about the risks of investing in US-listed Chinese companies. The blog re: The Auditors has a longer 3 part analysis of this case.
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Dalian Wanda's property business files for IPO
Dalian Wanda Commercial Properties has filed a listing application with the Hong Kong stock exchange to an IPO that could raise between US$5 billion and US$6 billion, which would make it the biggest IPO in the SAR since Glencore International raised US$10 billion in May 2011. The firm is the property arm of Dalian Wanda Group, the Chinese company that bought AMC Entertainment in 2012 and is owned by billionaire Wang Jianlin.
Source:
The Wall Street Journal
According to a report in ECNS.cn, Wang has said that the listing is “not aimed at raising money” but is instead designed to improve transparency. Dalian Wanda Commercial reportedly abandoned a plan to list in Shanghai earlier this year after unsuccessfully seeking approval. The listing is a brave move, as China's real estate market has slowed markedly in recent months, with sales reducing and constructing dropping off. The sheer size of Dalian Wanda, plus moves by local governments in China to relax policies may help to make this IPO a success, but investors will be cautious.
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