China tells state-owned developers to avoid publicly issued debt defaults...Alibaba integrating travel, takeout, e-commerce units...China imports of multiple US agricultural products plunge in May
China tells state-owned developers to avoid publicly issued debt defaults
China has introduced a requirement for state-owned developers to avoid defaulting on publicly issued debt, in the latest attempt by authorities to contain the nation’s prolonged property crisis, reports Bloomberg. The State-owned Assets Supervision and Administration Commission added the directive to its latest performance metrics for about 20 developers that are controlled by the central government, people with knowledge of the matter said, asking not to be identified discussing a private matter.
The commission, known as SASAC, didn’t respond to a faxed request for comment on Monday.
While the regulator has so far stopped short of providing additional support to backstop the developers, the new stipulation underscores growing urgency to contain credit risks from China’s protracted property downturn. Most of the biggest private developers have defaulted since 2021, shattering confidence in the housing market and leaving a pile of distressed debt that currently stands at almost $140 billion.
Alibaba integrating travel, takeout, e-commerce units
Alibaba Group Holding Ltd. is integrating its food delivery service Ele.me and travel booking platform Fliggy into its e-commerce division, as the Chinese tech giant streamlines its businesses while competition intensifies across China’s consumer services sectors, reports Caixin. Under the new structure, Ele.me and Fliggy will retain independent company operations, but will align their business decisions and execution with the e-commerce division, according to an internal memo sent by Alibaba CEO Eddie Wu on Monday. Ele.me CEO Wu Zeming and Fliggy CEO Zhuang Zhuoran will report directly to e-commerce business group CEO Jiang Fan.
“This marks our strategic upgrade from an e-commerce platform to a comprehensive consumer platform,” Wu said in the memo sent to employees of all three business groups. “Going forward, we will optimize and integrate our business models and organizational structure with a greater focus on user needs, aiming to deliver a richer and higher-quality consumption experience.”
The restructuring comes amid escalating battles on multiple fronts. E-commerce rival JD.com Inc. entered food delivery in February and has already surpassed 25 million daily orders. Last week, it launched a travel services portal offering hotel, flight and train ticket booking services.
China imports of multiple US agricultural products plunge in May
China’s imports of a slew of US agricultural products plunged dramatically in May, and it is possible the trade may never fully rebound as Beijing’s moves to diversify its food supplies will be “difficult to unwind,” experts said, reports the South China Morning Post. The shift in Chinese demand sparked by the trade war and Beijing’s concerns about long-term uncertainty in its relationship with America could have deep implications for global supply chains—and particularly for the US farm sector, for which China has long been a key export market.
According to the latest Chinese customs data, the country’s imports of a basket of US farm products plummeted by more than 43% year on year in value terms in May, with shipments in several categories almost entirely halting as the US-China tariff war took its toll.
Chinese imports of fresh boneless beef and edible sorghum from America tumbled over 97% year on year, while shipments of corn and uncombed cotton yarn were down over 93% and 94%, respectively.
Starbucks denies considering full sale of China operations
US cafe chain Starbucks said it is not currently considering a full sale of its China operations, after Chinese financial magazine Caixin reported that it was, without disclosing where it obtained the information, reports Reuters. Starbucks has held preliminary talks with more than a dozen potential buyers, Caixin also reported on Monday, citing sources who did not specify what was for sale.
"I can confirm Starbucks is not currently considering a full sale of its China operations,” a company spokesperson said in a statement.
Starbucks kicked off a formal sale process of its China operations in May, inviting interested buyers to submit answers to a list of questions by the end of last week, said three sources with knowledge of the situation.
Saudia Cargo sets up HK JV
Saudia Cargo, the national air cargo carrier of Saudi Arabia, is tapping into diverse sectors in China and Asia, including e-commerce, agriculture and technology, through the launch of a new venture in Hong Kong and a planned capacity expansion, reports the South China Morning Post. “China specifically, and the Far East in general, as a critical trade market to Saudi Arabia, will play a critical role in supporting Saudi Vision 2030 goals, and hence expanding our operations here just comes naturally,” CEO and managing director Loay Mashabi said in an interview with the Post on Monday.
As the Middle Eastern country modernises and diversifies its economy to reduce its reliance on oil under the Vision 2030 plan, its ties with China have deepened, generating more opportunities.
Even amid trade and geopolitical tensions like the escalating Iran-Israel conflict, trade volume—at least from the Saudi Arabia side—would not slow down, as the country’s economy and projects would keep pushing ahead, Mashabi said.
Keeping it hidden
China has told state-owned property developers to avoid defaulting on publicly issued debt, in the latest attempt by authorities to contain the nation’s prolonged property crisis.
The move suggests that there are SOEs that are on the edge of default, but as always, it is unclear how many and how close they are to being unable to meet repayment requirements. What is clear is that it is another step away from truly allowing market forces to guide companies in China. Defaults exist as the next step for when businesses can’t repay, and avoiding public defaults will presumably require a lot of financial maneuvering within the SOEs, likely adding more volatility, not less, to the economics of the property sector.