BusinessDay
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China wants banks to curtail credit

China’s central bank asked the nation’s major lenders to curtail loan growth for the rest of this year after a surge in the first two months stoked bubble risks, according to people familiar with the matter. This is according to a Bloomberg report.

At a meeting with the People’s Bank of China on March 22, banks were told to keep total advances in 2021 at roughly the same level as last year, said the people, asking not to be identified as the matter is private.

Some foreign banks were also urged to rein in new lending through so-called window guidance recently after ramping up their balance sheets in 2020, one of the people said.

The comments give further detail to what the central bank stated publicly after the meeting when it said it asked representatives of 24 major banks to keep loan growth stable and reasonable. In 2020, banks doled out a total of 19.6 trillion yuan ($3 trillion) of credit, with about a fifth directed to inclusive financing such as small business loans.

With the coronavirus largely contained and the economy rebounding, Chinese policymakers have renewed a campaign to curb risks, especially in the financial and real estate sectors.

The prospect of higher interest rates and fewer soured loans may boost the profitability of banks, which saw earnings slump after they were enlisted to help borrowers obtain cheap credit during the pandemic.

The PBOC didn’t immediately comment when Bloomberg news reached out.

Chinese banks advanced a record 4.9 trillion yuan of new loans in the first two months, 16% more than the same period last year, official data show. The central bank told banks in February to keep new lending in the first quarter roughly at the same level as last year, if not lower, the Financial Times reported earlier.

The PBOC wants banks to focus on lending to areas such as innovative technology and the manufacturing sector, it said at the March gathering.

Earlier in the month, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, warned about bubbles in the property and financial markets, fueling concerns policymakers will begin tightening monetary policy.

Gunmen free more than 1,800 inmates from Nigerian prison

More than 1,800 inmates escaped from a Nigerian prison in the southeastern city of Owerri after an attack by gunmen carrying rocket-propelled grenades, machine guns, explosives and rifles, the prisons authority said.

Nigerian police said it believed a banned separatist group, the Indigenous People of Biafra (IPOB), was behind the attack, but a spokesman for the group denied involvement.

The secessionist movement in the southeast is one of several serious security challenges facing President Muhammadu Buhari, including a decade-long Islamist insurgency in the northeast, a spate of school kidnappings in the northwest and piracy in the Gulf of Guinea.

“The Owerri Custodial Centre in Imo state has been attacked by unknown gunmen and forcefully released a total of 1,844 inmates in custody,” a Nigerian Correctional Service spokesman said in a statement late on Monday. The attackers stormed the facility at around 2:15 a.m. (0115 GMT) on Monday, he said.

The attackers used explosives to blast the administrative block of the prison and entered the prison yard, police said in a separate statement.

Tensions have increased in the southeast in recent months in the wake of accusations that a paramilitary wing of IPOB, known as the Eastern Security Network, have been involved in clashes with the military.

“Preliminary investigations have revealed that the attackers… are members of the proscribed Indigenous People of Biafra (IPOB),” said Frank Mba, a spokesman for the Nigeria Police Force.

But a spokesman for IPOB told Reuters in a phone call that the group was not involved. He said a statement would be issued in due course.
Several police stations have been attacked in southeastern Nigeria since January, with large amounts of ammunition stolen. No groups have claimed responsibility for the attacks.

Why the Suez crisis failed to disrupt LNG markets

On the morning of March 23, the world was shaken by the unfortunate news of the Suez Canal being blocked. At 07.40 local time, the Ever Given ran aground when strong winds blew it off course.

The importance of the Suez Canal to global shipping can hardly be underestimated. Pundits were quick to point out the blockade’s effect on global supply chains. Energy prices were anticipated to be impacted too. However, the blockade failed to significantly move oil and gas prices.

Before the crisis with the Ever Given, on a daily basis, 10 percent of the world’s oil and 8 percent of liquid natural gas went through the canal. The modest rise in prices of LNG in Europe shows that the market didn’t face serious disruption.

Taking a closer look at global LNG markets, the world’s largest importers are predominantly located in two areas: Europe and East Asia. In the area of energy exports, natural gas and oil are sourced from roughly the same areas (with some exceptions such as Australia). The blockade’s effect, however, was different on LNG prices than oil with moderate price rises in both Europe and Asia.

Europe is fortunate enough to be surrounded by countries that hold major gas resources in virtually all directions except for the Atlantic Ocean. While domestic production is dwindling due to depletion or political reasons (the Dutch are scaling down production due to tremors), imports are on the rise. Europe’s massive pipeline infrastructure connects it with producers in the north (Norway), south (Algeria), and east (Russia and the Caspian region).

The U.S. is losing the energy tech war against China

For years, the U.S. and China have waged war over technology, trade, and capital markets. Tensions between the world’s leading economies reached a fever pitch during former president Trump’s term in office, leading to escalating tariffs and trade restrictions.

But now, a new revelation will have Washington scratching its head again: China has been vastly outspending the United States in renewable energy R&D.

According to BNEF data cited by Bank of America in a recent report, for every dollar that the U.S. spent on renewable energy research between 2010 and 2020, China spent two, making it by far the leading investor in renewable energy around the world.

BofA says in this new climate war, China hopes to gain the upper hand in supply chain dominance, carbon-related trade tariffs, and domestic-focused manufacturing policies.

Global supremacy

According to BofA, it’s not just the need to mitigate the effect of climate change. The biggest motivating factor, in fact, is quite different: Attaining energy independence and global supremacy.

“It’s not just about saving the planet. We believe climate strategies offer a route to global supremacy, as much more is at stake here: the economic impact of climate could reach $69 trillion this century, and energy transition investment needing to rise up to $4 trillion per year. Energy independence and supply chain control are also at stake with the geopolitical balance of power also linked to peak oil in 2030.”

According to Harry Broadman, managing director and chair of the emerging markets and CFIUS practices at Berkeley Research Group, “We’ve done really well among democratic countries collaborating on investment and trade, but we’ve done an extraordinarily poor job in R&D, and this is where China is frankly a hugely competitive and potentially a huge economic and maybe geopolitical, threat,” he said.

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