Finance
China’s central bank says local government debt risks are declining
Pan Gongsheng, governor of the People’s Bank of China (PBOC), during the Lujiazui Forum in Shanghai, China, on Wednesday, June 19, 2024.
Bloomberg | Bloomberg | Getty Images
BEIJING — China’s financial risks have dropped, including from local government debt, People’s Bank of China Governor Pan Gongsheng said in state media interviews published late Thursday.
Pan also said the central bank will work with the Ministry of Finance to enable China to reach its full-year growth targets. He said that monetary policy would remain supportive.
Beijing has increasingly prioritized addressing risks from high debt levels in the real estate sector, which is closely linked to local government finances. International institutions have long called on China to reduce its ballooning debt levels.
“China’s overall financial system is sound. The overall risk level has significantly declined,” Pan said in an interview released by state broadcaster CCTV. That’s according to a CNBC translation of the transcript.
He noted that “the number and debt levels of local government financing platforms are declining,” and that the cost of their debt burden has “dropped significantly.”
Local government financing vehicles emerged in China in the last two decades to enable local authorities, who couldn’t easily borrow directly, to fund infrastructure and other projects. LGFVs primarily obtained financing from shadow banking.
The lack of regulatory oversight often meant indiscriminate funding of infrastructure projects with limited financial return. That raised the debt burden on LGFVs, for which the local governments are responsible.
Coordinated efforts in the last year by local governments, financial institutions and investors have “alleviated the most pressing repayment needs of the weakest LGFVs and boosted market sentiment,” S&P Global Ratings analysts said in a July 25 report, one year since Beijing made a concerted effort to reduce LGFV risk.
However, the report said LGFV debt “remains a big problem.” The analysis found that more than 1 trillion yuan ($140 billion) of LGFV bonds are due to mature over the next couple of quarters, while such debt growth remains in the high single digits.
Exacerbating debt challenges is China’s slowing growth. The economy grew by 5% in the first half of the year, raising concerns among analysts that the country would not be able to reach its target of around 5% growth for the full year without additional stimulus.
The International Monetary Fund on Aug. 2 said in its regular review of China’s financial situation that macroeconomic policy should support domestic demand to mitigate debt risks.
“Small and medium-sized commercial and rural banks are the weak link in the large banking system,” the IMF report said, noting China has nearly 4,000 such banks that account for 25% of total banking system assets.
Addressing real estate
The number of high-risk small and medium-sized banks has dropped to half of what it was at their peak, Pan said via state media on Thursday, without sharing specific figures.
In real estate, he pointed out the mortgage down payment ratio has reached a record low of 15% in China, and that interest rates are also low. Pan noted central authorities are helping local governments with financing so they can acquire property and turn them into affordable housing or rental units.
Property and related sectors once accounted for at least one-fourth of China’s economy. But in recent years Beijing has sought to shift the country away from relying on real estate for growth, toward advanced tech and manufacturing.
Pan’s public comments come after a week of heightened volatility in the government bond market.
Earlier on Thursday, the PBOC made the rare decision to delay a rollover of its medium-term lending facility in favor of a 577.7 billion yuan capital injection via another tool called the 7-day reverse repurchase agreement. Pan highlighted that 7-day tool in June when discussing PBOC efforts to revamp its monetary policy structure.
The PBOC is scheduled Tuesday morning to release its monthly loan prime rate, another benchmark rate. The central bank cut the 1-year and 5-year loan prime rates by 10 basis points each in July, after keeping the 1-year unchanged for 10 straight months, and the 5-year unchanged for four months.
Barrons Roundtable discusses reports that Gen Z members are aggressive about wanting to retire.
Gen Z is the youngest generation of adults today, but with many struggling to make ends meet, a growing proportion say they do not expect to retire and few are socking away money to do so.
A new report from the TIAA Institute and UTA’s NextGen Practice found that a greater share of these adults age 27 and below do not anticipate retiring – at least in the traditional sense – after prior data showed nearly half of young adults either don’t want to retire, don’t believe they will be able to afford to, or are not thinking about it at all.
Gen Z as a whole has a very different view of retirement than previous generations, and a growing proportion of young adults say they do not plan on retiring at all. (iStock / iStock)
What’s more, just 20% of Gen Z respondents of working age say they are saving for retirement at all. While planning for retirement is important for everyone, saving for the future is critical for this generation that is projected to live past 100 years old. Yet, a higher cost of living could be impacting their ability to do so.
The study found that almost one-third of Gen Z (29%) are living paycheck-to-paycheck, with most of their money going to funding their basic needs, making it increasingly difficult for them to achieve financial milestones like homeownership while saving for their financial futures.
THIS AVOIDABLE SPENDING HABIT IS CREATING A RETIREMENT ‘CRISIS,’ FINANCIAL EXPERT WARNS
“Thirty-six percent of respondents cited high debt or low income as the primary reason they are not saving for retirement,” Surya Kolluri, head of the TIAA Institute told FOX Business. “Gen Z is spending more on essentials than previous generations.”
Inflation is weighing on Gen Z’s finances more than prior generations, data shows. (iStock / iStock)
Kolluri said it is true that Gen Z is bearing the brunt of inflation more than the generations that preceded them, noting that as of this year, the annual inflation rate for Gen Z was half a percent higher than it was for other generations at the same age.
But Kolluri pointed to some positive findings in the data, too. He said that while only 1 in 5 reported saving for retirement, 66% of those who are saving for retirement are doing so through 401(k)s.
Empower President and CEO Ed Murphy discusses retirement planning on ‘The Claman Countdown.’
There is also at least an awareness amid Gen Z’ers that it is important to save for the future. Eighty-four percent report saving a portion of their income each month (albeit not for retirement), and 57% say they have a budget that they stick to.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Kolluri noted 52% of Gen Z reported putting savings into savings accounts because they value the liquidity that supports current financial freedom.
“They do not equate saving for retirement as helping to ensure their financial freedom later in life…and ‘freedom’ is a concept that is very important to Gen Z,” he said. “They want flexibility and access to savings if and as they want.”
LONDON — Cybersecurity firm Wiz is seeking to hit $1 billion of annual recurring revenues next year, the company’s billionaire co-founder Roy Reznik told CNBC, adding that the firm will go public “when the stars align.”
Wiz makes software that connects to cloud storage providers like Amazon Web Services or Microsoft Azure and scans for everything it stores in the cloud, helping organizations identify and remove risks in their cloud environments. It was founded by four Israeli friends while they served in 8200, the intelligence unit of Israel’s army, and most of Wiz’s engineering personnel are still based in Tel Aviv, Israel.
Earlier this year, the company rejected a $23-billion acquisition bid from Google, which would have marked the tech giant’s largest-ever takeover. At the time, Wiz CEO Assaf Rappaport said the startup was “flattered” by the offer, but would remain an independent company and aim to list instead.
Speaking with CNBC at Wiz’s new office space in London, Reznik said that the company has received offers from “many people that want to get their hands on Wiz stock” — but that, while “very flattering,” the firm still thinks it can do it alone by going public.
“We’ve already broken a few records as a private company, and we believe we can also break a few more records as an independent public company as well,” Reznik said.
Four-year-old Wiz has raised $1.9 billion in venture capital to date, including $1 billion secured this year in a funding round led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital at a valuation of $12 billion.
In 2022, Wiz said it had reached $100 million in annual recurring revenue (ARR), up from just $1 million in 18 months. At the time, the startup said it was “the fastest software company to achieve this feat.”
Reznik, who is the vice president of research and development at Wiz, said the firm now hopes to double from the $500 million of ARR it achieved this year and hit $1 billion in ARR in 2025, which CEO Rappaport cited as a key condition before the company goes public.
UK expansion
Wiz has been expanding its presence internationally, with a particular focus on Europe, from where it sources 35% of its revenues. Last month, the firm opened its first European office in London.
“I think the talent here is amazing, and the ecosystem is amazing,” Reznik told CNBC. “We have always been very much involved in Europe — and specifically the U.K. — and I feel like it’s a natural evolvement of Wiz to double down even more here in London and the U.K.”
The U.K. represents a major growth opportunity when it comes to cybersecurity, Reznik said, adding that recent events like the cyberattack on National Health Service hospitals and an incident affecting Transport for London have “roof topped” the level of interest in the kinds of products Wiz offers.
“The cloud market is going to reach $1 trillion over the next next few years,” Reznik, who moved from Israel to the U.K. just three months ago, told CNBC. “This year is going to be around $700 million, while security is just 4% out of that, I would say. So that makes it a $30 billion market, which is huge.”
Speaking about the U.K. market, Reznik said: “We see a lot of interest here. Many of the largest banks and retailers, are Wiz customers. But we’re also seeing a huge potential for growth.”
Wiz’s customers include online retailer ASOS and digital bank Revolut as customers in the U.K.
Cryptocurrency CPAs race to prepare clients for end of universal wallet accounting from IRS rule change
Why parents will pay $500,000 for Ivy League admissions consulting
Tax Strategy: Tax assistance for natural disasters
Are American progressives making themselves sad?
U.S. Beneficial Ownership Information Registry Now Accepting Reports
CPA licensure program off to ‘promising’ start
-
Personal Finance1 week agoInvestors face delays moving certain assets from TreasuryDirect
-
Stock News1 week agoBeleaguered Stellantis ousts CFO, other top execs in bid to ‘redouble’ its focus
-
Economics1 week agoInflation rate at 2.4%, topping expectations
-
Economics1 week agoThe Democrats will struggle to retain the Senate
-
Economics1 week agoHurricane Milton inundates Florida
-
Economics1 week agoProducer price index September 2024:
-
Personal Finance1 week agoOzempic drives up health-care costs, whether you can get it or not
-
Finance1 week agoWells Fargo WFC Q3 2024 earnings