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China’s economic downturn – Industry roundup: 15 August

China's economy takes a downturn due to pandemic outbreaks and fragile property market

Beijing’s zero-pandemic policy and the real estate crisis caused China's economy to slow down unexpectedly in July 2022. To boost demand, the central bank shocked the markets by lowering key lending rates.

Data from the National Bureau of Statistics (NBS) revealed that the industrial output increased by 3.8% compared to a year earlier in July, which was a slight decrease from the 3.9% growth in June. Retail sales reportedly rose 2.7% year on year, falling short of analysts' forecast of 5% growth and falling short of the 3.1% growth seen in June.

According to reports, China, as the world's second-largest economy, narrowly avoided a recession in the second quarter, hampered by the closure of Shanghai's commercial hub, an intensifying decline in the property market, and persistently low consumer spending. However, many manufacturing centres and tourist destinations imposed lockdown measures in July following the discovery of a new variant. NBS further stated, “the risk of stagflation in the global economy is rising, and the foundation for domestic economic recovery is not yet solid.”

Additionally, property investment fell 12.3% in July, while new home sales fell 28.9%. Reports say the economy is expected to miss its official growth target of 5.5% this year.

The labour market reportedly remains precarious. Reports show that the nationwide survey-based unemployment rate fell slightly in July to 5.4% from 5.5% in June, but youth unemployment remained high, reaching a record 19.9% in July. To boost growth, the central bank unexpectedly reduced interest rates on key lending facilities for the second time this year. New yuan loans fell more than expected in July, as businesses and consumers remained wary of taking on debt, according to data recently released. Wang Jun, Economist, Zhongyuan Bank, expects that the government will concentrate on implementing existing policies rather than deploying new stimulus measures.

Jun further added that China is experiencing a typical liquidity crisis where credit may be easily attainable but where companies and consumers are wary of taking on more debt, with some even paying their debts in advance. Jun expects this may signal the beginning of a recession.

Reports indicate that fixed asset investments, which Beijing expected to grow as exports slowed in the second half of 2022, increased 5.7% year on year in the first seven months of 2022, below the forecasted 6.2% increase and down from a 6.1% increase in January-June.

ANZ New Zealand to migrate to the FIS Modern Banking Platform

ANZ Bank New Zealand Ltd has chosen FIS, a US-based financial technology firm, to modernize its traditional banking capabilities. This will make ANZ New Zealand the first bank outside of the United States to use FIS' Modern Banking Platform, which is hosted on Microsoft Azure to enable streamlined digital banking services through its cloud-native platform. Additionally, the platform is said to provide extensive data security measures as well as leveraging Azure's newest technologies in cloud security, monitoring and reliability.

According to the Cloud Security Alliance, 91% of financial institutions are currently using or plan to use cloud services. However, traditional brick-and-mortar banks have been sluggish to migrate the operational processes and conventional functionalities to the cloud.

The FIS Modern Banking Platform with its cloud-enabled and modular system built with API-first functionality claims to provide financial institutions with complete control over their users’ interactions. Additionally, the plug-and-play elements of the system, according to reports, enable financial institutions to quickly develop the retail and commercial capabilities required for today's innovations.

Andrew Beatty, Head of Enterprise Banking, FIS, expects banks to move quickly to market and become more versatile due to cloud-based core banking. Beatty further commented that ANZ New Zealand may become a trendsetter to help accelerate digital transformation through the cloud. ANZ New Zealand's Chief Information Officer, Mike Bullock, stated that their current core banking system is very comprehensive and updated regularly, but, like most systems used by financial institutions worldwide, it is based on technology developed decades back. After recently integrating with Azure, FIS' Modern Banking Platform has been made accessible globally in the United Kingdom, Thailand and New Zealand.

LianLian Global launches e-commerce financing to UK merchants

LianLian, an international provider of cross-border payment services, has launched its cross-border digital payments platform to the United Kingdom, providing more assistance to clients seeking finance. The LianLian Global cross-border digital payments platform was created to give the UK’s e-commerce businesses that trade with foreign countries the ability to send and receive payments quickly in markets like China and the US.

The cross-border digital payment platform, which made its debut in the US at the end of the second quarter 2022, is said to be available through a number of online markets, including Allegro, Amazon, Fruugo, Google Shopping Actions, Rakuten, Shopify and Walmart. In addition to receiving funds from marketplaces, paying suppliers and managing foreign exchange (FX) risk, UK e-commerce businesses can expect to access up to £10 million in financing to scale their business through LianLian Global, providing them the flexibility and equitable financing to finance their expansion plans before the height of the season for cross-border trade in the fourth quarter.

E-commerce entrepreneurs are said to need more capital to expand their businesses and enhance their inventory to maximize their share of growth. However, the Federation of Small Businesses reports that in Q1 2022, less than one in every ten (9%) small businesses applied for finance, the lowest proportion since SBI statistics have been kept. Reports also indicate that a record low has been reached by the proportion of responders (43%) who had their applications approved.

Through the LianLian cross-border platform, users have the option of initiating or receiving payments in US dollars, British pounds, euros, Polish zloty, Chinese yuan, and Hong Kong dollars. In addition, reports indicate that customers can utilize the platform without agreeing to an annual fee (unlike other well-known market players) or paying (in some nations, such as the UK, US and China) to open an account or receive payments. As an alternative, LianLian Global charges a fixed FX conversion fee of 0.5%. High volume clients may benefit from more competitive rates.

HSBC Singapore grants Atome Financial a debt facility worth US $100 million to expand deferred payments

Atome Financial announced a US $100 million debt facility with HSBC Singapore to support its Asia-wide flexible deferred payments business. The fintech firm, a division of Singapore-based tech unicorn Advance Intelligence Group, is comprised of two brands: Atome, a buy now pay later platform, and Kredit Pintar, an Indonesian digital lending platform.

The group reportedly raised over $400 million in a Series D financing round last September led by SoftBank Vision Fund 2, Warburg Pincus, Northstar and Singapore-based global investor EDBI, valuing the company at more than $2 billion.

HSBC is said to be the structuring bank, lender, facility and security agent in providing a flexible, scalable and pan-regional financing solution to support Atome Financial's business expansion.

Regina Lee, Head of Commercial Banking, HSBC Singapore, commented that the bank is able to connect clients to global opportunities and new markets through flexible financial arrangements in markets where HSBC also has a physical presence, and by leveraging their ability to execute multi-market and multi-currency deals.

Asia Pacific’s potential regional unicorns and growth drivers identified via KPMG and HSBC research

The Emerging Giants in Asia Pacific report, recently published and released by KPMG and HSBC, analyses new economy companies throughout the region with a high potential to influence the global business environment over the next ten years. A total of twelve markets were analysed according to reports, resulting in over 6,472 technology-focused start-ups with valuations up to US $500 million, and the ten top emerging giant businesses were recognized in each market. Additionally, the research lists 100 Leading Emerging Giants for the entire Asia Pacific area.

Asia Pacific's fully developed technology-focused ecosystems are reportedly creating billion-dollar companies rapidly. The International Monetary Fund (IMF) is forecasting that Asia Pacific's emerging markets and developing economies will grow 20% faster than the global average. Both fast growing emerging behemoths and innovative start-ups with unicorn goals are said to be the key indicators of the region's rising trend this year.

The survey identified almost 120 technology-related industry subsectors among enterprises such as fintech or software-as-a-service, with blockchain, smart cities, sustainability and ESG verticals being the most significant. Furthermore, the top emerging giants in six of the twelve markets studied had average valuations of $300 million or more.

The following are some of the report's key findings:

  • Data from the first quarter of 2022 indicates that funding levels in Asia Pacific for private investments are on track to surpass both 2020 and 2019. Deal values in Australia, Malaysia and South Korea have reportedly surpassed or nearly exceeded 2020 totals.
  • The Asia Pacific region is the globe’s largest fintech adopter and has reportedly seen a surge in financial services transformation over the last two years, with continual surge in fintech applications. Significant interest in cryptocurrencies has also resulted in an increase in the number of crypto financial services providers and blockchain adopters.
  • An increasing demand for green products and services across all markets is anticipated due to mounting pressure on businesses and investment strategies to incorporate ESG factors in order to meet climate targets, providing substantial potential for emerging behemoths.
  • Achieving technology talent and negotiating regulatory complexity are two of the biggest hurdles for emerging giants. Future growth will depend on developing efficient ESG and tax policies, utilizing government incentives, and establishing management procedures for distributed workforces.

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