China In-Focus — Asian giant’s April forex reserves fall; US, Chinese regulators in talks for audit deal; Tesla targets pre-lockdown output in Shanghai

BEIJING: China’s foreign exchange reserves fell by $68 billion in April, the biggest drop in five and half years, official data showed on Saturday, as the dollar climbed while foreign investors dumped Chinese stocks amid worries about the slowing economy.

The country’s foreign exchange reserves — the world’s largest — fell to $3.12 trillion last month from $3.18 trillion in March, the biggest monthly drop since November 2016.

Analysts polled by Reuters had expected the reserves to fall to $3.13 trillion in April.

The State Administration of Foreign Exchange said in a statement that the 2 percent drop in April reserves from March mainly reflected the valuation effect as the dollar gained against other major currencies and changes in global asset prices.

“In April 2022, China’s cross-border funds generally continued the trend of net inflows, and the supply and demand in the domestic foreign exchange market remained basically balanced,” the SAFE said.

The yuan fell 4 percent against the dollar in April, while the dollar rose 5 percent in April against a basket of other major currencies.

Overseas investors extended their selling of Chinese shares into April on mounting worries about the impact of prolonged COVID-19 lockdowns and the fallout of the Ukraine-Russia war.

China’s foreign exchange reserves dropped $130 billion in the first four months, the official data showed. They had climbed to $33.6 billion in 2021.

China held 62.64 million fine troy ounces of gold at the end of April, unchanged a month earlier. The value of China’s gold reserves fell to $119.73 billion at the end of April from $121.66 billion at the end of March.

US, Chinese regulators in talks for audit deal

The standoff, if not resolved, could see Chinese firms kicked off New York bourses. (Shutterstock)

The US and Chinese regulatory officials are in talks to settle a long-running dispute over the auditing compliance of US-listed Chinese firms, three people briefed on the matter told Reuters.

The standoff, if not resolved, could see Chinese firms kicked off New York bourses.

The US Public Company Accounting Oversight Board, also known as PCAOB denied an earlier Reuters report that said a team from the agency had arrived in Beijing for talks.

This week the US Securities and Exchange Commission added over 80 firms, including e-commerce giant and China Petroleum & Chemical Corp. to the list of companies facing possible expulsion.

The talks between officials from the PCAOB and their counterparts at the China Securities Regulatory Commission can be described as “late-stage” after China made concessions in recent months, the people said.

But a PCAOB spokesperson said, “Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017.”

He said the board continues to engage with the Chinese authorities but “speculation about a final agreement remains premature.” As a result, the PCAOB is planning “for various scenarios.”

Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.

But in a key concession, Chinese regulators last month proposed revising confidentiality rules for offshore listings and scrapping requirements that on-site inspections of overseas-listed Chinese firms be conducted mainly by domestic regulators.

Sources told Reuters last month that a preliminary framework for audit supervision cooperation between the two countries has been formed.

The spat over audit oversight of New York-listed Chinese companies, simmering for more than a decade, came to a head in December when the SEC finalized rules to delist Chinese companies under the Holding Foreign Companies Accountable Act. It said there were 273 companies at risk but did not name them.

As of Friday, the PCAOB has identified 128 Chinese firms as at risk of being delisted.

The issue has been a major factor dragging on American depositary receipts issued by Chinese firms, with the Nasdaq Golden Dragon China Index tumbling 57 percent over the past 12 months.

Goldman Sachs estimated in March that US institutional investors held around $200 billion worth of Chinese ADRs.

Tesla targets pre-lockdown output in Shanghai by mid-May

This will bring weekly output to 16,900 vehicles based on Tesla’s established work week at the facility. (Shutterstock)

Tesla Inc. is aiming to increased output at its Shanghai plant to 2,600 cars a day from May 16, it said in an internal memo seen by Reuters, as it seeks to restore production to levels before the city was locked down to control COVID-19.

Tesla, which is now only running one shift, plans to add more at its Shanghai plant from May 16 to achieve the goal, the memo reviewed by Reuters showed.

That would bring weekly output to 16,900 vehicles based on Tesla’s established work week at the facility, according to Reuters calculations.

It would also represent a return to the production levels at the plant before Shanghai’s lockdown in late March forced the company to suspend work there.

Tesla declined to provide immediate comment.

Before the lockdown, Tesla had run three shifts at the Shanghai plant. The factory, which makes Tesla’s Model 3 and Model Y, reopened on April 19 after a 22-day closure, its longest since the site opened in late 2019.

The Shanghai lockdown has also been challenging for Tesla and other manufacturers because of the complication of getting parts from suppliers.

(With inputs from Reuters)


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