China has been conducting mixed-ownership reforms among state-owned enterprises (SOEs), introducing investment from private companies in SOEs. A special fund for this purpose will be launched during the first half of 2018, according to cnstock.com. The shareholding structure of the fund consists of private and state-owned assets, with state-owned assets taking a large share of 40% to 50%. The total asset under management of this fund will be 950 billion yuan (approx. US$150 billion).
China Banking Regulatory Commission (CBRC) will issue guidance on insurance fraud this April. The guidance aims to bring standardized supervision to the industry and promote anti-fraud technologies. The responsibilities of insurance companies in this context will be clarified, according to CBRC. The guidance will also explain the obligation of regulators and interested institutions in regulating insurance fraud, according to CBRC.
Anbang Insurance Group is to be taken over by China Banking Regulatory Commission (CBRC) for one year and its former chairman Wu Xiaohui to be prosecuted for economic crimes. After being married to the granddaughter of China’s former leader, Deng Xiaoping, Wu founded Anbang Insurance in 2004. In June last year, Wu was reported as being detained. China has been tightening its supervision of the insurance industry since last year when CBRC’s former chairman Xiang Junbo was accused of "serious regulatory violations".
China’s Ministry of Agriculture has been investigating the safety of genetically modified crops. Beijing Dabeinong Technology Group and other six companies were reprimanded for violating industry rules. All seven companies failed to report problems in testing on genetically modified corn.
Beijing Dabeinong Technology Group Co is one of the two agricultural companies on the list for MSCI’s inclusion of the 222 A-share stocks. Founded in 1994, the company engages in the livestock science and technology, planting technology, and agricultural internet businesses. It produces animal feed products; animal health insurance products for the aquaculture industry; biotechnology products and solutions; and corn, rice, and other crop seeds.
China exported 2.2 million tonnes of scrap steel last year, compared to only around 1,000 tonnes in 2016, according to the China Iron and Steel Association. China phased out the production of 140 million tonnes of “ditiaogang” (substandard steel) last year as part of efforts to reduce excess capacity in the steel sector. As a result, scrap steel exports soared in 2017 as domestic demand was dampened. Most exports went to Southeast Asian nations such as Indonesia, Thailand and Vietnam. The biggest sources of exports were eastern and southern coastal provinces including Guangdong, Jiangsu, Zhejiang, Fujian and Hainan.
China’s local state‑owned assets investment platforms will play a more important role in 2018, according to Chinese state-owned media.
There are three channels of state-owned assets investment: through the Chinese government, through institutions authorized by the Chinese government, and through state-owned enterprises (SOEs). Local state‑owned assets investment platforms are the second channel. Through investment and financing, these platforms manage state-owned assets, aiming to inject power into this sector.
Since last year, China has been emphasizing the management of state-owned assets. Before that, the country used to focus more on the supervision of SOEs’ corporate governance.
The senior executives of major Chinese display screen producer BOE have been increasing their shareholding in the company’s stocks on Shenzhen Stock Exchange. Founded in April 1993, BOE Technology Group Co., Ltd. is a major Chinese supplier of the Internet of Things technologies, products, and services. In Q3 2017, the company ranked first in terms of the global market share for large-size screens. With an estimated net profit of 7.5 billion (US$1.18 billion) to 7.8 billion yuan in 2017, the company performed well last year. Senior executives of the company have increased their investments by 768,000 shares in total this month, accounting for a total investment of 4.26 million yuan.
Hong Kong’s stock market will be very active in 2018, with better connectivity with the international community including mainland China, according to HKEX chief executive Charles Li, speaking on the first trading day of the Chinese lunar Year of Dog. Investors have been worrying about the impact of US stock market and geopolitical issues, but the Hong Kong stock market will continue to develop its competitiveness in valuation, according to Li.
HKEX also launched the new Connect Hall yesterday, marking the transformation of the trading hall first opened in 1986. “It is a centrally-located venue at the heart of our financial hub that will help us to better serve our local community through investor education initiatives, exhibits and public seminars,” says Li.
Private capital investment recorded an increase of 2.8% y-o-y in 2017, reaching 3.815 billion yuan (approx. US$601 million), according to National Bureau of Statistics of China (NBS). The country’s private investment has been recovering since March last year, with the implementation of the regulations vitalizing private capital, according to NBS. The growth rate of private investment is catching up with the country’s total investment growth rate, according to NBS.
The Greater Bay Area, which connects and integrates the industries in Guangdong, Hong Kong and Macau, will make efforts to curb the offshore pollution. Guangdong has around 4,114 kilometers of coastline and much of that offshore area is heavily polluted, according to the Guangdong department of environmental protection. Environmental protection institutions will share environment data in the area, actively monitoring risks. According to the plans of the environmental protection authorities, new sewage outlets are banned in protected areas. Nature reserves and scenic areas of Guangdong and the discharge of pollutants will aim to be greatly reduced in heavily polluted areas.
China’s housing rental market was estimated at 1.3 trillion yuan (about $205 billion) in terms of revenue last year, according to Liu Zhifeng, head of China Real Estate Association. The country has been supporting rental market to cool down the housing price and stabilize the real estate sector. Chinese authorities now aim for a long-term mechanism for real estate regulation and a housing system that ensures supply through multiple sources including both housing purchases and rentals. Problems such as unbalanced supply and demand and insufficient regulation still exist, according to the Association, calling for detailed regulations on housing rental and improved standards for management of the sector.
China Insurance Regulatory Commission (CIRC) will tighten its supervision over innovations and reforms in insurance funds investment. So-called “innovations” aiming to elude regulators will be cracked down, according to the regulator. Insurance funds should be invested in projects serving the real economy and national strategy, the regulator emphasizes, encouraging insurance funds to invest in fixed income products.
Ministry of Commerce released the Foreign Direct Investment (FDI) data in January. According to MOFCOM, 5197 new foreign-invested companies were set up in January 2018, 158.6% up from the same period last year. The investments were majority in the technology sector and primarily from Singapore, Taiwan and the US.
JD.com announced that its subsidiary JD Logistics completed a $2.5 billion fund raising. Investors include Hillhouse Capital, Sequoia Capital, China Merchants Group, Tencent and China Life. The deal marks the largest single fund raising in China's logistics industry. Upon the completion of the fund raising, JD.com will still hold 81.4% of JD Logistics.
China Securities Regulatory Commission recently released Foxconn's IPO prospectus. Once the application is approved, Foxconn will become the largest global electronic devices manufacturer listed in China. Chinese analysts believe that the IPO will be approved within six months and Foxconn related stocks will benefit from the IPO.
According to Chinese media, the stock pledging business of Chinese securities companies have been declining recently due to the recent sell-off. To mitigate the potential risk, some Chinese securities companies started to raise the borrowing cost of stock pledging by 50 bps. Some Chinese analysts also attributed the rising borrowing cost of stock pledging to rising onshore financing cost.
Ministry of Finance issued a guidance on the subsidy of new energy vehicles. The guidance set higher standards and qualification of new energy vehicles eligible for subsidy. The guidance also specifies relevant regulatory bodies for setting up the regulatory framework for new energy vehicles. The new guidance was effective on Feb 12 of this year.
The National Development and Reform Commission issued an official list of sensitive industries in terms of outbound investment. In addition to industries which have been restricted including real estate and hotels, weapon equipment, water resource, the media are now listed as sensitive industries. In addition, investment in these companies require investors to disclose the ultimate controller. The new list will be effective on March 1st of this year.
Kweichow Moutai general manager Baofang Li expects the demand and supply disequilibrium will become the norm in China. The company is still looking for the best price of the wine to cater to the market needs. Li said that reaching the sales target of 90 billion yuan in 2018 is not a difficult task.
Although Chinese regulators have already banned bitcoin trading in China, Chinese media has still found bitcoins platforms which facilitate bitcoins trading. Users will be able to use Alipay to make payments. Currently, there are still at least 21 bitcoin platforms running in China, the servers of which are all overseas.
China plans to conduct its mixed-ownership reform in state-owned enterprises (SOEs) in seven areas including power, petroleum, natural gas, railway, aviation, telecommunication and defense. Central SOEs such as PetroChina, China North Industries Group Corporation, China Electronics Technology Group Corporation, China Minmetals, State Grid Corporation of China, Power Construction China, China Energy Investment, China Huadian Corporation, State Power Investment Corporation and Ansteel Group have announced their reform plans. The reform in power industry is a major focus in 2018, according to Chinese media.
China has seen robust growth in imports and exports of goods in January, while its trade surplus with the United States shrank amid rising China-US trade tensions, according to the country’s the General Administration of Customs (GAC). The country’s imports surged by 30.2% y-o-y to 1.19 trillion yuan last month. Its exports increased by 6% to 1.32 trillion yuan, according to the GAC. China’s robust export indicates steady global demand momentum, according to Chinese media.
China’s producer price index (PPI), which measures costs for goods at the factory gate, rose 4.3% y-o-y in January, according to the National Bureau of Statistics says today. The index is down from a growth of 4.9% recorded in December, according to the bureau.
China and the Netherlands yesterday agreed to carry out more mutually beneficial cooperation through joint implementation of the Belt and Road (B&R) Initiative in 2018. China’s President Xi Jinping suggested the two sides carry out more mutually beneficial cooperation through the Belt and Road construction. Dutch King Willem-Alexander said the Netherlands is willing to participate in the first China International Import Expo, which is to be held in Shanghai from Nov 5 to 10 this year.
China has formed an overarching framework for the country’s next round of opening-up, according to the country’s state-owned media. Banking, securities and insurance will be the key focus of the opening up of the country’s financial sector. The opening-up might exceed market expectations, according to the media. China’s stock market and the bond market will be further opened up. The mechanism of the Bond Connect will be improved; the discussion over Shanghai – London Connect will be carried forward.
Three Chinese telecom operators, namely China Mobile, China Unicom, and China Telecommunications Corporation, is planning and testing 5G projects. China Mobile plans to set up 500 stations for 5G in major cities such as Beijing, Shanghai, Shenzhen, etc. In addition to the operators, telecommunications equipment and system company, ZTE, launched a fundraising last week for researching and developing the 5G technology. Local government such as Beijing, plan to advance their smart city construction, and are testing on 5G technologies.
China has been promoting the housing rental industry recently. The country's National Development and Reform Commission (NDRC) has recently announced that it will support professional and institutional companies in the housing rental industry. Long-term housing rental loans will be encouraged, according to NDRC. Chinese banks, including Bank of China, China Construction Bank and Industrial and Commercial Bank of China, have been issuing housing rental loans or providing relevant services.
Some of the companies listed in A-share market have been giving irrational reasons in their statement for their declining performance, according to China Securities Regulatory Commission (CSRC). The regulator says they will follow up on such practice to protect the investors. The supervision of China’s listed companies will be enhanced, according to the regulator.
National Internet Finance Association (NIFA) has signed a memorandum with a UK association, Innovate Finance, to enhance the cooperation between the two parties in financial innovations. The technology and resource of UK’s Internet finance sector will help Chinese companies going overseas, according to NIFA. The two parties will meet regularly, holding events and training programs.
Agricultural Development Bank of China (ADBC) plans to lend about 100 billion yuan ($15.9 billion) by 2020 to support the maritime economy. The financing will mainly go to modern fisheries, strategic and emerging maritime sectors such as maritime medicine and renewable energy, as well as infrastructure and public services, according to guidelines issued by the State Oceanic Administration and ADBC. This announcement came about 10 days after the country’s central bank and other government agencies decided to strengthen financial support for China’s maritime economy by increasing bank loans and diversifying financing channels.
China will crack down on the illegal practices in forex this year. State Administration of Foreign Exchange (SAFE) says it will pay particular attention to those illegal practices in the name of innovation. But legal innovation will continue to be supported, according to SAFE. The regulator will also enhance its cooperation with Ministry of Public Security in supervising the forex market.
China’s official new rules on asset management will be issued soon, according to a source talking to yicai.com, noting that it will be possibly issued before the annual plenary session of the National People's Congress (NPC) in March. A draft regulation on asset management was issued last year. The official regulation will be more rigorous, according to the source.
The Asian Infrastructure Investment Bank (AIIB) will enhance cooperation with Hong Kong in boosting the Belt and Road (B&R) Initiative, said Jin Liqun, the bank’s president. “We are willing to strengthen cooperation with the Hong Kong officials, financial institutions, relevant agencies and enterprises to further promote the initiative, thus contributing to economic expansion in Asia, as well as the global economy,” said Jin. Key areas of cooperation will include commerce and trade, industrial development, science and technology, according to the bank.
China has announced that it has allowed direct trading between the renminbi and the Thai baht on its interbank foreign exchange market beginning today (February 5). The move aims to boost bilateral trade and investment, facilitate the use of the two currencies in trade and investment settlement, and reduce exchange costs for market players, said the China Foreign Exchange Trade System (CFETS) in a statement. Previously, trading between the yuan and the baht was only allowed in regional interbank markets.
Shanghai International Group, together with three former executives from Credit Suisse, have set up a European buyout fund on February 2. The fund will be managed by an equity investment management company in Shanghai (上海美丽境界股权投资管理有限公司). The fund plans to raise 3 billion yuan in the first tranche, investing in medium size in Europe, especially those can serve the manufacturing upgrading of China. The second tranche (3 billion yuan) of the fund will be launched during the second half of this year.
Since LeEco's stock resumed trading in January, its stock price has been dropping by 10%; reaching the daily price drop limit for eight consecutive days. According to Chinese media, the management of LeEco has been going through the relevant bad debt. The significant price drop raised concerns over the switch of control of LeEco, as the founder Yueting Jia's holdings in the company can be liquidated as a result of margin cut.
A public note from China State Shipbuilding Corporation (CSSC) draws market attention towards the possible merger of CSSC and China Shipbuilding Industry Corporation. According to CSSC, it is expecting to receive an approval letter from State Asset Supervision and Administration Commission in February. CSSC has seen profit decline in 2016 and is likely to see a further decline in its 2017 financial report.
China National Nuclear Power Co has merged with China Nuclear Engineering Group Co., marking the third restricting project since China started its central state-owned enterprise (SOE) reforms. This is also the first central SOE to reform in 2018. The number of central SOEs under the control of State-owned Assets Supervision and Administration Commission of the State Council (SASAC) has been reduced to 97 so far. Chinese regulators have disclosed the third batch of pilot projects in the SOE reforms, including 10 central SOEs and 21 SOEs, whose reform plans are under discussion.
China Development Bank (CDB) will implement a special purpose loan of 250 billion yuan this year, serving the construction along the Belt and Road (B&R) Initiative, according to Zheng Zhijie, Vice Chairman and President of CDB. In addition, CDB has signed a memorandum with Standard Chartered, promoting the cooperation of the two parties in the B&R projects. The two parties agreed to conduct a cooperation worth 10 billion yuan in the next five year. This will boost the internationalization of the renminbi, according to CDB.
Tencent has signed an agreement with Xi’an local governments in setting up a town for mass entrepreneurship and innovation in Xi’an. With a total investment of 16 billion yuan, the project will integrate functions including research and development, hatching, industrialization, training, attracting investment, etc. Cloud computing, Internet plus and other 9 industries will be the major focuses of the project which plans to attract more than 500 enterprises. At least 10 of these enterprises will be listed companies.
Some of the Chinese banks have stopped lending to property developers, according to a source speaking to cs.com.cn. Regulations in the real estate sector have been increasingly tightened, according to the source, noting that this sector is one the major focus of China’s regulation and control targets. “Trust companies have done a lot of real estate financing business last year. But now, companies are becoming more cautious,” says the source.
A Memorandum of Understanding was signed between China Railway Corporation (CR) and the Hong Kong Special Administrative Region (HKSAR) government, to arrange the key work during the trial operation of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail. Hong Kong section of the Rail will be in operation in the third quarter of this year, according to HKSAR Chief Executive Lam Cheng Yuet-ngor
An index tracking China’s entrepreneurial environment increased in recent years, indicating a more mature ecosystem for innovation, according to a report from Tsinghua University. The aggregate index for entrepreneurial environment climbed from 2.87 in 2010 to 3.1 during the survey period from 2016 to 2017.
Entrepreneurs surveyed reported significant improvements in financial and policy support as well as better social and cultural standards. Young entrepreneurs aged 18 to 34 were the most active innovators, accounting for 44.4 percent of the total.
“China’s financial system is seriously distorted,” says Lou Jiwei, chair of the National Council for Social Security Fund (NSSF). The possibility of a financial systematic risk breaking out in China is very high, according to Lou. China’s financial market is complex, with interbank financing, cash pooling, universal life insurance products, P2P loans, and payday loan adding to the risk of the market, according to Lou.
China’s annual plenary session of the National People's Congress (NPC) will start on March 5. Held in Beijing, the member of the NPC will discuss and decide framework policies of China and elect the officials of state institutions.
The Agricultural Development Bank of China (ADBC), one of the country’s three policy lenders has offered loans of over 859 billion yuan last year for agricultural and rural infrastructure development, according to a recent statement by the bank.
The loans covered major fields in rural infrastructure sector including shantytown transformation, water conservancy, and road and environmental protection projects. Housing renovation in the rural area took about half of the overall lending, with a total loan of 427.4 billion yuan.
Listed companies in China reported rapid profit growth in 2017 as the country’s supply-side structural reform began to bear results, according to state-owned Xinhua News Agency. So far, over half of the listed companies on the country’s two major exchanges have reported their 2017 performance, and nearly 70% of them saw profit gains, according to Shanghai Securities News. Most companies in traditional sectors such as coal and steel showed strong growth on the back of the country’s economic restructuring and business environment improvement, according to Xinhua, noting that 19 out of 20 companies in the coal sector saw profit growth.
Ministry of Finance (MOF) has recently established a fund for the development of the agricultural industry with a proposed 50 billion yuan in asset. MOF has already invested 8 billion yuan in the fund. The fund will attract private capital, according to the regulator.
People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission and State Oceanic Administration have jointly issued a guidance to boost the financial service in the marine economy. Qualified companies in the marine related sector will be encouraged to list on the main board; banks are encouraged to set up financial departments serving the marine economy; the insurance funds are welcomed to invest marine economy related projects.
The regulators will enhance the financial services in the marine economy, guiding the sector to form a developing mode of quality oriented efficiency.
The National Development and Reform Commission (NDRC), People's Bank of China and Ministry of Finance have jointly issued a notice on banks’ debt-to-equity swap. Qualified institutions are allowed to set up private equity funds to marketize the debt-to-equity swap; listed companies or unlisted public companies are allowed to issue equity financing tools to marketize the debt-to-equity swap, according to the notice. Relevant innovations are also encouraged, according to the notice.
Hong Kong Exchanges and Clearing (HKEx) hopes to implement the London-Hong Kong stock connect next year, according to Charles Li chief executive of HKEx Group. Plans for the stock connect started in 2015 but was put on hold in 2016 due to uncertainties around Brexit. According to Li, the discussions will hope be restart after March 2019.
China’s Ministry of Commerce, People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission have jointly issued a draft regulation to supervise the overseas investment of Chinese companies. A much-tightened supervision over the overseas investment will be deployed out. Regulators will focus on investment over 300 million yuan, according to the regulation.
Guangdong plans to implement several projects relating to the Greater Bay Area. The Guangdong government is seeking to set up free trading ports. Several projects of transportation construction will be deployed this year.
China Banking Regulatory Commission (CBRC) emphasizes again that it will further crackdown on illegal practices in the financial sector. Corporate governance and shareholding will be one of the regulator’s focus points. “Some of the shareholders are establishing illegal financial groups and turning banks into their ATM machines by violating the regulations,” says Guo Shuqing, chairman of CBRC. The regulator will supervise the market with stricter penalties, protecting consumers’ rights. The financial sector will be boosted in order to provide better services to the real economy.
China’s financial and manufacturing sectors will be further opened up, according to Liu He, general office director of the Central Leading Group for Financial and Economic Affairs, speaking on the World Economic Forum held in Switzerland. China welcomes enterprises from Switzerland to invest in China, according to Liu. China also seeks deeper cooperation with Switzerland in customs, cross-border e-commerce, and financial sectors.
China’s State Council has issued a proposal to enhance the collaboration between the e-commerce and logistics sectors. The country will improve the infrastructure of the two sectors, according to the proposal. Technologies in big data, cloud computing and robotization will be more widely used in the two sectors, according to the proposal, noting that information sharing will be encouraged.
China’s private sector has been significant to the country’s economic growth, according to China’s President Xi Jinping. There are 65.79 million individually-owned businesses and more than 27.26 million private enterprises which employ 341 million people as of the end of 2017. The private sector is expected to make a greater contribution to the country’s economy with new regulations expected to come out soon. The business environment of this sector will be improved with better administration services and lower fees and taxes, according to Chinese Premier Li Keqiang.
China’s central government’s annual “No. 1 Document” will focus on the revitalization of the rural regions and supply-side reform in the agriculture industry, according to a source talking to cnstock.com. Green agricultural products are highlighted, according to the source. An improved financial system serving the rural regions and agriculture industry will be deployed, and relevant financial innovations are encouraged, according to Chinese regulators previously.
China will advance the mixed-ownership reforms in the traditional industrial zone in north-eastern parts of the country, according to National Development and Reform Commission (NDRC). Pilot reform projects will be rolled out in this region and the investment environment will be improved, according to the regulator. The investment environment rankings of major cities in this region range from the 20th to 30th among all the cities in China, according to Chinese media.
Chinese regulators are discussing a development strategy for the intelligent car industry, according to National Development and Reform Commission (NDRC). Interested institutions and enterprises are encouraged to innovate and cooperate in this field. An innovation platform for the intelligent car industry will be established, according to NDRC, noting that enterprises from automotive, IT, Internet, and financial sectors should collaborate to ensure the implementation of the intelligent car development strategy.
Inner Mongolia autonomous region will set up a fund of 30 billion yuan for upgrading state-owned enterprises (SOEs), according to Xinhua News Agency. The fund is invested in by the government of Inner Mongolia and four other institutions, according to the local office of State-owned Assets Supervision and Administration Commission of the State Council.
The Shenzhen Stock Exchange will continue to reform in the Growth Enterprise Market. Qualified innovative and start-up companies are encouraged to do Initial Public Offerings (IPOs), according to Shenzhen Stock Exchange. Companies with businesses that comply with China’s development strategy will be supported. Fintech innovation will be one the major focus, according to the bourse.
The total value of the logistics industry in China is predicted to reach 280 trillion yuan in 2018, an increase of 6.5% y-o-y, according to a report by Chinese Academy of Sciences. The total revenue of the logistics industry is expected to exceed 9 trillion yuan in 2018, according to the report. Investments in transportation, warehousing and postal industry will maintain a growth of 10% in 2018, according to the report. The development in the high-end manufacturing industry and the consumption boom is driving the demand for logistics services, according to report.
China’s economy has grown by 6.9% in 2017, according to the country’s State Council. This marks the first time during the past seven years that the country’s economic growth rate has picked up, according to Xinhua News Agency. The country’s GDP totaled 82.7 trillion yuan (about $13 trillion) in 2017.
China will soon shift its SOE reform plan to the defense industry, according to Chinese media. Major Chinese regulators including the National Development and Reform Commission (NDRC), Ministry of Education and Ministry of Science and Technology have jointly issued a notice to advance the mixed-ownership reforms in the country’s defense industry. The notice also encourages the cooperation and innovation in integrating the state-owned defense companies and private enterprises. Defense companies should share their advanced technology, and private companies should share their corporate governance experience, according to the notice.
SAFE (State Administration of Foreign Exchange) will encourage enterprises to improve their risk management systems in 2018, promoting the reforms in exchange rate formation mechanism. SAFE will also diversify the products and participants of the forex market and expand the transaction scope. The regulator will further open up the market, improving the service and competitiveness of China’s forex market.
The Chinese government will continue to reduce the subsidies of new cars this year, according to a source talking to China Daily. The plan of cutting new energy car subsidies was raised last year. It was not until recently that interested parties including the Ministry of Finance and Ministry of Industry and Information Technology reached an agreement, according to the source. The subsidies is expected to be eliminated since 2020, the source adds.
National Development and Reform Commission (NDRC) encourages central state-owned enterprises (SOEs) to increase its capital strength by equity financing and debt-to-equity swap. In order to deleverage and control the risks, NDRC has set up warning lines of enterprises’ debt-to-assets ratio. The debt-to-asset ratio of industrial enterprises should not exceed 70%, non-industrial enterprise 75% and research and development enterprises 65%.
China will continue to curb the real estate bubbles, according to Guo Shuqing, chairman of China Banking Regulatory Commission (CBRC). The regulators’ attitude towards real estate is certain, according to Ministry of Housing and Urban-Rural Development, emphasizing again that houses are not for speculation. The regulators aim to form a virtuous cycle among real economy, financial sector and real estate sector, according to Guo.
China’s Liaoning Province and Shandong Province are planning to establish free trade port, according to Economic Information Daily. The local government of Liaoning has already submitted the application of setting up a free trade port in its coastal city of Dalian; Shandong is planning to locate the port at Qingdao, according to the media. China has been encouraging setting up free trade ports since last year. Applications from Shanghai, Zhejiang, Liaoning, Shandong, Fujian and Guangdong are being processed.
Hong Kong Exchanges and Clearing (HKEx) hopes to launch derivative products of A-shares this year, according to chief executive Charles Li Xiaojia. “The trading volume through the stock connects has increased from 2016’s HK $68 billion to last year’s HK $88 billion. With A shares to be included in MSCI in the middle of this year, 2018 is a good time for HKEx to launch A-share derivatives,” says Li.
Qualified companies operating in regions with high poverty will enjoy favorable regulations when doing initial public offerings (IPOs), according to a guidance issued by People's Bank of China (PBoC) and interested departments. Faster processing of IPO applications from these particular companies are expected. This will boost the financial institutions' lending to the poverty regions, according to Chinese media, noting that China aims to establish a credit system covering all the poverty regions by 2020.
China’s State Grid plans to establish an electric vehicle network of 120,000 public charging piles for electric cars by 2020. The network will cover the Beijing, Tianjin, Hebei, Shandong and Yangtze River Delta cities, together with major cities in other regions, says State Grid Corporation of China. China has the world’s largest new energy auto industry with an estimated sales volume of 577,000 units last year. “Starting 2020, electric cars are likely to go beyond their nature as vehicles, and become a basic unit of the energy system,” says Jiang Bing, chairman of the company.
China’s largest LCD glass substrates producer, Dongxu Optoelectronic Technology has signed a cooperation agreements with institutions from Japan, Thailand, Malaysia, Indonesia and Mongolia in constructing smart cities. Dongxu Optoelectronic Technology will initiate a managing platform based on the Internet of things (IoT) for smart cities. The platform will include technologies such as big data, cloud computing, graphene and new energy car.
Founded in 1992, Dongxu Optoelectronic Technology Co., Ltd. is the world’s fourth largest LCD glass substrates producer. The company also taps into new sectors including new energy car and technologies relating to smart city construction.
China’s Silicon Valley, Beijing’s Zhongguancun Science Park, has made 4.2 trillion yuan of revenue during the first 11 months of 2017, recording a growth of 14.2% y-o-y, according to Beijing Municipal Bureau of Statistics. This is driven by the growth of companies in areas including electronics and information, bioengineering and medicine, advanced manufacturing, environmental protection, and energy-saving. The research and development investment of Zhongguancun grew nearly 18% y-o-y during the same period, reaching 144 billion yuan.
China will be releasing its 4Q and 2017 full year GDP this week. The country’s Premier Li Keqiang recently disclosed that economic performance has surpassed expectations with 6.9% growth in 2017. According to Chinese Academy of Social Sciences, the expectation of GDP growth for this year will be 6.7%. But early this month, the country’s Inner Mongolia Autonomous Region has announced that it has inflated its industrial data by 40% and fiscal revenue by 26% in 2016. Tianjin Binhai New Area, a special economic zone, has also revised its 2016 GDP down 33.4% to 665.4 billion yuan. They are not the first Chinese local governments that admit cooking its GDP data. In January 2017, Liaoning Province admitted that it inflated its GDP figures during 2011 to 2014.
The past year has seen a 14.2% increase in China’s total export and import volume, putting an end to the consecutive decrease during the previous two years, according to China Customs. One of the major drivers is the country’s increasing export and import volume with the countries along the Belt and Road Initiative, according to China Customs. However, the double-digit growth momentum will be difficult to maintain in 2018 according to China Customs.
National Development and Reform Commission (NDRC) says that some of the Chinese central state-owned enterprises (SOEs) are violating rules by making short-term loans and providing external guarantees. Some of central SOEs’ subsidiaries are carrying out illegal trade financing, according to NDRC. The regulator also points out that some of the SOEs fail to integrate its subsidiaries, causing the overlap of management and horizontal competition. NDRC will strengthen the supervision of SOEs with a focus on the issues mentioned.
SANY Heavy Industry has announced that the company's largest shareholder, SANY Group, and its persons acting in concert, have reduced 75 million shares in the secondary market, accounting for a reduction of 5.24%. This has not impact the valuation of SANY Heavy Industry’s stock too much, according to Chinese media.
Sany Heavy Industry is a Chinese multinational heavy machinery manufacturing company headquartered in Changsha, Hunan Province. Founded in 1989, SANY has now become the sixth-largest heavy equipment manufacturer in the world.
Chinese electronics and software company Xiaomi Inc. has been talking to investment banks in Hong Kong and will soon announce its underwriters for listing in Hong Kong, according to a source talking to yicai.com. Headquartered in Beijing, Xiaomi designs, develops, and sells smartphones, mobile apps, laptops and related consumer electronics. The company will be among the first batch of companies that will go public under Hong Kong’s weighted voting rights structure, according to yicai.com. In 2017, the number of the newly listed companies on Hong Kong Stock Exchange was 174, up 38% compared to 126 in 2016.
China will establish a mechanism of industrial Internet by 2020, according to Ministry of Industry and Information Technology (MIIT). The mechanism will include about 10 multi-industry platforms supporting the digitalization, networking and intelligent production of Chinese enterprises. The mechanism will also support Chinese industrial enterprises to develop software applications.
Chinese AI leader iFlytek has announced its cooperation with China’s largest national home improvement and furniture retail platform Red Star Macalline. Robots with biometric recognition functions will be deployed to Red Star Macalline’s stores as shopping guides. Founded in 1999, iFlytek is a Chinese information technology company listed in Shenzhen. The company creates voice recognition software and other voice-based internet or mobile products covering education, communication, music, intelligent toys industries. China Mobile holds 12.9% of iFlytek’s shares as of end September 2017.
China is considering giving the ok to high-quality companies involved in the Belt and Road Initiative to raise funds through yuan-denominated initial public offerings (IPOs) in Hong Kong's stock market. This move would strengthen Hong Kong’s role as a renminbi offshore hub, according to Chinese media. The Chinese government plans to select certain companies and facilitate their fundraising in the offshore market, but the detailed timeline for the plan remains under discussion.
The number and the value of initial public offerings (IPOs) on China’s two bourses hit a record high in 2017. A total of 438 companies launched IPOs on the Shanghai and Shenzhen stock exchanges in 2017, up 93% from 2016, according to Chinese financial information services company Wind. The value of IPOs last year was 230 billion yuan, up 56% y-o-y.
Oriental Pearl Group has announced today that it will cooperate with China Unicom in areas including content, channel, hardware and service, promoting the “Entertainment plus” strategy. The two parties will innovate in areas such as home entertainment. The two parties will also cooperate in terms of capital and equity, jointly investing in new business and innovation projects.
Founded in 1992, Oriental Pearl Group is a cultural company engaged in touring, radio and TV transmission service, media investments, advertising, video game console manufacturing, software developing, and real estate investments. Based in Shanghai, the company is listed as one of the 50 pivotal large-scale enterprises by the Shanghai government.
China Insurance Regulatory Commission (CIRC) has recently drafted new rules regarding the cashing out of insurance policies. The new regulation allows pilot insurers to offer cashing out business. Policyholders needing emergency funds can sell their life insurance policies to investors through certain institutions. The draft regulation prohibits reselling the sold policies.
China has recently issued a new guidance on the mixed ownership reforms of the country’s state-owned enterprises. This year will be a breakout year for these reforms, according to Chinese media, noting that the coal industry will speed up its reforms.
Eleven coal related enterprises including China Shenhua, China Coal, China Guodian Corporation, SDIC, and China Poly are said to be active in these reforms this year, according to Chinese media.
Investment and consumption will be the two engines to drive China’s economic growth in 2018, according to a recent report by Economic Information Daily. Driven by the manufacturing and the primary sectors, fixed-asset investment is projected to grow at around 6.5% while consumption is expected to reach 10% this year boosted by increasing residential income, says the report.
People's Bank of China (PBoC) says recently that higher interest rates will help squeeze asset bubbles and restrain debt expansion. “There is room for an increase in interest rates in the short term as industrial product prices and enterprises’ profitability have improved since last year,” Ji Min, deputy head of the PBoC’s research bureau. Inflation and foreign exchange rates also have to be factored in before adjusting interest rates, Ji said.
China has recently established an open financial cooperation mechanism to help revitalize the traditional industrial zone in northeastern China which is also known as the rust belt. More than 40 financial institutions, including the China Development Bank and the State Development and Investment Corp, are involved in the newly set-up system. It aims to bridge government agencies, financial institutions and local governments and enterprises in northeast China to help boost the rust belt.
Wuliangye, the well-known Chinese liquor-producer in Sichuan province has become a shareholder of a carmaker. Push Group, a subsidiary of Wuliangye Group Co in Sichuan. The comapny has acquired a 0.5% stake in Cowin Auto, a brand of Chery Automobile. The acquisition was part of a deal package in which Chery sold a 51% stake for 2.49 billion yuan, according to Chery’s statement.
Founded in 1998, Wuliangye distributes its products mainly in the domestic market.
China Banking Regulatory Commission (CBRC) has issued new regulations on foreign banks’ admission into Chinese market. The new rules set a clear standard for foreign banks getting approvals from Chinese regulators. This move will help to further open up China’s financial market, says CBRC, noting that the new regulations simplify relevant administration processes.
Some Chinese banks are suspending their public-private partnership (PPP) funding projects, according to 21jingji.com. Many of the suspended projects are postponed to March of this year, according to the media. Chinese regulators have not made any official announcement to this.
China’s Insurance Regulatory Commission (CIRC) has issued new regulations to curb implicit public debts of Chinese local governments. Insurance companies are prohibited to promise explicit returns when setting up equity investment plans. The regulations also clarify that insurers are forbidden to participate in the shadow banking system.
Chinese pharmaceutical company Beijing Tongrentang Co., Ltd opens its first store in Switzerland. Located in Geneva, the new store offers traditional Chinese traditional treatments including acupuncture, cupping, and massage.
Founded in 1669, Beijing Tongrentang is a brand known for manufacturing and selling traditional Chinese medicine. Beijing Tongrentang Co., Ltd operates a hospital in Beijing. Headquartered in Beijing, the company operates about 130 stores in 26 countries and regions globally.
China’s banking system will go through a number of reforms in an effort to further open up. The change will focus on supply-side structural reforms, China Banking Regulatory Commission (CBRC) says during the annual Central Economic Work Conference which sets the economic policy tone for the coming year. The regulator also warns about possible risks in the sector including the debt risks of local governments and risks in the real estate sector.
China’s Belt and Road Initiative will roll out four major rail projects simultaneously in 2018, accounting for a total investment of US$40.27 billion (164 billion ringgit). These projects include the 50 billion to 60 billion ringgit Kuala Lumpur to Singapore high-speed rail (HSR), 55 billion ringgit East Coast Rail Line (ECRL), 40 billion ringgit Mass Rapid Transit 3 (Circle Line), and the 8.9 billion ringgit Gemas to Johor Baru electrified rail double tracking.
China Development Bank (CDB) has issued a specialized bond for the Belt and Road (B&R) initiatives. The bond is a five-year fixed rate bond worth US$ 350 million, listed on Hong Kong Stock Exchange. This is the first specialized bond for B&R issued by CDB. The money raised will be used to support projects along B&R, marking an innovative cooperation with Hong Kong’s financial market, according to Chinese media.
The government is likely to maintain a neutral monetary policy in 2018 and will not become more stringent than this year in order to stem a slide in economic growth, according to researchers of Chinese Academy of Social Sciences, a leading think tank advising the government. China needs to deepen its reforms in financial sectors, says Xu Zhong, Director General, Research Bureau of the People's Bank of China. “The financial security will be generated from reforms rather than maintenance,” says Xu.
The annual Central Economic Work Conference which sets the economic policy tone for the coming year has recently concluded. Key takeaways from the event include the maintenance the sustainable development of the financial and real estate sectors. Avoiding unexpected risks will be China’s economic policy priorities next year. These measures are seen as key objectives to safeguarding China’s economic stability, according to Chinese media.
Zhong De Securities, a joint venture securities company set up by Deutsche Bank and Shanxi Securities, has faced difficulties in their IPO business. Over the past two months, four IPOs sponsored by Zhong De Securities were rejected by the China Securities Regulatory Commission (CSRC). Since the new IPO review committee was appointed two months ago, the approval rate has been low. Only 47 out of 79 companies have received approval from the CSRC.
The Chinese ride hailing leader Didi successfully acquired a payment license in China through purchase of a payment company. Didi is now the only ride hailing company with a payments license. It is expected that apart from the traditional ride hailing business, Didi will enter the financial services market in the future.
According to Chinese media, the Asset Management Association of China (AMAC) will no longer disclose the money market fund size information and will not include the size of money market fund into asset management companies’ AUM. Market analysts believe that it shows authorities have started to emphasize the active management capability of Chinese asset management companies. Data from AMAC shows that the AUM of money market funds almost doubled in first ten months. It is likely that asset management companies with large money funds such as Tianhong AMC and ICBC credit Suisse will be largely affected.
Qingdao Haier plans to inject capital into one of its overseas subsidiaries, Haier US Appliance Solutions, Inc. Qingdao Haier indirectly holds 100% of shares in US Solutions. This percentage will be maintained after the injection.
Qingdao Haier a subsidiary of Haier Group, was established in 1989. It has a total asset of 131 billion yuan as of end 2016. Founded in 1984, Haier Group is the world’s leading brand of major household appliances.
The mixed-ownership reform of Chinese state-owned enterprises (SOEs) is speeding up, according to State-owned Assets Supervision and Administration Commission of the State Council (SASAC). Central SOEs’ reforms are all approved, says the regulator, noting that 87 central SOEs have set up boards of directors.
National Development and Reform Commission (NDRC) is to issue a code of conduct for state-owned enterprises making outbound investments. China has been tightening its control of outbound investment. The code is seen as one of the measures to protect the nation’s financial security, according to Chinese observers. Private enterprises are encouraged to invest overseas, but risks still exist, according to the NDRC, noting that a code of conduct for private companies regarding outbound investment will also be issued.
China will further tighten its supervision on insurance companies in order to reduce the risk in the sector, according to China Insurance Regulatory Commission (CIRC). Insurance companies will be rated from A to D by CIRC based on their ability to ensure the matching of maturity, cash flow and cost on both sides of their balance sheets. Companies with the rating of D which is the lowest will be banned from applying to launch new products within a certain period. Salaries of the top management of these firms will also be restricted.
China will set up funds totaling 50 billion yuan to invest in the Belt and Road (B&R) infrastructure and industrial projects in Southern China’s Guangxi region and ASEAN countries. The funds will be established by an investment arm of China Development Bank (CDB) and Guangxi Investment Group, according to the CDB. China Minsheng Bank estimates that infrastructure financing demand along the B&R will amount to US$10 trillion in the next five years.
China will set up a model area for sharing economy, according to National Development and Reform Commission (NDRC). The regulator has issued a new notice on this, noting that the area will focus on fields including innovative sharing and productivity sharing. Qualified industries will be supported, according to the notice.
Hong Kong has signed a new agreement with Beijing regarding the Belt and Road (B&R) Initiative. Mainland will support “relevant parties” to use Hong Kong as a financing platform for infrastructure construction along B&R; the green bond market in Hong Kong will be further boosted; Hong Kong’s position as the global renminbi offshore market will be strengthened, according to the agreement. Hong Kong and mainland will also further cooperate in areas including airports, ports, railways and roads, according to the agreement.
Hong Kong government today has revealed its plan for the next five years on upgrading Hong Kong into a smart city. Next year, Hong Kong will focus on developing a “fast payment system”. Virtual banks will also be introduced as a new financial service channel.
The People’s Bank of China will not shrink the balance sheet and nor will it increase the benchmark interest rates on deposits and loans, according to Sheng Songcheng, an adviser to the PBoC. “There is no such thing as shrinking balance sheet for China,” says Sheng, noting that China’s interest rate is now “very high”. Sheng thinks that China’s monetary policy should be steady. According to Chinese economists, the country will tighten its monetary policy next year while increasing policy flexibility to ensure sufficient credit supply.
China’s Internet giant Tencent has signed an agreement with the Zhuhai government in its cooperation with the Zhuhai Hengqin District. The two parties will seek to innovate in areas including smart cities, transportation and healthcare. They also plan to use technologies including AI, cloud computing, big data and mobile payment.
Tencent has confirmed that it would buy 5% of Yonghui Superstores’ shares. Tencent also plans to inject capital in Yonghui Yunchuang Technology, a subsidiary of Yonghui in supply chain. Tencent will hold a 15% stake in the company afterwards. Detailed plans are subject to further discussion between the two parties.
Founded in 1995, Yonghui Superstores operates a chain of supermarket stores in China. The largest shareholder of the company is The Dairy Farm Company.
China Banking Regulatory Commission (CBRC) says that the limit on foreign shareholdings of Chinese banks and asset management companies (AMC) will be loosened. The banking sector will be further opened up, according to CBRC. Foreign banks business in China will be expanded; the restrictions on foreign banks’ retail deposit business will be relaxed; foreign banks are encouraged to get evolved in the financial system, according to the regulator.
Alibaba Cloud, the cloud computing arm of Alibaba Group has recently launched a "regional economy brain" to help the government analyze the operation of enterprises through technologies including big data, cloud computing and AI. Jiangsu Suzhou's Gaoxin District is the first area that is implementing the project.
Under the guidance of the People's Bank of China, the country's national bankcard association, China UnionPay has launched a mobile payment application jointly with more than 30 commercial banks and payment platforms, in an effort to enhance its competitiveness against mobile payment providers such as Alibaba and Tencent.
China UnionPay's new mobile payment gateway, Cloud Quick Pass, will become the third-largest Chinese mobile payment platform, following Alipay of Alibaba and Tenpay of Tencent.
China’s top power distributor, State Grid, will seek market expansion in countries involved in the One Belt One Road Initiative (OBOR). The power investment demand along OBOR will reach $1.5 trillion in the next five years, according to State Grid’s chairman, highlighting the strong demand from the 1 billion people without access to electricity in Africa/South Asia and the need to upgrade facilities in Central and Eastern Europe and Western Asia.
Midea Group is planning an IPO for its subsidiary in the real estate business, Guangdong Midea Property Co. With a total asset of about 77.6 billion yuan as of end June this year, the property company plans to go public in Hong Kong. Founded in 1968, Midea Group is a Chinese electrical appliance manufacturer, headquartered in Foshan, Guangdong. Being one of the world’s largest appliance producers, the Group ranks No. 450 on the 2017 Fortune 500 list.
China is to hold its annual Central Economic Work Conference in the coming few weeks according to sources talking to Chinese media. The meeting will set the country’s GDP goal at around 6.5%, according to an officer at Chinese Academy of Social Sciences. The meeting will set policy priorities according to China’s economic status. The country is said to focus on economic liberalization and structural reforms, according to Chinese media.
China Insurance Regulatory Commission (CIRC) will revise the regulations on insurance fund management. In order to further control the liquidity risk, the new rules reduce the amount of liquidity support that an insurance company can apply for. The draft regulation is completed and CIRC is taking advice from the industry.
Suning Commerce Group has sold 5.5 million shares in Alibaba Group Holding, about a fifth of it’s holding in the internet giant, and 0.22% of Alibaba's total issued shares. Founded in 1990, Suning is one of the largest non-government retailers in China, headquartered in Nanjing, Jiangsu Province. The Shenzhen-listed Group’s net gain from this sale is expected to be about 3.25 billion yuan. Suning’s shares in Alibaba were reduced to 0.81% after the sale.
The online to offline model of Alibaba is applying to China Unicom's offline branches. As Alibaba and China Unicom deepened the collaboration in AI technology, the two conglomerate will open their first smart retail store based on AI, AR and big data. Popular products sold on Tmall will be available in the smart store, which will be opened as early as December 12, another shopping festival established by Alibaba.
Data from Wind shows that as of December 2017, 1088 listed companies have bought wealth management products (WMP), up from 778 companies in the same period last year. The total AUM of the WMP bought by listed companies have exceeded one trillion yuan, 47% up from same period in 2016. The large demand from listed companies shows that there were a lot of idle cash within listed companies.
The announcement of new investors in Yonghui Superstores has triggered strong investors' interest in its A-shares. According to Chinese media, inflows from the Shanghai-Hong Kong Stock connect into Yonghui Superstore was 18.3 million from mostly Chinese investors last Friday. Yonghui Superstores announced on December 8 that there will be new strategic investment into Yonghui's Super Species, a retail store brand under Yonghui Superstores. Founded in 1995, Yonghui Superstores operates a chain of supermarket stores in China. The largest shareholder of the company is The Dairy Farm Company.
China’s monetary policy will be further tightened, aiming to curb the soaring debt growth especially in state-owned enterprises and local governments, according to Li Yang, director of the National Institution for Finance and Development and a former member of the monetary policy committee of the People’s Bank of China. “China is wise and capable of tackling risks and challenges even if the financial sector enters into a phase of risk explosion, said Li.
The Chinese economy is likely to achieve higher than 7% growth next year, supported by a likely rebound in private investment that has remained sluggish for months, according to Li Daokui, economist and director of the Center for China in the World Economy at Tsinghua University. UBS predicts that China’s economy will grow by 6.4% next year. ICBC (Asia) sees a 6.9% growth for China’s GDP next year.
Tencent is said to invest heavily in Yonghui Superstores, which is listed on the Shanghai Stock Exchange, according to finance.sina.com.cn. The share price of Yonghui Superstore hit its stock price limit today as a result of the announcement. Founded in 1995, Yonghui Superstores operates a chain of supermarket stores in China. The largest shareholder of the company is The Dairy Farm Company.
China’s information consumption will reach 6 trillion yuan by 2020, inducing relevant productions to increase to 15 trillion yuan, according to an officer of the country’s Ministry of Industry and Information Technology (MIIT). The information economy representing by e-commerce has become the new driver for economic growth.
Senior executives of multinational companies attending the Fortune Global Forum in Guangzhou are optimistic regarding China’s rising role as a strong advocate for globalization and innovation in international trade. This year’s Fortune Global Forum is held in Guangzhou from December 6 to 8. China’s President Xi Jinping’s congratulatory letter to the Forum indicates China will adhere to its reform and opening up policies to promote globalization in the years to come.
China’s state-owned investment fund, the Silk Road Fund has signed up with 17 projects so far, promising to invest about US$7 billion, according to a senior officer at the Fund talking to China News Service. The projects supported by the Fund include a total investment of US$80 billion. The officer says that the Fund’s investment emphases on the real economy. The fund will eye on the projects that can support the host country’s real economy and improve its sustainable development capacity.
China will continue to regulate financial markets and crack down on illegal financial activities, says China Banking Regulatory Commission (CBRC), noting that market irregularities and imprudent operations will receive tougher punishment. “Despite progress in the ongoing financial scrutiny, the market is still prone to risks both currently and for the future period, which should not be taken lightly,” said Wang Zhaoxing, vice chairman of CBRC.
China Banking Regulatory Commission (CBRC) has issued a draft regulation on the governing of the liquidity risk of Chinese commercial banks. The new rules have three quantitative indexes to measure the liquidity risks, providing a more efficient method of risk management. The regulation also improves the supervision system of liquidity risks, optimizing some of the measuring methods.
China’s Internet finance (ITFIN) alliance for small and medium banks launches today. The alliance is initiated by Ping An Insurance (Group) Company of China and several small and medium banks in China. With 230 members onboard, the alliance now has a total asset of more than 35 trillion yuan.
China’s State Council has issued a circular stating that the country will promote integration between military and civilian sectors in the defense technology industry. Private capital will be allowed to participate in the shareholding reform of defense industry companies. Qualified defense industry enterprises are encouraged to go public or invest in public companies. Defense industry enterprises should deepen its cooperation with civilian companies, transfer more military technologies into civilian use. China will implement a batch of major projects for military-civil integration, says the State Council.
China Insurance Regulatory Commission (CIRC) encourages foreign capital to participate in China’s liability insurance, health insurance, and pension insurance market. This will help to improve the professionalism of China’s insurance industry. CIRC also calls for collaboration with Central and Eastern European countries in innovation regarding coinsurance and reinsurance, providing protection against the risks in the "Belt and Road" construction.
National Development and Reform Commission (NDRC) will innovate in the supervision mechanism of the corporate bond market, deepening the reforms in this context. The regulator will strengthen the guidance function of corporate bonds and manage the risks in this market. The credit system for bond market will also be strengthened, according to the regulator.
Oriental Pearl Group has joined an alliance for AI and big data. Microsoft, Foxconn and Chinese internet giant Baidu, Alibaba and Tencent, are also members of the alliance. Founded in 1992, Oriental Pearl Group engages in the culture and entertainment, media, advertising, property, and investment businesses primarily in Shanghai. With a total asset of 35 billion as of Q3 2017, the Group’s 45.04 % of shares are held by SMG. China Securities Finance Corporation Limited is the Group’s second largest shareholder with 4.99% in hand.
iFlyTek, a Chinese information technology company specializing in speech intelligence and artificial intelligence (AI), will expand its business in new areas such as education and medical care. Its intelligent robot, iFlyTek Smart Doctor Assistant, has recently become the first AI robot to pass the Chinese qualification exam for licensed doctors. The company was founded in 1999. With China Mobile being its largest shareholder, iFlyTek has seen its shares more than double this year in Shenzhen Stock Exchange, outpacing the 3% gain in the Shenzhen Composite Index.
China Banking Regulatory Commission (CBRC) says that the detailed regulations on the banks’ wealth management business will be issued soon. The regulator says that it will listen to the market’s voice when making the new rules. CBRC will ensure the smooth transition from the existing rules to the new rules.
China Securities Regulatory Commission (CSRC) says it will promote the development and application of fintech. Meanwhile, the regulator will focus more on protecting the rights and interests of the investors, taking precautions against risks. The regulator is also innovating in applying new technologies including big data and AI to supervision.
China will further increase its competitiveness and international influence by opening up its financial market, says CSRC. Qualified foreign financial institutions are welcomed to provide securities and futures services in China, says the regulator. Relevant market admission will be further loosened.
LUXSHARE-ICT, one of the major suppliers for Apple’s wireless earphone AirPod, is predicted to overtake Inventec and become the largest supplier next year. Founded in 2004, LUXSHARE-ICT is a manufacturing company with business in cable and connector for 3C (computer, communications and consumer electronics), automobile and medical. The valuation of LUXSHARE-ICT’s A-share has raised to a record high at the end of October due to the release of iPhone X.
China Banking Regulatory Commission (CBRC) says regulations on online micro-loans will be issued soon. The regulator will stop giving approvals for setting up new online lending companies. Small to micro loans companies are not allowed to set up new cross-province business.
National Development and Reform Commission (NDRC) has issued a notice to further support private capital participating in the public-private partnership (PPP). The notice prohibits irrational restrictions on private capital coming into PPP projects.
National Development and Reform Commission (NDRC) says it will support the overseas investment of Chinese corporates, noting that regulations will be more supportive. China’s overseas investment will leverage on the Belt and Road Initiative, promoting global collaboration on production capacity. Meanwhile, NDRC will control and guide the development of Chinese enterprises’ overseas investment.
The new 21 rules regarding fintech will soon be rolled out in Shenzhen Qianhai, according to Chinese media. The new rules will deepen the cooperation between Shenzhen and Hong Kong and open up the financial system. The new rules will relax the restrictions in the admission of Hong Kong and Macau financial institutions, supporting Hong Kong to establish the Offshore RMB Center.
China’s air logistics are faced with challenges including lack of resource, underperformed airport service and poor market competitiveness, according to Chinese media. Mixed-ownership reforms have been conducting among Chinese air logistics companies. Civil Aviation Administration of China will issue a guidance to boost this sector, according to Chinese media.
Dongxu Optoelectronic Technology has recently announced that it will set up a production base for new energy cars. This sector has been benefitting from China’s regulations recently. New rules will be implemented to support the technology innovation in this sector soon, according to a source talking to Chinese media. Founded in 1992, Dongxu Optoelectronic Technology Co., Ltd. is China’s largest LCD glass substrates producer, ranking the fourth globally. In addition to this, the company also taps into new sectors including new energy car and technologies relating to smart city construction. With an investment of more than three billion yuan, the new production base plans to produce ten thousand new energy bus and 30 thousand new energy logistic vehicles.
China Insurance Regulatory Commission (CIRC) will issue regulations on the management of Chinese insurance companies. The new rules require insurance companies to conduct due diligence before appointing a new senior executive. Senior executives who have been penalized twice within five years should not be recruited.
National Development and Reform Commission (NDRC) has recently issued a draft regulation on the budgetary investment of the country’s central government. A new supervision system will be formed. This will improve the utilization efficiency of the investment, according to the regulator.
China’s Premier Li Keqiang yesterday announced the establishment of the China-CEEC Inter-Bank Association and the second phase of China-Central and Eastern Europe (China-CEE) Investment Cooperation Fund. The China Development Bank will provide an equivalent amount of two billion euros as development-oriented financial cooperation loans to the association, while the second phase of the fund that totaled $1 billion will be mainly invested in Central and Eastern Europe. China will encourage its enterprises to make more investment in Central and Eastern European countries, says Li.
Major Chinese display screen producer BOE has overtaken Korea’s LG Display for the first time, ranking first in global market share of large-size screens in Q3 2017. Chinese media says that BOE is likely to become the screen supplier for Apple’s iPhone XI to be released next year, providing foldable OLED screens. Founded in April 1993, BOE Technology Group Co., Ltd. is a major Chinese supplier of the Internet of things technologies, products, and services. BOE’s share price has had a huge increase during the past two months. But after the company’s two major shareholders reduced their holding-shares last week “according to their business plans”, the valuation of BOE’s A-share slumped.
China’s draft legislation on e-commerce is nearing finalization. Chinese media say that the finalized laws will be rolled out next year. The new laws will focus on protecting the rights and interests of consumers, according to Chinese media, adding that intellectual property protection is also a major topic.
The World’s largest coal supplier, Shenhua Group, has merged with power producer China Guodian Corporation. The new company, National Power Group, was officially set up today. With total assets of 1.8 trillion yuan (US$270 billion), the new power giant ranks fourth among China’s largest energy enterprises.
China’s Premier Li Keqiang yesterday announced the establishment of the China-CEEC Inter-Bank Association and the second phase of China-Central and Eastern Europe Investment Co-operation Fund.
The China Development Bank will provide two billion euros-equivalent (US$2.38 billion) as development-oriented financial co-operation loans to the association, while the second phase of the fund, that totals US$1 billion, will be mainly invested in Central and Eastern Europe. China will encourage its enterprises to make more investments in Central and Eastern European countries, according to Li.
BOE Technology Group Co Ltd.’s two major shareholders reduced their shareholdings last week. The valuation of BOE’s A share has been falling for four consecutive days. It has fallen by 20% accumulatively. BOE was founded in April 1993. It is a major supplier of the internet of things technologies, products, and services in China. The share price of the company has seen a huge increase during the past two months.
State-owned Assets Supervision and Administration Commission (SASAC) has issued a notice stating that the Chinese state-owned enterprises (SOEs) should manage the risks of public-private partnership (PPP) business. This notice requires SOEs to tighten the admission of this business, strictly controlling the scale of it. SOEs should prevent their debt ratios from going up when doing PPP business, says the notice, noting that the SOEs with debt ratio exceeding 85% are prohibited to invest in PPP projects individually.
China will take further steps to issue more regulations regarding the supervision and risk management of the country’s financial market, says Financial News, a state-owned media under the People’s Bank of China (PBoC). The country will further regulate online financial institutions to reduce systematic risks. The overall supervision of the financial sector will be tightened, says the state-owned media.
National Internet Finance Association of China (NIFA) suggests that the unqualified lending institutions should stop their illegal lending business. Online micro-loans has been developing at a fast speed in China, says NIFA, noting that some of the lending institutions have been attracting the clients with exaggerated advertising. Qualified lending institutions also need to do self-checks, says NIFA.
China’s State Council has issued a notice stating that the application for setting up national model areas leveraging the “Made in China 2025” strategy is now open. Chinese cities are encouraged to set up in such areas to form ecosystems for the manufacturing industry. The regulator supports the new areas to utilize “Internet plus”, entrepreneurship and innovation, renovating the traditional industries.
The People's Bank of China (PBoC) and China Banking Regulatory Commission (CBRC) has met with local regulators to discuss the supervision on online micro-loans. The new regulations on this sector will be issued next week, according to an officer talking to The Beijing News. The officer says that the supervision will focus on forming a more stable financial system, noting that the online micro-loans will not be banned in China.
Ministry of Finance (MOF) will further reduce the import tax on certain consumer goods starting December 1, 2017. The average tax on certain imported goods including food and beverage, medicine, home appliance, recreational products, general merchandise, etc., will be reduced from 17.3% to 7.7%.
China is planning to set up a 100 billion yuan fund for mixed-ownership reform by June next year. Major central state-owned enterprises (SOEs) and private capital will invest in this fund. The shareholding of SOEs will be about 50%. More than 50 SOEs are about to conduct mixed-ownership reforms, according to Chinese media.
China will implement new rules to support technology innovation in the new energy car sector, according to a source talking to cnstock.com. The new rules will focus on supporting the high-tech innovations and will benefit the leading companies in this industry, according to the source. Smaller players will be washed out of this market in the long run, says the source, noting that the new rules will take effect by the end of this year.
China’s Ministry of Finance (MOF) has planned to issue a total of 14 billion yuan national debt in Hong Kong this year, half of which has been issued earlier in June. Another 7 billion national debt will be issued next Monday, says MOF. The debt will be issued through Hong Kong’s Central Moneymarkets Unit (CMU) to institutional investors, foreign central banks, and regional monetary authorities. It plans to be listed on HKEX.
The People's Bank of China (PBoC) and China Banking Regulatory Commission (CBRC) will meet with the local financial regulators to discuss the supervision of online microloans, according to Chinese media. Regulators from seventeen provinces and cities including Guangdong, Chongqing, and Zhejiang will attend this meeting.
China’s Insurance Regulatory Commission (CIRC) says that currently most of the country’s supervision on the insurance industry is about daily practices, while the regulation on risks is “gravely insufficient”. The use of capital is lack of efficient management, leading to “serious risks” in some insurance companies. The watchdog promotes that regulations need to shift to risk supervision and management.
China’s National Development and Reform Commission (NDRC) says that more projects will be rolled out on the basis of the country’s One Belt One Road Initiative. In order to further open up, attracting foreign investment and overseas investment will be the major focuses of China. This requires advancing the legislative process of laws on overseas investment.
People's Bank of China (PBoC) might be determined to carry out exchange rate reform, says an expert from Chinese Academy of Social Sciences talking to finance.sina.com.cn, noting that China is “ready to reform and PBoC’s preparation is sufficient”. The expert says that Minsky Moment is unlikely to happen in China, adding that the issues regarding China’s capital flight have been controlled with tightened supervision.
The People's Bank of China (PBoC) will implement a steady and neutral monetary policy, according to the central bank’s recent report. China’s economy has been turning from high-speed growth to high-quality growth, says the report. Chinese regulators will continue to focus on structural reforms, deleverage and risk management, says the report, noting that the supervision in China’s finance sector needs innovation.
Ministry of Industry and Information Technology and other interested parties have jointly issued a guidance on China’s private capital, promoting innovations in Chinese private enterprises. The guidance supports the vitalization of private capital, and encourages private enterprises to reform in terms of industry structure, service orientation, and internationalization.
China has proposed building an economic corridor with Myanmar to further enhance bilateral cooperation between the two countries. The deal was announced by Chinese Foreign Minister Wang Yi during a joint press conference with Myanmar’s State Counsellor and Foreign Minister Aung San Suu Kyi after their meeting in Myanmar’s capital Naypyitaw yesterday. The economic corridor will start in the northern Chinese province of Yunnan and go down south to the central Myanmar city of Mandalay, and further extend east to the new city of Yangon and west to the Kyaukpyu special economic zone, forming a three-pillar giant cooperation pattern, Wang explained.
People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission have jointly issued a draft guidance on the governing of asset management services of financial institutions. According to the draft guidance, the investment in one single asset from multiple asset management products of one financial institution should not exceed 30 billion yuan; the risk reserve should be equivalent to 10% of the income from the management fee. The draft guidance also states that the common practice of bailouts in Chinese asset management industry should be eliminated fundamentally.
The first direct bank in China officially opened on November 18. The new bank, AiBank, is launched by the China’s internet giant Baidu and one of the country’s largest lenders, China CITIC Bank, after two years of preparation. AiBank is supervised by China Banking Regulatory Commission (CBRC) in accordance with the general regulations of China’s commercial banks, says CBRC.
Alibaba’s Ant Financial, Alibaba-backed complete online insurer ZhongAn, and Ant Financial-backed Qudian rank the top three among 100 leading fintech innovators globally, according to a joint report by KPMG and fintech investment firm H2 Ventures. Chinese fintech companies account for five of the top 10, according to the report.
Chinese state-owned enterprises (SOEs) will seek to establish a mechanism for preferred stocks and golden shares that are managed by the central government, the country’s State Council has said. Chinese SOEs still need to improve shareholding structures and corporate governance, says the government. Central SOE reforms will be completed by the end of this year, according to the State Council, noting that the pace of mixed-ownership reforms will be accelerated.
China will implement a property tax “soon”, says Huang Qifan, deputy chairman of the economic and finance committee under the National People’s Congress. He notes that the property tax complies with international conventions, and will help to control speculation in real estate sector. China will issue relevant regulations in the next few years, Huang says.
Bank of China (BoC) has signed an agreement to underwrite the Government of the Philippines’ first panda bonds in China. The issuance is equivalent to US$200 million. BoC will be the sole bookrunner and lead underwriter in the deal. BoC will assist the Philippines to register in China's interbank market.
In order to further open up its markets, China is revising laws regarding the market admission for foreign investors, according to a senior official at People's Bank of China talking to cnstock.com, noting that non-financial payment industry is the only financial sector that has not yet opened up.
The restrictions on market admission and the shareholding ceiling for foreign investors will be adjusted in the revised laws. China is determined to further open up its financial market to attract more foreign investments.
China’s Ministry of Science and Technology has officially launched the new office for promoting AI and announced the first batch of companies that are listed on national innovation platform for AI. Chinese Internet giant Baidu, Alibaba and Tencent (BAT) are on the list. The Chinese government will deepen international co-operation in developing AI.
China Banking Regulatory Commission (CBRC) has issued a draft regulation on governing the shareholding structure of Chinese commercial banks, stating that each investor and its affiliated parties can be major shareholders of two commercial banks at most; each investor and its affiliated parties can control only one commercial bank. The shareholders of a commercial bank are prohibited either to entrust their shares to other parties or to be entrusted.
The National Development and Reform Commission (NDRC) says that it has given approvals for 16 fixed investment projects in October, amounting to a total investment of 66.6 billion yuan (US$10.04 billion). The approved projects include investments in infrastructure, high-tech, energy, IT, and social undertakings.
China’s Ministry of Finance (MOF) has issued a notice, stating that interested institutions should study international conventions regarding consumption tax legislation and provide advice for the legislation and implementation of China’s consumption tax laws. The draft law plans are to be issued before June 30 next year.
China Banking Regulatory Commission (CBRC) is promoting the reform of China’s policy banks, namely China Development Bank, Exim Bank of China, and Agricultural Development Bank of China. CBRC says that the three banks should stick to their responsibilities for financing economic and trade developments and state-invested projects. Meanwhile, the three banks are required to improve their supervision, forming a capital constraint mechanism based on the capital adequacy ratio (CAR).
The State Council recently released a circular approving the establishment of an inter-department joint conference system on market supervision. Led by the State Administration of Industry and Commerce, the new conference system will be composed of 35 departments including the National Development and Reform Commission, the Ministry of Commerce, and the General Administration of Customs. The move targets strengthening the coordination in market supervision during the 13th Five-Year Plan period, according to Chinese media.
China’s National Bureau of Statistics says that the country will maintain a stable growth in its economic development according to the market expectation so far. The Bureau emphasizes that China’s economic growth will focus on quality rather than the quantity next year. The economy is expected to undergo reforms, says the Bureau.
WeChat, Chinese social media mobile application software developed by Tencent, which used to offer credit card payment service free of charge, will start to charge its clients by 0.1% per month in this service. Each month, WeChat users can enjoy accumulatively 5,000 yuan of credit card payment free of charge. During March last year, WeChat started to charge its users a fee of 0.1% when they transferred money from the app's built-in digital wallet to their personal bank account.
Tencent Cloud recently launched BaaS (Blockchain as a Service), a new fintech solution that combines blockchain with insurance. In cooperation with Aixin Life Insurance, this new initiative is based on Tencent’s Financial Cloud. The new solution offers blockchain service regarding smart contracts, mutual insurance, big data, supply chain finance and cross-border trading.
Hong Kong recently signed a free trade agreement with ASEAN countries. The agreement will provide more attractive market admissions for the product and service trading in Hong Kong. This will boost the economic development of Hong Kong. The agreement will not take effect until January 1, 2019 at the earliest.
China regulators say that online trading platforms for forex and precious metal are illegal. These kinds of online trades are subject to high risks, but some domestic institutions are doing these trades via online channels such as the Internet and mobile apps, says the regulators. The regulators also warn that the investment activities in such trades are not protected by laws.
China’s Ministry of Finance has recently issued a notice about the taxation on corporate income, stating that the tax on accredited enterprises using advanced technology will be reduced to 15%. The accreditations will be conducted by provincial regulators. This move will further strengthen Chinese enterprises’ advantages in technology innovations, says Chinese media.
China will open up its financial market “significantly”, says China’s official media, Xinhua News Agency. The market admission of banking, securities and insurance will be loosened; the shareholding ceiling of foreign investors in financial institution JVs in China will be further relaxed. Foreign investors are now able to hold 51% of securities companies, fund management companies and futures companies, says China’s Ministry of Finance, noting that the limit used to be 49%. In addition, the limit on foreign holdings in Chinese banks and financial asset management companies will no longer hold.
The tariff on US car imports will be reduced in steps. China will also roll out pilot projects in the free trade areas to relax on the restrictions of the shareholding of foreign capital regarding enterprises producing new energy vehicles and special-purpose motor vehicles.
The newly established financial stability committee will strengthen the supervision on financial holding companies, says Financial News, a media under the People’s Bank of China (PBoC). Headed by China’s Vice-Premier Ma Kai, the new committee is higher than PBoC, China Securities Regulatory Commission, China Insurance Regulatory Commission, and China Banking Regulatory Commission. This enables the new committee to serve better in terms of regulatory coordination. The overarching development scheme and regulations will be made by the committee, says Financial News.
China’s state-owned investment fund, the Silk Road Fund sets up an infrastructure investment platform with General Electric (GE), says the country’s State Administration of Foreign Exchange (SAFE). The new platform will focus on investing in countries along China’s “One Belt One Road” regarding the infrastructure of the power grid, new energy, oil and gas.
Tencent has signed an agreement with China Merchants Bank (CMBC) and Funde Insurance Holding in promoting fintech cooperation. Tencent and CMBC will cooperate in anti-fraud using technologies including big data and AI. This will enable CMBC to perform better in identifying fraud in financial service. The cooperation between Tencent and Funde will focus on new innovations in the insurance industry.
JD Finance and Bank of Dalian has agreed to cooperate in blockchain, AI, big data risk management and client operation. Bank of Dalian’s new direct bank App “壹伴客” was launched yesterday. Being one of the results from the cooperation of the two sides, this App targets young clients, providing services including wealth management and consumer credit services.
China’s Ministry of Commerce says that China will import more than US$10 trillion of products and services from the US. China and the US enterprises have signed cooperation contracts worth US$253.4 billion during US President Trump's visit to China. China sees the economics and trade relations between China and the US as the cornerstone of the Sino-US bilateral relation. China’s President Xi Jinping welcomes enterprises from the US to participate in the Belt and Road Initiative.
People's Bank of China (PBoC) and China Banking Regulatory Commission (CBRC) has revised the regulations on car loans. In order to support the green industry, loans for new energy automobile were relaxed up to 85% of the total purchase. Traditional vehicle loans can take up to 80% of the total purchase.
A national committee for overseeing financial stability and development is officially set up under the administration of China’s State Council. The new Cabinet-level regulatory body will help the country better cope with potential financial risks, says Chinese analysts. China’s Vice-Premier Ma Kai heads the new committee.
China National Petroleum Corporation (CNPC) starts to sell electricity by setting up a new company, CNPC Electric Power Company. Founded yesterday, the new company was formerly Daqing Electric Power Group. This move marks the success of Daqing Electric Power Group’s reform. The new company plans to conduct a mixed-ownership reform and go public.
China’s Insurance Regulatory Commission (CIRC) will deploy a real-name registration scheme. A draft regulation on this is in progress and is taking advice from the country’s insurance industry. The new regulation requires that insurance companies, intermediaries and third-party platforms need to check the identity documents of policyholders and beneficiaries that need to register accordingly.
China will deepen its reforms in the financial sector and improve the inclusive financial system, says China’s Premier Li Keqiang. The financial services focusing on small and micro enterprises should be promoted, says Li, highlighting the importance of forming a more stable interactive relation between banks and enterprises. Li says that innovations and supportive regulations will help to vitalize small and micro enterprises.
China Securities Regulatory Commission (CIRC) has signed an agreement with the Australian Securities and Investments Commission on sharing fintech information. The two sides agreed to exchange information on the development and regulations of fintech. This move will serve to deepen the cooperation between the two countries, says Chinese media.
China’s National Development and Reform Commission (NDRC) recently issued new regulations on pricing. Taking effect in 2018, the new regulations emphasize the supervision and examination of costs – no pricing should be done without this process. From 2013 to 2016, NDRC and interested departments have finished nearly 24,000 projects of cost supervision and examination and found 800 billion yuan that should not have been included as cost when pricing.
China will crack down on the financial crimes, especially in terms of Internet finance (ITFIN), says Ministry of Public Security. Ministry of Public Security says that China’s financial industry is facing various risks. Illegal fund-raising is one of the targets of Chinese regulators. Securities and futures market also needs strict supervision, says the regulator.
Setting up a legal digital currency is the cornerstone of developing the digital economy, according to an officer at the People’s Bank of China (PBoC). A legal digital currency can serve to reduce risk and improve the macro-control of the digital economy, says the officer, adding that this will support anti-money laundering, counter-terrorist financing, and anti-tax avoidance. Internet should be further combined with real economy, says the officer.
The 2nd China International Intelligence Connected Vehicle Forum was held in Shanghai today. The “Shanghai Declaration” is issued by China’s Ministry of Industry and Information Technology and Shanghai Government during the forum, stating that the government will provide a open market and a cooperation platform to attract world’s major automobile enterprises. Relevant regulations will be improved and deployed; technologies including big data and innovation on intelligence connected vehicles will be supported.
China’s Ministry of Finance and State Administration of Taxation have issued a notice regarding the taxation of financial institutions. From December 1 this year to the end of 2019, financial institutions’ interest income from issuing small amounts of loans to rural households, individual businesses and small and micro enterprises are exempt from value-added tax (VAT). From the beginning of next year to the end of 2020, financial institutions’ loan contracts with small and micro enterprises are free of stamp duty.
Being suspended for issuing offshore USD bonds for over half year, Chinese LGFVs are now coming back to the offshore market. Yunnan Energy Investment Overseas Finance Company, a triple B rated LGFV, is about to issue a reg-S senior unsecured USD bond. The issue amount is undisclosed and the roadshow will be held in Singapore and Hong Kong on Sep 3. Sources have told The Asset that NDRC has relaxed the restriction on LGFV offshore bonds.
Chinese regulators plan to shut down illegal companies providing micro-credit loans, according to a source talking to sina.com. Driven by online lenders, China’s micro-credit loans which are similar to payday loans have developed rapidly. These type of loans lend money based purely on the borrowers’ credit and has raised concerns regarding sub-standard loans among non-creditworthy borrowers. Relevant regulations are said to roll out soon, states Chinese media.
China Insurance Regulatory Commission (CIRC) will deploy new rules regarding the independent directors of insurance companies, according to a source speaking to cnstock.com. It is said that CIRC will revise relevant regulations and require insurance companies to increase the number of their independent directors. The independent directors should be completely independent from major shareholders and actual controllers. The independent directors might be entitled to certain unique functions, according to the source.
Chinese regulators including the People's Bank of China (PBoC) and CBRC (China Banking Regulatory Commission) and Chinese official media have been warning the risk of Internet finance (ITFIN) recently. They have been emphasizing that no financial institutions should operate without licenses. There will soon be a crackdown on ITFIN companies without licenses, according to Chinese media. Many of Chinese Internet companies are involved in financial business, but only a few of them are holding licenses for all of their business.
China has become the number one economy for the consumption of renewable energy, says the country’s National Energy Administration (NEA). China will improve its energy utilization, says NEA, noting that the regulator will roll out rules regarding green certificates that put a restriction on energy-related trades.
China will deepen its reforms in the free trade areas, says China’s President Xi Jinping during the 19th Party Congress. Shanghai being earmarked to be the first to construct a free trade port, Tianjin and Ningbo are expected to follow Shanghai’s path. There are 11 cities in China that have free trade areas. Tianjin, Ningbo, Shenzhen, and Guangzhou standing out among their peers with their large capacity and geographical advantage.
China will focus on forming a system for trading electricity and deepen the supply-side structural reform of the power market, says National Energy Administration. In terms of private capital entering certain areas of the power market, there are a lot of interests but obstacles regarding bidding and shareholding structure still lie ahead, according to a source talking to the Economic Information Daily.
The government of Shanghai has submitted their plan for constructing a free trade port. The plan is awaiting approval and has been consistently revised now, says an official. This plan will serve to improve the function of Shanghai as being an international shipping center.
Ministry of Human Resources and Social Security (MHRSS) says that the investment of China’s retirement funds has started. The country’s nine provinces have signed investment contracts with the National Council for Social Security Fund, accounting for a total investment of 430 billion yuan. More than 40% of it has already been put into investment.
A new batch of pilot projects for mixed-ownership reform of Chinese state-owned enterprises (SOEs) has been rolled out. Forty SOEs have suspended the trading of their shares, indicating that they are about to announce major news which can possibly be related to reforms, said Chinese media. The next two months will see a wave of SOE reforms, says a source talking to cnstock.com.
China hopes to cooperate with the US in clean energy, says Xie Zhenhua, special representative for Climate Change Affairs of China. China will live up to its international obligations in accordance with the country's ability and its development phase, says Xie.
China Insurance Regulatory Commission (CIRC) has been tightening its regulations since 2015. So far, 157 Chinese insurance companies have been penalized, accounting for a total fine of 25.407 million yuan. CIRC says it will further monitor the insurance industry and warn policyholders of possible risks by publicizing illegal cases.
China Banking Regulatory Commission (CBRC) says that fintech should be regulated via high-tech means. A regulating system leveraging innovative technology is under construction, says CBRC. A platform for sharing fintech information will be deployed, says the regulator. Technologies such as big data will be used to supervise the inclusive finance, says CBRC.
Regulators from China’s National Equities Exchange and Quotations (NEEQ), or the “New Third Board”, says that NEEQ-listed private placement firms who are registered as private securities fund managers are not allowed to raise funds through NEEQ. Interested firms should report to regulators by November 11 this year. Those who violate relevant rules will be delisted.
The GDP of China’s provinces and municipalities will be investigated and calculated by the country’s National Bureau of Statistics. It used to be calculated by local statistics organs. Some provinces, such as Liaoning, had in the past falsified their GDP reports. Liaoning had reported that its GDP was up by 23% from 2011 to 2014. This new rule will serve to make better macro policies. It will be deployed next year.
Driven by online lenders, China’s micro-credit loans which lend money based purely on the borrowers’ credit has been experiencing recent growth. This type of loans is similar to the payday loan, and has raised concerns about substandard loans among non-creditworthy borrowers. Relevant regulations are said to roll out soon states Chinese media.
China’s Insurance Regulatory Commission (CIRC) has been tightening its supervision on the corporate governance of Chinese insurers. The regulator’s attitude has gone from providing guidance to deploying restriction. More than 15 Chinese insurers have been required to revise its business in accord with relevant corporate governance rules. Some of these companies are banned from trading in related areas.
China Banking Regulatory Commission (CBRC) will focus on proactive preventions on systemic financial risk. The illegal actions in the banking industry will stopped, says CBRC, adding that the supervision of CBRC will be further improved. CBRC promises to prevent partial risks from developing into systemic financial risks.
The overseas asset of China’s central state-owned enterprises (SOEs) has amounted to 6 trillion yuan, according to the State-owned Assets Supervision and Administration Commission (SASAC). Chinese central SOEs’ overseas business consists of sectors in infrastructure, resource, nuclear power, power grid, telecommunication etc. The assets in found in 185 countries. Forty-seven central SOEs have been cooperating with countries relating to the Belt and Road Initiative, running 1,676 projects.
China will stop to seek high-speed growth and focus more on the quality of the economic growth, says Yang Weimin, the deputy director of the country’s Leading Group for Financial and Economic Affairs. The country will deepen the supply-side structural reform and further open up its market, says Yang. The mixed-ownership reform of Chinese state-owned enterprises will be reinforced after 19th Party Congress, says Yang.
China Insurance Regulatory Commission (CIRC) warns that Chinese online insurer Zhongan’s distribution mode may generate risks. One regional insurance agency has been cooperating with Zhongan to distribute the company’s product. However, this violates China’s regulations on Internet trading, according to CIRC, adding that the two parties are suspected of operating beyond their business scope.
China’s foreign capital related laws need to be revised thoroughly, says Ministry of Commerce (MOC) during the 19th Party Congress. Made at the beginning of China’s reform and opening-up process, these laws are not adequate for the country’s market today, says MOC. A draft bill on foreign investment has been made and is now open for the public’s input, says MOC.
China’s efforts in reducing the overcapacity in the coal industry is making much progress. During the past five years, 2,802 coal enterprises have been shut down, according to China National Coal Association. More than 1,000 mines were scheduled to be closed in 2017 YTD. By the end of 2016, there are 5,067 coal companies left in China.
China's Ministry of Finance (MOF) has said that it will issue a sovereign bond worth US$2 billion in Hong Kong. China has sufficient foreign exchange reserves, and the major purpose of this move is not a fundraising move, says MOF. The bond includes a 5-year tranche of US$1 billion and a 10-year tranche of US$1 billion. The release date is to be announced. This is China’s first sovereign bond to international investors since its last issuance in 2004.
During the first nine months of this year, China’s issuance of labeled green bonds reached 134 billion yuan, accounting for 24% of the world’s total issuance, says Yang Weimin, the deputy director of the country’s Leading Group for Financial and Economic Affairs. This makes China one of the leaders in this context, says Yang. The country has “great potential” in sustainable development, with green finance being one of the spotlights, says Yang. Yang also sees the possibility of mainland China cooperating with Hong Kong in green financing.
Eco-environment has become one issue in China’s development, says Yang Weimin, the deputy director of the country’s Leading Group for Financial and Economic Affairs, noting that the price system of natural resource needs improvement. Interested parties are driving the reforms in resource tax and mining rights, says Yang.
China is committed to providing technical and financial support to Jordan, says China's Deputy Minister of Commerce Qian Keming. The two sides have signed the Program for Development, Economic and Technical Cooperation for the years 2018-2020 and agree to start meetings to draw a draft concerning the cooperation under China’s Belt and Road Initiative. From 1999 to 2016, China had provided Jordan with grants and loans worth a total of 225 million dollars.
People's Bank of China (PBoC) and China Banking Regulatory Commission (CBRC) have been investigating and discussing with interested parties for advice in terms of China’s financial market opening, according to a source speaking to 21jingji.com. CBRC says that a plan for further open up China’s financial market is under discussion.
Chinese regulators have been encouraging private investment and promoting the public-private partnership. Local regulators recently issued new rules in this context, according to Chinese media. Regulators of Heilongjiang, Shandong, Hubei, Guizhou, Sha’anxi, and Xinjiang have rolled out PPP projects with investment volumes of more than 100 billion yuan respectively. China has deployed 144 PPP projects during the first nine months of this year, attracting a total investment of 183.65 billion yuan.
China Insurance Regulatory Commission (CIRC) has set the benchmark for China's Risk Oriented Solvency System (C-CROSS) in a draft regulation on the solvency of Chinese insurance companies. Core solvency ratio should be more than 50%. Detailed rules will be issued at the end of this year.
China’s cross-border capital flows will be stable in general, says State Administration of Foreign Exchange (SAFE), noting that this trend will not be influenced by the US Federal Reserve shrinking its balance sheet. The first three quarters of this year have seen a steady trend in China’s cross-border capital flows, with a general balance between the supply and demand of the foreign exchange, says SAFE.
“China has no problem to overcome the middle-income trap,” says Lou Jiwei, chair of China’s National Council for Social Security Fund and former Minister of Finance, during a discussion meeting of the 19th Party Congress. In 2015, Lou said that more than 50% of China’s population would be troubled by the middle-income trap and the country needed reforms. China has done “a lot” during the past two years, says Lou, explaining the reason of him changing the outlook for this issue.
Baidu Peng Huan Investment LLP, a subsidiary of Chinese Internet giant Baidu, has become the owner of a Chinese insurance company and completed its capital increase. Interested party from Baidu confirmed that this move had been approved by the regulator. The three major Chinese Internet companies have all tapped into the country’s insurance industry by now, says Chinese media.
Chinese regulators will become “stricter” in supervising the country’s finance industry, says Guo Shuqing, the chairman of the China Banking Regulatory Commission (CBRC), during a discussion meeting of the 19th Party Congress. Banks’ wealth management service and interbank business will be the main focus of regulators, says Guo. The tightened regulation will cover aspects including shadow banking and real estate bubbles, which will create limited influence on the real economy, says Guo.
The market share of foreign banks in China has shrunk during the past 5 years, according to China Banking Regulatory Commission (CBRC). Guo Shuqing, the chairman of CBRC says that this situation is unfavorable to market competition and structural optimization. China needs to further open up to foreign banks in terms of the shareholding structure and business scope, says Guo, adding that private investment should be introduced to the banking industry gradually.
According to the performance of China’s macro economy in September, the country’s GDP is projected to grow by 6.9%, says the State Council of China. The investment in infrastructure and real estate maintained steady growth in September, which indicates a stable momentum till the end of 2017, says the State Council. The decreasing growth of the private investment during the first nine months this year will be put to an end, with more supportive regulations being deployed, says the State Council.
China’s National Party Congress (NPC) says that China will continue to further open up its market. The country has been deploying new rules in this context. The total amount of the country’s import and export during the first nine months of 2017 recorded a y-o-y growth of 16.6%, according to Ministry of Commerce (MOC). China’s exports recorded an increase of 12.4% and imports 22.3%, reducing the trade surplus to 17.7%.
China has been cracking down on the irrational foreign investment and tightening on capital controls. During the first three quarters of 2017, Chinese investors’ new non-financial outbound direct investment towards 5,159 foreign enterprises of 154 countries recorded a total amount of USD 78.03 billion, marking a decline of 41.9% y-o-y. During the same period, the new foreign investment in projects relating to the Belt and Road Initiative amounted to USD 9.6 billion. This took a share of 12.3% of the total foreign investment from China.
New channels to use the renminbi in an international scope will be explored, according to a recent report by People's Bank of China (PBoC). The bank says that the renminbi will become a more widely used international currency, efficiently serving the real economy and simplify trades and investment. The PBoC will enhance the flexibility of the renminbi’s exchange rate preserve to stability in the international system.
China’s Ministry of Land and Resources has recently been conducting a study on the country’s housing inventory. The organization hopes to form a sharing system of housing information in China. Chinese media says that the system development will start at the end of this year.
Chinese regulators tightened the rules relating to the import of scrap copper, making the imports barely possible, said Chinese media. This move, which will take effect early next year is seen as China’s efforts to cut pollution from heavy industries. This also indicates that China’s refined copper import will boom, says Chinese analysts.
Shanghai Stock Exchange (SSE) has been China’s first comprehensive trading platform that covers markets ranging from stocks to derivatives. SSE ranks second in the world in terms of the funding amount of IPOs, according to World Federation of Exchanges (WFE). SSE’s market capitalization moreover is fourth in the world. SSE will be built into a sophisticated world-class bourse, says an officer from the SSE.
Regulators will start to issue new regulations to further relax barriers around private investments. After months of consecutive growth, the private investment rate of China dropped by 3% in August, according to China’s National Bureau of Statistics. In order to drive the vitality in private investments, the new regulations will loosen the market admission and lower the cost of private investment, encouraging the money to flow into the mixed-ownership reform of China’s state-owned enterprises (SOEs) and Public-Private Partnership (PPP).
In order to supervise the money flow of consumption loans and to prevent lending from being abused in the housing market, Chinese regulators have sought to tighten controls. Banks in Beijing for example require relevant documents when a customer applies for a consumption loan that exceeds 200,000 yuan. Chinese media says that some banks are asking their customers to provide relevant documents when they are applying for a loan that exceeds 10,000 yuan.
China Securities Regulatory Commission (CSRC) says it will crack down on the illegal reduction of shareholdings. Some of the major shareholders of listed companies will violate the law by reducing their shareholdings, says CSRC. This move looks to stabilize China’s financial markets in the run up to China’s 19th Party Congress, says Chinese analysts.
The direct cross-border exchange between the Chinese renminbi and Vietnamese dong has been rolled out through Chinese and Vietnam banks, according to China’s official media. This marks a new milestone in the internationalization of the renminbi. A branch of Agricultural Bank of China located in Móng Cái, a city that borders China has started to offer this service.
Chinese regulators have been supportive in the new energy automobile industry. This industry recorded a historical high sales volume of nearly 400,000 million vehicles in September. The related industries including finished automobile, automobile parts, and automotive battery are expected to grow as well predicts Chinese media.
China’s trading volume with the regions involved in Belt and Road Initiatives increased by 20% in the first three quarters of 2017, according to General Administration of Customs of China (GACC). This is 3.5% higher than the import and export growth during the same period. The structure and the quality of China’s import and export during the first three quarters of this year are constantly improving, says GACC.
China Insurance Regulatory Commission (CIRC) has accused Bohai Life Insurance of violating regulations, in regards to various transactions as well as shareholdings structuring. For the next six months, Bohai Life is required to cut off its connection with HNA Group and interested parties in terms of trading and financial support, according to CIRC’s announcement. HNA has been aggressive in expanding its business and conducted several major overseas acquisitions last year. Bohai Life must respond and report to CIRC by November 30 this year.
Shanghai’s minimum wage for 2017 is 2,300 yuan per month, ranking the highest in China. The country’s average minimum wage has raised significantly in 2017, says Chinese state-owned media. So far, at least 17 cities have reported an increase in their minimum wages, with minimum wages of Shanghai, Shenzhen, Tianjin, and Beijing exceeding 2,000 yuan per month. In 2016, 9 cities recorded an increase in their minimum wages.
Foreign insurance companies in China are required to modify their business in terms of corporate governance, according to a source close to Chinese regulators talking to cnstock.com. This move will the focus to 16 aspects including shareholding, business operation, administrative management, and information disclosure. Chinese regulators have been tightening the supervision of insurance industry since late last year.
China’s National Development and Reform Commission (NDRC) will continue to promote the reform of the corporate bond issuance regulation system, the regulator has said in a recent announcement. The industrial guidance function of corporate bonds will be reinforced. NDRC will also emphases on building the credit system in the bond market. The bond issuance in China has increased from 1987’s 10 billion yuan to 2016’s 700 billion yuan, says the NDRC.
China's Ministry of Finance (MOF) has said that it will issue a sovereign bond of US$2 billion in Hong Kong. The bond includes a 5-year tranche of US$1 billion and a 10-year tranche of US$1 billion. The release date is to be announced.
Risk management companies are forbidden to provide services to individuals in derivativea trading, says China Futures Association (CFA). Interested companies should conduct self-checks and report to CFA before October 15 this year. This move indicates regulators determination in controlling speculative risks, says Chinese analysts.
A “timely” long-term solution for China’s overheated real estate market is under discussion, according to the National Development and Reform Commission (NDRC). Chinese regulators have been effective in destocking its real estate inventories, says the NDRC. Over the past year, the country has reduced 100 million square metres of real estate inventories, most of which are located in third- and fourth-tier cities.
Hong Kong’s Securities and Futures Commission (SFC) will roll out a real-name registration scheme next year for the Shenzhen/Shanghai – HK Stock Connect. Currently, 6% of the trading volume on HKEx is via the Stock Connect, but this will likely increase in the future, says the SFC. The upcoming scheme will serve as a precaution against international market manipulation and fraud via the HKEx.
China’s GDP grew at an average annual rate of 7.2% during 2013 to 2016, 2.6% higher than the average annual growth rate of the world’s developing economies during the same period, according to the country’s National Bureau of Statistics. During the first half of this year, China’s GDP recorded an annualized growth of 6.9%. Chinese analysts predict that the country’s annual GDP growth for 2017 will be 6.8%.
China’s Purchasing Managers' Index (PMI) recorded 50.6 in September, the lowest it has been since January 2016. The figure, released by Markit and Caixin, is lower than the PMI of 54.4 recorded by China’s National Bureau of Statistics. However, both figures indicate flat growth in China’s employment in the service industry. A figure under 50 would represent a contraction.
As of September 30, China Securities Regulatory Commission (CSRC) received IPO applications from 405 companies, 328 of which were approved and 53 rejected. The pass rate has fallen to 80.99%, recording a nearly 10% decrease compared to the same period last year. China’s jammed IPO applications will be eliminated in about one year, say Chinese analysts.
The 4th China Smart City International Expo was held in Shenyang, Liaoning. Two national innovation centres on big data were launched in the city. Big data transactions will be rolled out in Shenyang by the end of this year.
China will continue reducing the leverage ratio of state-owned enterprises (SOEs) through reforms, according to an official from National Development and Reform Commission (NDRC) talking to Xinhua News Agency. NDRC will focus on reducing the leverage ratio of SOEs and set up different warming lines according to the characteristics of different industries.
China’s One Belt One Road (OBOR) Initiative contains promising opportunities such as huge funding demand in infrastructure projects, said Chen Siqing, Chairman of the Board at Bank of China. Due to the long life cycle and the large investment, many of the OBOR related projects have difficulties in funding, Chen added, noting that interested financial institutions should innovate in service and products and form a system of financial protection.
The total market value of China’s National Equities Exchange and Quotations (NEEQ), or the “New Third Board”, has reached 524.52 billion yuan in 2017, with 11,594 companies listed on NEEQ. More than 2,000 NEEQ-listed companies issued stocks in 2017 YTD and the amount of the stocks accounts for 97.985 billion yuan.
China’s Purchasing Managers' Index (PMI) for September increased to 52.4%, recording a growth of 0.7% compared to August, based on information from China’s National Bureau of Statistics. This marks the highest PMI since May 2015. The GDP growth of the third quarter of 2017 is predicted to be 6.8%, according to several Chinese analysts talking to yicai.com.
Cargo train services between Chengdu, capital of Southwest China's Sichuan province, and Czech capital Prague started service recently. This marks the seventh international cargo service from Chengdu, following Lodz, Nuremberg, Tilburg, Almaty, Minsk and Moscow. This train service cuts the delivery between the two destinations to 13 days, adding to the geographical advantage of Chengdu.
Interested parties of China’s government and major companies in China’s liquor industry have been promoting Chinese liquor “baijiu” go international. Baijiu brands plan to enter overseas market leveraging China’s One Belt One Road Initiative, said Chinese media. Baijiu’s production currently takes one-third of the world’s liquor production, while the sales volume accounts for less than 1%.
In order to support financial institutions in their financial inclusion efforts, the People's Bank of China will cut certain commercial banks’ reserve requirement ratio (RRR) by 50 basis points to 100 basis points next year. This move will benefit those qualified banks that lend to small to micro companies or agriculture-related businesses. Yet the central bank’s prudent monetary policy will be maintained in order to control risk and serve the country’s deleveraging scheme.
The sharing economy is estimated to maintain a 40% annual growth rate, accounting for 10% of China’s GDP by 2020. China will continue to boost the development of the digital economy. Regulators will respect the market discipline, said National Development and Reform Commission (NDRC), noting the importance of government’s guidance. The regulators will maintain a prudential supervision and decentralize some of its power to the market, according to the NDRC.
China Banking Regulatory Commission (CBRC) will regulate the activities of financial institutions lending to the Chinese local governments. This will serve to reduce the implicit debt. In order to control the risk of the real estate bubble, the CBRC will further tighten its supervision on cash loans. The regulator has also taken steps in controlling the risk from the shadow banking system.
China’s State Council has issued guidance on anti-money laundering, counter-terrorist financing, and anti-tax avoidance. The guidance highlights more than 20 measures needed to improve the legal environment and to help control the financial risks to China’s economy.
Hong Kong Monetary Authority (HKMA) will take a series of measures to support digital innovations in the banking industry. HKMA will roll out a payment system which enables banks and payment platforms to participate. The regulator will cooperate with the banks in simplifying ‘irrational’ regulations. HKMA will also support innovations in cross-region cooperation with fintechs.
China plans to set up a state-owned natural gas pipeline company. The first plan for this may be issued next year, according to an official from PetroChina. National Development and Reform Commission (NDRC) is discussing this issue with PetroChina and Sinopec, Chinese media have said.
China’s natural gas long-distance transportation system is now mainly run by PetroChina, Sinopec and CNOOC, with PetroChina taking up 70% of long-distance transportation and 90% of the underground gas storage.
Foreign capitals are welcomed to participate in mixed-ownership reforms of Chinese state-owned enterprises (SOEs), said Xiao Yaqing, the director of the State owned Assets Supervision and Administration Commission (SASAC), at a press conference today. China hopes that countries including the US can open up to Chinese capital, said Xiao, noting that Chinese central SOEs should be evaluated with proper, objective and comprehensive criteria.
The cross-border capital flow of mainland China has remained balanced in August, said the State Administration of Foreign Exchange (SAFE). Domestic entities’ foreign trades have also remained stable during the same period. The capital inflows through major channels including trading and investment increased. Regulations on foreign exchange are consistent, said SAFE, noting that legal overseas investments are encouraged.
The central state-owned enterprises (SOEs) of China’s steel and coal industries have exceeded their goals of reducing overcapacity, said the State owned Assets Supervision and Administration Commission (SASAC). During the first eight months of this year, central SOEs has reduced 1,614 tons of steel and 5,510 tons of coal. Last year, Chinese SOEs reduced 80% of the national production of steel and 73% of national production of coal.
The accumulated profit of the SOEs during the first eight months of this year increased by 17.3% y-o-y to 976.6 billion yuan.
Industrial and Commercial Bank of China, COFCO, CRRC, State Grid and three other central state-owned enterprises signed a cooperation framework agreement today on forming a supply chain alliance for funding. The alliance will serve to integrate resource in clients, market, channels, data, and technology. The alliance will promote the innovations in fintech including big data, Internet of things, and blockchain.
China plans to set up a general system of technology transfer and form an interconnected technology market by 2020, according to a recent plan by the country’s State Council. The plan focuses on technology innovations, noting that the country supports the technology transfer between different regions and countries. Technology transfer between defense and civil entities is also encouraged. The plan aims to form a sophisticated national scheme of technology transfer by 2025.
China’s first and biggest bitcoin trading platform, BTCChina, has stopped accepting renminbi and digital asset deposits today at 4:00 AM (UTC). The platform will completely shut down its exchange businesses at the end of this month. The service of withdrawing renminbi and digital assets will stop on October 31. Chinese regulators called for a halt to the rapidly developing initial coin offerings (ICOs) early this month, and hinted to close all the virtual currency trading platforms in the country.
Central state-owned China Unicom’s mixed-ownership reform plan is awaiting approval from China’s Securities Regulatory Commission (CSRC), explained China Unicom in a recent statement. China Unicom highlighted that this would be the last step in its reform strategy. The company is expected to get CSRC approval in about one month.
China plans to set up a centralized financial company to manage the 2 trillion yuan worth of funds held by the finance units of the country's state-owned enterprises (SOEs), according to a source familiar with the matter.
China hopes the US could give equal treatment to Chinese enterprises, and increase high-tech products’ export to China, said Chinese Premier Li Keqiang during his meeting with US Commerce Secretary Wilbur Ross on Sept 25 in Beijing. Based on the principles of mutual respect and win-win cooperation, China is aiming to expand commodity and service trade, and deal with disputes and divergences through dialogues, said Li.
The US welcomes China’s accelerating opening-up steps, and is glad to expand trade and investment cooperation with China, said Ross.
China’s economic growth for next year is estimated to reach 6.4%, according to a recent report from Asian Development Bank (ADB). This indicates a 2% increase compared to the prediction made by ADB in April this year.
The outlook for Asia’s economic growth is positive, said Yasuyuki Sawada, ADB’s Chief Economist. This is fueled by the recovery of global trades and the momentum of China’s economy, Sawada added.
ADB predicts that China’s economic growth for 2017 will reach 6.7%.
China Securities Regulatory Commission issued a modified regulation on M&A disclosures. The new regulation requires fewer items to be disclosed in the M&A applications to shorten the trade suspension period of involved listed companies. In order to avoid insider trading, the new regulation requires the companies to disclose the share reduction plan of large shareholders and some concert parties.
The number of unprocessed A-share IPO applications have been dropping significantly. As of Sep 15, there were only 497 pending A-share IPO applications compared to 780 applications the same period last year. According to Chinese media, over 300 A-share applications have been approved in the first nine months of 2017. It is expected that the Shanghai Stock Exchange will exceed Hong Kong Exchange to be the second largest stock exchange in terms of no. of new IPOs only behind the New York Stock Exchange.
According to Chinese media, asset under management (AUM) by Chinese securities companies continued to shrink in the third quarter due to China's recent efforts to clamp down on the shadow banking sector. As of Sep 10, the total AUM of asset management business of securities companies have declined to 17.67 trillion yuan from 18.1 trillion yuan in the second quarter of 2017. Chinese analysts said that the shadow banking business does not effectively bring more profits to Chinese securities companies.
Following the recent forms of China’s central state-owned enterprises, Guangdong Province is planning to have a wave of reforms among its state-owned enterprises (SOEs), explained Chinese media. They noted that Guangdong's 36 SOEs will be soon conducting M&As in the near future. The total asset of Guangdong’s SOEs is seven trillion yuan, said Chinese media. After the reforms, each enterprise on average will have an estimated asset of 800 billion yuan.
The rating agency, S&P Global Ratings, lowered China’s sovereign rating by one notch to A+ from AA- yesterday. China’s Ministry of Finance (MOF) called this “a wrong decision”. MOF said that S&P focused on issues such as China’s soaring debt, but ignore the characteristics of the country’s financial market and the financial support from the Chinese government. China will further open up and restructure the economy, said MOF, highlighting that the country will maintain proper money and credit growth.
China supports eligible enterprises to participate in the construction of overseas development zones, said Ning Jizhe, deputy director of China’s National Development and Reform Commission (NDRC). These zones will serve as major platforms for overseas investment. Meanwhile, China promotes the innovation and reform of the country’s domestic development zones. This will help to form a more compelling market to attract foreign investors.
Central state-owned power juggernaut State Grid Corporation of China is studying whether to acquire electricity distribution subsidiaries that will be sold by Brazil’s state-owned Centrais Elétricas Brasileiras by the end of this year, according to an executive at State Grid talking to Reuters. State Grid announced its plan of corporate governance reform early this month. This reform is scheduled to be completed by the end of this year.
China Insurance Regulatory Commission (CIRC) supports insurers to invest in community services for aged care. By the end of June, there were eight major insurers in China investing in 29 aged care communities, according to the CIRC. The estimated investment has reached 67.8 billion yuan. Some of the communities have already been put into operation.
China’s State Council extended the time to comply with the new regulation on cross-border e-commerce by one year. The transitional policy will be valid until the end of next year. China will continue to support the development of cross-border e-commerce, said the Chinese State Council. Chinese cities relating to the One Belt One Road Initiative are encouraged to construct cross-border e-commerce facilities.
China wishes to align its One Belt One Road Initiative to Singapore’s development strategies, said China's Premier Li Keqiang. This will improve the trading and investment between China and Singapore. Li welcomes more Singapore enterprises to invest in China and hope that Singapore can support Chinese enterprises participating in the Kuala Lumpur-Singapore High Speed Rail construction project. Singapore wishes to collaborate with China in improving the China – Singapore Free Trade Agreement, said Lee Hsien Loong, Prime Minister of Singapore.
The new regulation on life insurance will take effect this October. This regulation calls for the halting of universal life products. Experts see this as China Insurance Regulatory Commission’s (CIRC) strictest regulation. Some insurers have been trying to design new products that hope to circumnavigate the new regulations, said Chinese media. The CIRC has become notably stricter on approving newer insurance projects.
China has recently deregistered 24 payment platforms that violated relevant regulations. Licenses for running online payment platforms has become scarcer in China, explained Chinese media. An online payment license normally costs 600 million yuan, said a source talking to china.com.cn, noting that some licenses can cost more than 2 billion yuan.
Agricultural Bank of China (ABC) has been promoting its financial support for the mixed-ownership reform in China. There will be more reforms in energy and steel sector in the second half of this year according to the Chinese media. ABC has signed contracts with 43 clients in providing services in such reforms. The bank also offers integrated service solutions for 99 clients and provides 83.4 billion yuan in supporting the funding of 31 companies.
China’s Insurance Regulatory Commission (CIRC) issued a notice in April this year reaffirming its determination in regulating the insurance market. Currently insurance companies found 1,131 irregularities through self-examination, accounting for 98.2 billion yuan; the regulators discovered 2,300 problems in the insurance market, accounting for 1 billion yuan, according to the CIRC. There has not been any irrational overseas investment in China’s insurance market during the first half of 2017, said the CIRC.
China Banking Regulatory Commission (CBRC) recently issued a draft regulation on China Development Bank Corporation (CDB) clarifying the function of this policy bank. CDB plays a key role in China’s ambitious One Belt and One Road initiative. The bank enjoys the advantages as a policy bank but conducts commercial banking business. This differs CDB from the other two policy banks, the Export-Import Bank of China and Agricultural Development Bank of China.
Eight China central state-owned enterprises were selected as the next mixed-ownership pilot enterprises, according to Chinese media. In addition to COFCO Capital and China National Gold Group Gold Jewellery Co., Ltd, these list of companies might also include Huaneng Capital Services Corporation Ltd. and China National Salt Industry Corporation, reported Chinese media.
China’s State Council recently issued the guiding opinions on guiding Chinese private investment. The country will further open up in areas including infrastructure and public utility. Private investments are encouraged to participate in the PPP (public-private partnership) projects in such areas. Chinese analysts said that the money invested in these projects has been increasing, the first three quarters of 2017 has maintained a growth rate of 50%.
Hui Ka Yan, Chairman of the Board of China Evergrande Real Estate Group Limited, has become the new richest individual in China and the second richest person in Asia.
As one of the largest property developers in China, Evergrande Group’s stock price has been on the rise. The 58-year-old Hui recorded a new net worth of 39.1 billion according to the recent figures from Forbes.
China will set up a fund of over 100 billion yuan to support the mixed-ownership reform of Chinese central stated-owned enterprises (SOEs), said Chinese media. The fund is still waiting for the approval from China’s State Council.
The shareholders of this fund will include influential Chinese private enterprises with solid backgrounds in finance and real estate in addition to central SOEs and SOEs, said Chinese media. The fund has also drawn attention from Chinese internet juggernauts such as Alibaba, Baidu and Tencent.
The National Development and Reform Commission (NDRC) recently announced that China's would further ease restrictions on foreign investment admissions. The NDRC highlights that there will be favorable rules in areas including finance and new energy vehicles during the second half of 2017.
China has eliminated about 30% of the existing foreign investment admissions restrictions in July this year, said the NDRC. The foreign investment negative list, which has been used in China’s 11 free trade zones (FTZs) will be deployed nationwide. Foreign investors off this list will not be prohibited from entering China’s market.
China Banking Regulatory Commission (CBRC) issued a draft regulation on the supervision of China’s Development Bank (CDB), regulating the bank’s management and prudential supervision. CDB plays a key role in China’s ambitious One Belt and One Road initiative. This regulation serves to clarify the function of CDB forming a mechanism for areas including corporate governance, capital restraint, and risk management. The draft regulation is open for the public’s advice.
Central state-owned China Railway Corporation, the country’s national railway operator started its reform early in September, said Chinese media. The reform aims to separate state-owned enterprises from the government.
After the reform, the company’s 18 subsidiaries which used to serve as railways bureaus will be renamed by November this year and operated under new management from next year.
There will be no layoffs resulting from the reform, said Chinese media, noting that the reform will enhance the company’s commercial viability.
China’s overseas investment has turned to be more rational. According to the Chinese Ministry of Commerce (MOC) Chinese investors invested in 4789 overseas non-financial companies in 152 countries during the first eight months of 2017. Amounting to US $68.72 billion this represents a decline of 41.8% y-o-y of overseas Chinese investments. There were no new investments in overseas real estate, sports, and entertainment projects.
China’s Ministry of Commerce (MOC) is cooperating with interested departments in expanding renminbi settlement business in cross-border trades and overseas investment. This will help Chinese enterprises in dealing with exchange rate risks.
MOC will adhere to the mission of seeking stable development and serve to reduce the external risks for foreign trades.
Chinese state bodies have issued an implementation plan today promoting the production of ethanol. The plan states the country’s 2020 targets for nationwide ethanol gasoline use. Ethanol related Chinese concept stocks are expected to rise, say Chinese analysts.
China has been promoting ethanol gasoline since 2001, with 11 cities are now using ethanol, accounting for 20% of the country’s total volume of automotive fuel.
The announcement was issued by China’s National Development and Reform Commission (NDRC), the National Energy Administration, and the Ministry of Finance, along with some other interested departments.
Chinese regulators are shutting down virtual currency trading platforms, according to a source close to the regulators talking to cnstock.com. Regulators are talking with relevant platforms, says the source.
The rapid growth of virtual currency in China, such as Bitcoin, challenges the regulators in tackling money laundering and managing capital flows, says Sheng Songcheng, counsellor to the People's Bank of China (PBoC). PBoC will maintain its dominating position in the monetary market even when China develops into a cashless society in the future.
China Securities Regulatory Commission (CSRC) is to issue regulations on home rental Real Estate Investment Trusts (REITs). China has been promoting the housing rental market, and REITs are expected to be at the top of the priority list for Chinese regulators.
The funding of Asset-Backed Securitization (ABS) and REITs is suitable for the Chinese market, say Chinese analysts, noting that the two channels are expected to play a major role in the funding of home rental companies. This market in China is expected to be promising, say the analysts.
China Securities Regulatory Commission (CSRC) is to join the Organization for Economic Co-operation and Development (OECD) Corporate Governance Committee. The move will require CSRC to amend existing government regulations to comply with international conventions.
"With the approval of China’s State Council, CSRC is willing to accept the invitation of joining the Corporate Governance Committee of the OECD,” says Liu Shiyu, chairman of CSRC. China will become an active participator in implementing the G20 / OECD Corporate Governance Guidance, says Liu.
Chinese regulators issued a notice in early September defining initial coin offerings (ICOs) as an illegal form of fundraising. Since then, Chinese ICO platforms have been cleaning up their businesses. So far, several platforms have completely removed their ICO related services. 30 platforms are providing investors with services of refunding and repurchasing. Fifty platforms have issued notices of cleaning up their businesses.
The Shanghai and Shenzhen Stock Exchanges jointly issued draft guidelines on September 8 for securities companies on the risk management of stock-pledged repurchase transactions.
For a single transaction, the maximum proportion of the outstanding shares that can be pledged as collateral is set to be 50%, according to the guidance.
As of September 11, the Shanghai and Shenzhen exchanges have 122 listings with pledged collateral exceeding 50%. Companies with listings exceeding 50% will be effected by the new rules, according to Chinese analysts, who say that these companies might cope with the rules by setting up funds or loaning on credit.
Hong Kong will sign an agreement with mainland China which will let Hong Kong further benefit from the Belt Road initiative, according to Hong Kong Chief Executive Carrie Lam. The new agreement will cover the funding of infrastructure projects, promoting trade and investment, and sharing project information. This agreement is another major agreement following the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) signed in 2003, says Lam. As a free trade agreement, CEPA allowed qualifying products, companies and residents of Hong Kong preferential access to the mainland Chinese market.
Mainland China will support Hong Kong to explore the green bonds market and green credit policy, says Ning Jizhe, deputy director of China’s National Development and Reform Commission (NDRC). As a mature capital market, Hong Kong can use its geographical advantage to develop into a central hub on the Maritime Silk Road. Through Hong Kong, mainland China will continue to internationalize the renminbi and seek new funding channels such as Public-Private Partnership (PPP), says the NDRC.
The first half of 2017 has seen the explosive growth of initial coin offerings (ICOs) in China. After China tightened its regulations on ICOs, the country is to shut down all Bitcoin trading platforms, says an unnamed government source talking to the Wall Street Journal. Hong Kong regulators recently also decided to improve ICO rules, saying that the existing Securities and Futures Ordinance (SFO) fails to supervise fintech sufficiently.
The National Development and Reform Commission (NDRC) said it would encourage steel enterprises to conduct cross-region M&As especially mixed-ownership reform, to improve an effective supply of steel and avoid major fluctuations in the market. China has been cutting the excess and backward capacity in the steel industry.
At the start of 2017, the Chinese government hoped to reduce 50 million tons of steel by yearend. Around 85% of that target had been already met by May this year according to the NDRC.
The public offering of fund has become a crucial part of China’s retirement pension system, said Li Chao, Vice Chairman of the China Securities Regulatory Commission (CSRC). During a recent speech, Li highlighted that it is an important for Chinese regulators to build a sufficient framework for the country’s pension scheme. Chinese pension funds have been faced with a financial sustainability crisis due to a rapidly aging population. Li said that the mutual fund sector should play a major role in supporting retirement schemes.
The applications for fund raising of over 80 public offering FOFs (fund of funds) in China have been accepted and are being processed, that’s according to China’s Securities Regulatory Commission (CIRC). Chinese media has reported that six FOFs recently got their approvals, with four being in Beijing and one in both Shanghai and Shenzhen.
Over the past several years China has been ramping up its mixed-ownership economy by diversifying the shareholding structure of its state-owned enterprises (SOEs). Today, trading in the shares of central state-owned China National Building Material Group (CNBM) and several of its listed affiliated companies were suspended. This indicates that CNBM is about to announce some major news which can possibly be related to reforms, said Chinese media.
Early this year, CNBM said it had been discussing plans to enhance the integration of its 15 listed companies.
Chinese industry insiders are calling for relaxed measures on stock index futures. Economic Information Daily, a Chinese official media organized by Xinhua News Agency, said today that policies for China’s stock index futures need some moderate relaxation.
Currently the market is somewhat stable and investors are slowly regaining confidence said Chinese media, indicating that now is a good time to reform the regulations and policies. China Securities Regulatory Commission is aware of this demand, CSRC Vice-Chairman Fang Xinghai said today.
China’s Ministry of Industry and Information Technology (MIIT), together with relevant regulators and institutions, will promote the development of AI by deploying regulations and policies, said Chinese media.
Smaller enterprises and start-ups will benefit from favorable financial and tax policies. Regulators will promote the development of AI innovations by setting up innovation bases. In order to cope with the possible legal and ethical issues, regulators will improve relevant legislations.
China’s Insurance Regulatory Commission (CIRC) recently issued a notice to Chinese insurers saying that cases and statistics relating to fraudulent transactions within the trade credit insurance sector shall be reported to CIRC by the 15th of this month. Information collected will contribute to finding effective measures to cope with the fraudulent transactions. Relevant cases have happened in sectors including short-term export credit insurance and domestic trade credit insurance.
China’s Insurance Regulatory Commission (CIRC) will further open up the Chinese insurance market. In terms of the existing foreign insurers in China, regulators will improve the supervisory environment for them and encourage them to develop their business in health, pension, and catastrophe insurance sectors.
China will also improve policies of foreign investment admissions to attract more excellent foreign insurance institutions.
HSBC Bank (China) became the first foreign bank to provide facial recognition payments in China. In addition to the existing dynamic verifiable code service, this new technology will help to improve the security of mobile payments. China’s leading mobile payment platform, Alipay, debuted its facial recognition payments service early this year. The service received a mixed reaction in terms of its necessity.
Chinese media said that the People's Bank of China (PBoC) recently issued a notice, requiring banks and payment institutions to stop the services for cryptocurrency token issuance and transactions platforms. The services include opening accounts, registration, trading, clearing, etc. Banks and payment institutions are also required to investigate existing accounts suspected of fundraising through tokens. Such accounts shall be monitored and reported to regulators.
China’s Banking Regulatory Commission (CBRC) has been recently tapped to become the financial supervisor for financial licensing entities such as leasing, factoring, and pawn companies, according to Chinese media.
After this possible reform, the supervisory mode will be similar to that of micro-credit and P2P online loans companies, said an officer from a local regulatory institution. CBRC will guide the supervision, along with the local Financial Service Offices in implementing the regulations. The task could be challenging for regulators as there are more than 20,000 relevant financial institutions within China.
China Securities Regulatory Commission (CSRC) recently said that some of China’s money market funds with a large amount of assets need to be supervised with special regulations to mitigate domestic systemic risk. “Everyone knows what I am referring to and there is no need to point it out,” said Li Chao, Vice Chairman of CSRC. Yu’e Bao (余额宝), managed by Tianhong Asset Management, is an investment product of Alibaba’s payment affiliate Ant Financial. It has become the world’s largest money market fund, with a total amount of 1.43 trillion yuan as of June 30 this year, surpassing China Merchants Bank’s deposit of 1.3 trillion yuan.
A recent report on China’s energy finance development shows that the country’s energy finance, especially the clean energy sector, will experience explosive growth during the 13th Five-Year Period (2016-2020). The report was published by Central University of Finance and Economics and revealed that the investment demand of China’s clean energy finance, including nuclear power sector will amount to about 3.1 trillion yuan. Solar energy on its own will need a total of 1 trillion yuan of investments by 2020.
The Leading Group for Implement Special Rectification Work on Internet Finance Risks recently issued a notice defining ICOs (initial coin offerings) as illegal fund raisings. New ICOs projects are prohibited to be issued, and finished projects will be judged case by case. ICOs platforms will suspend operations and report to local regulators, said an officer from a blockchain platform. According to the Leading Group’s draft list there are 60 existing ICOs companies within China.
China’s Securities Regulatory Commission (CSRC) recently said that there might be more reform plans in terms of bourses’ function and investors’ claim settlement. CSRC is giving up some of its supervisory power and more of its resources will be used to protect investors and clamp down on illegal activities. Chinese analysts said that the Shanghai and Shenzhen exchange would aim to have additional autonomy in rule making. Moreover, both exchanges will have greater authority to act upon unusual trading activities.
China has been promoting a mixed-ownership economy by diversifying the shareholding structure of its state-owned enterprises (SOEs). Following China Unicom’s recent announcement of its reform plans, national railway operator, China Railway Corporation (CR) yesterday said that it had invited several companies including Alibaba, Tencent and state-owned FAW Group to participate in its mixed-ownership reform. Highlighting that there has always been good cooperation between the two companies, SF Express also said it will be an active participator for CR’s reform. In the first half of this year, CR had a total net loss of 2.968 billion yuan and its debt increased to 4.77 trillion yuan.
The People's Bank of China (PBoC) yesterday announced that commercial banks are no longer allowed to issue new interbank negotiable certificates of deposit (NCDs) with a tenor longer than one year. The new regulation takes effect from today.
This move was seen as improving the debt ratio assessment of the banking industry and reducing interbank risk, say Chinese analysts, noting that the new regulation might put smaller players under new pressure. But a PBoC official said that the change in regulation would not have much impact on the interbank lending market according to their results from a simulation.
A source close to regulators said that China Banking Regulatory Commission (CBRC) might become the regulator for the country’s funding leasing business, according to the China Business Journal. Recent years have seen the rapid growth in China’s funding leasing market. This sector has been regulated by the Ministry of Commerce (MoC) and CBRC only has supervising responsibilities. This move complies with the Financial Stability Board’s requirements, said the source, highlighting that there have not been any officially issued documents. MoC and CBRC have not responded to the news yet.
In order to set up a unified national trust registration system, China’s Banking Regulatory Commission (CBRC) recently issued regulations on the process of trust registration, highlighting the registration shall be protected by law.
China Trust Registration Co., Ltd, which was established in late December last year, will be in charge of relevant registration procedures, and the registration is free of charge. The regulations will take effect from tomorrow, but relevant institutions can have three months to comply with it. This will help strengthen market discipline and transparency, and will reduce the risks in this industry, said Chinese analysts.
China’s State Council recently issued an interim regulation on private investment funds, listing several detailed prohibitions on private investment funds’ managers and custodians. The regulation, which is said to be the strictest so far, says that those with net assets less than 50% of their paid-in capital and those with debt over 50% of their net assets are not allowed to be a private investment fund’s managers, major shareholders or partners. Private investment funds are required to reveal sufficient information on investment risks to the investors and are prohibited to promise any minimum profits, according to the regulation.
The first half of this year has seen China’s explosive growth of initial coin offerings (ICOs), a crowdfunding product using cryptocurrency. But due to its high risks, Chinese media recently has been discussing whether ICOs should be supervised, and regulators are also having meetings on this issue.
Sources say that regulations might be issued at the end of this year and ICOs in Beijing might be regulated in advance, according to eeo.com.cn. National Internet Finance Association of China (NIFA) yesterday also warned the risks of ICOs, highlighting that some institutions have misled investors to raise funds through ICOs, being suspected of illegal fundraising.
Postal Savings Bank of China, which executed the largest IPO on the Hong Kong Stock Exchange in 2016, recently announced its upcoming Shanghai IPO plan. The initial IPO size will be 5.172 billion shares at par value of one yuan per share. According to the official announcement, the proceeds from the IPO will be support PSBC's capital base.
According to Chinese media, Chinese regulators are now considering letting the social security fund hold some state-owned assets that are not part of listed SOEs. It is expected that over a trillion yuan of state-owned assets will be shifted out from non-listed SOEs to the social security fund. Currently, the social security fund is running over 2.5 trillion yuan of pension funds with an annual return of 8.37%.
Following the growth of the bike sharing industry in China, large Chinese conglomerates are now eyeing the automobile sharing industry. According to Chinese media, Alibaba, BMW, HNA and Vanke are all investing in this new market. As of 2016, there were 360 million license holders but only 140 million cars in China. Currently, there are over 6300 car renting companies. While there is market potential in China, experts are questioning whether automobile sharing companies can easily break even due to a higher operating cost of such activities.
China’s State-owned Assets Supervision & Administration Commission (SASAC) yesterday, announced that world’s largest coal supplier, Shenhua Group had merged with power producing giant, China Guodian Corporation. The M&A of these two central state-owned enterprises has created a 1.8 trillion yuan energy supermajor, ranking the fourth among China’s largest energy enterprises. The M&A was seen positively with experts believe that the deal will reduce over-capacity and “influence the landscape of the industry”, said Chinese media. Sources from the power industry indicated that China’s National Nuclear may soon merge with China Nuclear E&C Group. Moreover, China Huaneng Group might merge with State Power Investment Corporation.
Mainland China users of Apple’s App Store and Apple Music can now pay through Tencent Holdings' mobile payment platform, WeChat Pay. The payment method is supported by iOS 10.3 or later versions. WeChat Pay and Alibaba’s Alipay have been dominating China’s cashless payment system. Apple’s App Store users have been growing rapidly since November last year when the App Store announced that it would accept Alipay transactions. Apple CFO Luca Maestri said early this month that users for the paid service of App Store and iTunes increased by 12% to 185 million during the past three months, highlighting the significant contribution from accepting more payment methods such as Alipay.
The first half of this year has seen an explosive growth of initial coin offerings (ICOs) in China. A crowdfunding product thought the use of cryptocurrency, ICOs have been the subject of much debate on whether they are illegal or not. According to Chinese media, the People's Bank of China (PBoC), China Securities Regulatory Commission (CSRC) and China Banking Regulatory Commission (CBRC) had a meeting on ICOs this month. Due to their high risk, ICOs are certain to be regulated in the long run, said a CSRC official. Chinese analysts said that some companies might move their ICO activities overseas if the regulations are too strict.
China’s Banking Regulatory Commission (CBRC) recently issued a guidance on online lenders stating that within the first five working days of every month, online lending platforms should disclose information to government. This includes the amount and volume of online loans that are 90 days or more past due.
This sets a clear standard for online lenders on assessing overdue loans. The guidance indicates that online lending business will be regulated with the same risk assessment standard of the banking industry highlights Chinese analysts. Online lending platforms will have six-months to comply with the new regulation.
Chinese IPO has been growing significantly since the second half of 2016. During the first half of this year, 308 companies raised 155.4 billion yuan from IPO activities with nearly 10% capital being paid to intermediaries such as investment banks. Chinese analysts said about 60% to 90% of IPO relevant fees were paid to investment banks for their underwriting services.
China currently has no regulations or standards for the allocation of intermediary fees resulting in a huge discrepancy among different institutions. China Merchants Securities received the highest underwriting fee of 157 million yuan from a single IPO project in late July becoming the biggest intermediary winner for the first half of 2017.
As a precaution against international market manipulation and fraud via the HKEx, China’s Securities Regulatory Commission (CSRC) has sought to implement a real-name registration scheme. With further integration planned between the HKEx and mainland market there are fears that international financial predators would be able to trade A shares and investment in products such as ETFs and futures directly under the Shenzhen/Shanghai – HK Stock Connect.
HKEx and regulators of mainland China and Hong Kong will meet soon to discuss relevant schemes including a legal entity identifier (LEI) system reported local Hong Kong media.
According to the National Development and Reform Commission (NDRC), China will focus on promoting and speeding up the mergers and acquisition (M&A) of steel enterprises in major regions within the country.
Officials China’s Iron and Steel Association hope that M&A activities within China's steel industry will push the sector’s debt ratio to under 60% in the next three to five years.
China's market will further open up to foreign investment by relaxing additional restrictions.
Accord to China’s State Council, banking, securities, and insurance industries will reduce the constraints on the proportion of foreign shares and lines of business, Areas including new energy vehicles, ship design, and international maritime transportation will also see the relaxation on foreign share ownership.
China Unicom, who recently announced its mixed-ownership reform, today started to set up an alliance among Chinese corporates to create an Internet of things (IoT) ecosystem. In addition to China Unicom, the alliance has 30 members including internet giants Baidu, Alibaba, and Tencent (BAT), Chinese mobile device companies ZTE, Huawei, and Ericsson, and state-owned China Aerospace Science & Industry Corporation. China Unicom said such business innovations will be one of the company's core strategies after the corporate reform.
As China starts to implement the Common Reporting Standard (CRS), Chinese high net worth individuals (HNWIs) are seeking new approaches to hide their private wealth. Overseas private trust companies, different from family offices have become popular vehicles for Chinese HNWIs. Private trust companies usually adopt a model where a special purpose vehicle, which has no beneficiary, acts as the shareholder of the trust companies. As a result, regulators are unable to find the information of the investors through tracking the beneficiaries. According to Chinese media, the current CRS in China does not either include property assets into the reporting scope. Therefore, some wealth managers tried to promote their property solutions to their clients.
In order to reduce the debt ratio of the central state-owned enterprises, China’s State Council recently proposed to set a strict debt ratio warning lines sector by sector. Chinese analysts predicted that the warning lines for coal as well as iron and steel industry would be relatively high.
Those enterprises with debt ratios exceeding the warning lines will have a higher weight in the debt ratio assessment during their annual performance assessment, said the State Council, highlighting that investment projects with possibilities to increase the debt ratio will be prohibited.
China's Ministry of Commerce (MOC) recently said that China would focus on the supervision of overseas investments’ authenticity. China has been encouraging rational overseas investments. The bogus and irrational investments will be strictly curbed, said MOC. The supervision for overseas investments will be reinforced and the filing system will be improved. The legislation overseas investment will also be promoted, according to MOC.
China has sped up the central state-owned enterprises’ mixed-ownership reform by diversifying their shareholding structure after this year’s “Two Sessions”. State owned Assets Supervision and Administration Commission of the State Council (SASAC) yesterday announced the reform plan for central state-owned China Poly Group Corporation, stating that two other central state-owned enterprises, Sinolight Corporation and China National Arts and Craft (Group) Corp., will be merged into China Poly, becoming China Poly’s wholly-owned subsidiaries. These two companies will no longer under SASAC’s direct supervision.
China’s Ministry of Commerce (MOC) yesterday expressed its strong discontent with the United States' move on Friday to initiate an investigation under Section 301 of Trade Act of 1974, saying that the US neglected the World Trade Organization's rules and conducted unilateral and trade protectionism acts. China will take appropriate measures to defend the country's lawful interests. The investigation was an act of “unilateral protectionism” and sent the wrong message to the world, said the MOC. Chinese analysts said that the US was unlikely to ease its pressure on China.
The State Council recently issued regulations on financing guarantee companies. The regulations highlighted that China would boost financing guarantee services for small and micro businesses. At the same time strict rules were established to supervise the industry. Upon the establishment of a financing guarantee company, the company must have registered capital of at least 20 million yuan. If a financing guarantee company plans to set up branches in different provinces, it must have a registered capital of no less than 1 billion yuan. Outstanding liabilities guaranteed by a company should not exceed 10 times of its net assets. The regulation will take effect on Oct 1, 2017.
China Securities Regulatory Commission (CSRC) has officially approved the ownership reform of China Unicom in its recent press release. When China Unicom announced the mixed-ownership reform last week, some market experts believed that the reform did not comply with the new refinancing regulation issued early this year. Under current refinancing regulation, listed companies should not issue more than 20% of its outstanding shares in its private placement program. However, China Unicom issued new shares equivalent to 36.67% of total shares. According to the CSRC, China Unicom's mixed-ownership reform is a blueprint to the SOE reform so the CSRC will treat it as a special case and give a green light to that.
China’s State Council recently issued a guidance, stating its restrictions on certain overseas investments. Domestic enterprises are prohibited to participate in overseas investments that contradict China’s policy of diplomacy, economic opening up and macro control.
Overseas investment in sports clubs, film and television studios, as well as real estate, hospitality, and entertainment industries, are restricted. Unapproved export of core technologies and products from military entities are prohibited. The guidance also prohibited overseas investments in industries such as gambling.
The National Development and Reform Commission (NDRC) recently released an article on the development and construction of the Xiong’an New Area of Hebei Province. Railways between Beijing and Xiong’an are under construction and will be put into operation in 2019. It will take about 30 mins to travel between these two cities, according to Chinese media.The demand for green investment in the Xiong'an New Area will amount to about 1 trillion yuan in the next five years, said Ma Jun, Chief Economist at the Peoples Bank of China (PBoC).
China’s National Development and Reform Commission (NDRC) decided to issue policies to promote private investment and improve business environment. NDRC will promote the innovation of public-private partnerships (PPP) to boost the overall liquidity of the assets. Investment-return (I&R) mechanism will also be enhanced to attract private investment.
In a press conference of China’s Insurance Regulatory Commission, Sinosure, a state-owned insurance company focused on trade insurance, and said that they would provide insurance support to Chinese corporates going abroad. The company will especially focus on ventures to One Belt One Road (OBOR) countries. As of the first half of 2017, Sinosure has provided insurance services for $ 3.1 trillion trade activities and helped 240 banks raise 2.8 trillion yuan for their exporting clients.
In a notice issued by NDRC, financial innovations were encouraged in the OBOR Initiative. Financial institutions such as policy banks and Silk Road Funds will play a larger role in providing funds to the projects. In addition, the NDRC encourages the collaboration of Chinese and overseas corporates through direct investment and M&A.
China has been promoting a mixed-ownership economy by diversifying the shareholding structure of state-owned enterprises (SOEs). In its transition towards a joint-stock company, central state-owned telecommunications operator, China Unicom, recently announced its plan of issuing shares to raise 78 billion yuan of capital. Private enterprises such as Baidu, Alibaba, and Tencent (BAT), together with central state-owned China Life Insurance Company and CRRC, will be its strategic investors. The 14 investors will subscribe 35.19% of China Unicom’s A Shares, with China Unicom itself holding 36.67%.
China’s State Council recently issued a circular on attracting foreign investments, stating that China's market will further open up and the restrictions on foreign investment admissions will be loosened. The circular highlighted industries including banking, insurance, and security.
The foreign investment negative list, which has been used in China’s 11 free trade zones (FTZs), will soon be deployed nationwide to form an open and transparent investment environment. In addition, preferential tax policies are provided if foreign investors’ profit coming from Chinese resident enterprise is invested directly in projects under the encouraged category, according to the circular.
China's State Council recently issued opinions on the expanding logistics enterprises’ financing channels, highlighting that eligible state-owned enterprises (SOEs), financial institutions, large logistics enterprise should set up investment funds to support logistics enterprises.Banking industry is encouraged to cooperate with logistic enterprises in terms of developing electronic systems. The opinions also said that financial institutions in banking are encouraged to develop the supply chain financial products and financing solutions to provide comprehensive financial services such as crediting rating and systematic risks managing.
US President Donald Trump recently signed a memorandum to direct US Trade Representative (USTR) Robert Lighthizer to examine China's intellectual property practices. Chinese media said that this may lead to the US imposing new tariffs on imports from China, and the US would possibly take actions under Section 301 of the Trade Act of 1974, which might impact on China's high-tech industries.
But the US will not “easily provoke a trade war" and Sino-US trade will not be affected in the short term, as relevant investigation and negotiations will take longer than six months to one year, according to Chinese analysts.
By the end of July, China’s commercial housing inventory decreased by 20.8% YoY, to 341.81 million square meters, according to National Bureau of Statistics of China. This was the lowest level recorded in the past 33 months, China’s commercial housing inventory is now back to 2012 levels.
The numbers indicate that China has almost achieved its target of destocking the unsold houses after 20 months of efforts. A nationwide moderately tightened financial policy will be deployed soon, especially in the country’s three or four tier cities state Chinese analysts.
In order to support One Belt, One Road (OBOR) initiative and other development strategies, the National Development and Reform Commission (NDRC) recently issued a notice stating that relevant departments should offer priority support to OBOR projects through the application and issuance of bonds.
As for major regional development projects such as Xiongan New Area, the NDRC said relevant departments should encourage the qualified issuance of corporate bonds and provide support in reducing the costs for issuing such bonds.
As of the end of June this year, the assets of Chinese money market funds (MMF) amounted to 5.11 trillion yuan. This represents an increase of 18.09% in value compared to the end of 2016. Chinese media said new regulations will be issued in order to supervise the rapidly growing money market funds.
A more strict regulatory will reduce the risk in this market, but consequently, the return from MMF will get hurt as well, according to Chinese analysts.
The Government of Macau SARG plans to build a smart city as part of its major 2020 plan. The Government will collaborate with Alibaba in relevant areas including constructing a cloud computing center.
Macau’s government is estimated to have already invested MOP$500 million in the territory’s technology sector for 2017. For the next two years, Macau will increase around MOP$200 million in its government budget per year focusing on the smart city plan.
China’s Banking Regulatory Commission (CBRC) recently issued a proposed regulation for institutions conducting corporates' debt/equity swaps. China Construction Bank (CCB) has already established itself as a debt/equity swap institution, with relevant asset of companies signed with this bank amounting to 544.20 billion yuan.
Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China are preparing for such institutions with approvals. Chinese analysts said the total asset of companies signed with the five state-owned banks had exceeded one trillion yuan, noting that the outlook of Chinese corporates' debt/equity swap to be a positive move.
The People’s Bank of China (PBoC) recently released the 2017 China’s Regional Financial Operation Report, highlighting that the speculative investments in real estate market would be strictly curbed. Over the past four months banks issuing illegal loans to property developers or individuals have been punished by the PBoC with the highest fine being 16.7 million yuan.
In Q2 2017, the growth rate of China’s housing mortgage loans decelerated by the end of June. The trading volume of China’s real estate market may fall; housing prices may edge down but remain stable, according to PBoC.
In the light of curbing excess industrial capacity, National Development and Reform Commission (NDRC) and 16 relevant ministries announced that 33 construction projects in coal power industry from 10 provinces had been suspended; 61 projects of 20 provinces were postponed. Central state-owned enterprises including China Shenhua Energy Company Limited and China Coal Energy were involved.
The People’s Bank of China (PBoC) also called an end to the financial support towards outdated industrial capacity, according to its "2017 China’s Regional Financial Operation Report".
Looking to instill liquidity management in financial institutions, the People’s Bank of China (PBoC) said in a recent report that certain interbank deposits issued by banks with assets over 500 billion yuan should be assessed under the macro prudential assessment (MPA). The measure plans to start from the first quarter of 2018.
Chinese analysts said that this action would not make too much difference in the short term, but regulators’ attitudes have indicated that policies might be deployed to improve the Chinese supervision system.
People’s Government of Jiangsu Provincial has submitted an application to relevant departments in order to set up a national demonstration zone on sustainable development. In the light of the eco-friendly development, Jiangsu plans to set up this demonstration zone with cities including Xuzhou, Huai’an, Yancheng, Suqian, and Lianyungang. According to Jiangsu’s plan, by the end of 2020, each of the cities mentioned will have at least one industry park with eco-friendly factories.
People's Bank of China (PBoC) will issue regulations on the integration of financial institutions and industrial enterprises. State-owned Assets Supervision and Administration Commission (SASAC) also plans to issue special regulations towards central state-owned financial holdings. Relevant instructions and policies on aspects such as controlling risks and debt-to-equity swap are expected to be issued during the second half of 2017. Chinese central SOEs including China Merchants Group and Power Construction Corporation of China are carrying out deleverage solutions, which will hopefully take effect during the second half of 2017.
State Administration of Foreign Exchange (SAFE) recently released statistics showing that during the second quarter of 2017, the inflow of foreign direct investment on China's domestic financial institutions mounted to 23.30 billion yuan, outflow of 9.02 billion yuan and net inflow of 14.27 billion yuan. The outflow of China's domestic financial institutions’ direct overseas investment mounted to 17.99 billion yuan, inflow the 14.87 billion yuan, net outflow of 3.12 billion yuan.
The Supreme People's Court (SPC) issued a supreme guidance on August 9th to regulate misconducts and violations in finance industry especially fintech sector. The guidance points out that fraud fund raising activities or unauthorized fund raising activities in the name of financial innovation will be regarded as illegal. The guidance also states that it will implement a stringent disciplinary actions towards fintech crime. In addition, the SPC guidance also set requirement on key issues such as shadow banking and zombie companies.
For the full guidance, please go to http://www.court.gov.cn/zixun-xiangqing-55642.html
In a bid to further broaden the financing avenues of infrastructure projects from Chinese enterprises, the National Development and Reform Commission issued a new guidance that introduces new classes of enterprise bonds. The new classes of enterprise bonds are sector specific and the proceeds of the bonds can only be used for the projects within the specific sector. For example, enterprises issuing a health sector enterprise bond can only use the proceeds for health sector infrastructure projects. The principal and interest of the bond will be paid by the future cash flow generated from the infrastructure projects. The guidance also encourages third party guarantee as a credit enhancement mechanism.
China’s Banking Regulatory Commission (CBRC) recently issued a regulation on online loans from private commercial bank, noting that private commercial banks need to submit applications before operating online loans business. Private commercial banks are more likely to cooperate with traditional banks to provide syndicated loans, due to their limited capability of attracting deposits. Under this new regulation, this common collaboration may be restricted, because institutions without licenses issued by CBRC are unqualified to operate online loans business. Consequently, whether syndicated loans with participation of platforms such as JD Finance and VIPS are legal or not are still under discussion by Chinese authorities.
According to China’s National Development and Reform Commission (NDRC), the deleveraging process has so far achieved good results in terms of reducing the financial leverage of Chinese corporates. Zombie companies with weak financials are being disposed by the market itself. Since 2016, over 3000 bankruptcy applications have been received by courts. For the first five months in 2017, 3086 M&As with a total amount of 710.75 billion yuan from listed companies have been completed. NDRC states that it will make consistent efforts to reduce the overall debt level by encouraging financially weak companies to go into bankruptcy or to be acquired by companies with higher profitability.
Alipay and Wechat have been recently promoting their own payment platforms with a slogan of "promoting a cashless society". However, a state media started to criticize those payment companies for misusing "cashless" in their marketing activities. The Chinese media pointed out that cash will never disappear and will still play an important role in China. In addition, the media highlighted that it is illegal to reject cash payment for business transactions within China.
According to Chinese media, VISA is applying for a clearing license from People's Bank of China (PBoC), which marks first foreign participant to apply for a bank clearing license in China. The Chinese State Council opened the Chinese banking clearing market back in 2014, which has long been dominated by UnionPay. On June 6, 2017 PBoC issued a guidance that sets the eligibility and application procedures to companies that are interested in clearing business in China. According to Chinese analysts, foreign card issuers such as VISA will be allowed issue renminbi credit cards in China, which offers an alternative to Chinese retail customers.
Based on the data from the Chinese Ministry of Finance, the average debt ratio of Chinese SOEs stood at 65.6% as of the end of June 2017. According to Chinese media, the high debt ratio of Chinese SOEs is a major hurdle in deleveraging the overall market. Historically, Chinese financial institutions were some of the first entities to finance SOEs and evidentially have significant systemic risk exposure to the industry segment.
A government official at China’s State-owned Asset Supervision and Administration Commission (SASAC) said that it was adjusting the capital structure of SOEs through IPOs, private placement, ABS and debt-to-equity swap program. The actions hope to reduce the debt level of SOEs
In an interview with Chinese media, a spokesperson of China’s Banking Regulatory Commission highly commended the positive changes that fintech brings to the financial market. The official also at the same time highlighted the lack of proper regulation of the fintech industry and the rise to risks in the current financial system.
Decentralization and financial disintermediation emerging from fintech solutions has made it difficult for financial regulators to detect risks. The CBRC plans to keep up with the recent wave of fintech and studies into the cooperative models of fintech and traditional financial institutions. Moreover, the CBRC will maintain a balance between promoting fintech development and risk management.
State-owned investment company China Xiongan Construction Investment Group, set up in late July 2017 has recently propelled the stock price of 101 related A-share companies. The spike in interest is due to the company’s key position in getting financing for infrastructure projects in Xiong'an Special Economic Zone. In terms of sourcing financing, the company will apply multiple vehicles such as PPP and project funds.
An official circular from the People’s Bank of China (PBoC) was recently distributed to Chinese banks and third party payment platforms. The new document requires that all third party platforms connect with Wang'lian (网联), (a clearing company set up by PBoC). According to a government official at the Chinese State Council, Wang’lian will weaken the bargaining power of third-party payment platforms in China. The new model will allow banks to gain access to user data and even transaction data which was absent during the old regime.
China’s Insurance Regulatory Commission (CIRC) issued a circular on interbank deposits to Chinese insurance companies. In the new circular, insurance companies should now report monthly the amount of interbank deposits pledged for financing. According to Chinese analysts, the new ruling will better regulate the financing activities of Chinese insurance companies.
In a bid to clamp down money laundering activities and illegal cross border transactions, Hong Kong’s Monetary Authority (HKMA) issued a notice to Hong Kong banks. In the notice, banks are now required to report all ATM withdrawals from UnionPay cards issued in mainland China within the first half of 2017. It is the first time that HKMA has collected data on ATM withdrawals. Neighboring Macau likewise has also ramped up its efforts in reducing money laundering activities. The government recently announced that it would embed all ATMs with a face recognition technology and a KYC (know your client) capabilities.
In a recent press conference held by the China Insurance Regulatory Commission (CIRC) and China Taiping Insurance Company, CIRC recognized China Taiping's contributions to the Belt Road initiative.
According to Ruohan Zhang, a spokesperson for China Taiping, the company provided insurance products for Belt-Road participants and indirectly invested in the projects through their offshore investment arms. China Taiping also set up project funds and invested in project bonds with respect to the Belt Road initiative.
FAW Group Corporation and China South Industries Group Corporation, two leading Chinese state-owned automobile manufacturers, both announced the appointment of their new chairmen.
The chairman of FAW Group Corporation will switch with the chairman of China South Industries Group Corporation. While Chinese media regard it as a signal of a possible merger of the two companies, an official statement from the State-owned Asset Supervision and Administration told Chinese media that the exchange of the two chairmen does not mean that the two companies will be merged.
According to Chinese media, as China further relaxes the restrictions on foreign ownership in automobile joint ventures, improving Chinese local automobile companies via M&As will become more feasible.
An unofficial document from China Banking Regulatory Commission (CBRC) is being circulated among Chinese P2P companies and banks. The document requires Chinese P2P companies to only work with authorized banking institutions registered under CBRC when providing loans to borrowers.
Over the past two years, P2P platforms have been working with various financial institutions such as banks, consumer finance companies and some other financial services companies to provide loans to their customers. Chinese analysts believe that the new circular will have a large impact on non-banking institutions and is conducive to the success of the financial markets.
The Ministry of Finance (MOF) has issued guidance that allows provincial governments to issue municipal project bonds on a pilot basis. The underlying assets of the municipal project bonds will be the projects themselves. The proceeds from the projects should be used for interest and principal payments.
In a recent press conference, Xiaorong He, director of the Supreme People's Court's (SPC) reform division said that letting zombie companies go bankrupt is the perfect way to clear debt issues in the whole supply chain.
According to He, letting companies go bankrupt can fully solve systemic risk. In addition, He stated that the ease of letting a company go bankrupt reflects the maturity of an economy. SPC encouraged authorities to deal with financially weak companies through the bankruptcy process.
Just as when internet companies started disrupting financial industries, online platforms are now gradually taking market share from banks in fund distribution. For many years in China, East Money has been the largest online fund distributor. As of the end of June, 77.77% of mutual funds are available in East Money while 65.89% of all mutual funds are available in Ant Financial. Currently, Alipay has over 350 million monthly active users while East Money only has 15 million.
At a conference held by Ministry of Finance, vice minister Yaobin Shi said that some local governments treat PPP (public-private-partnership) projects as a financing tool, which increases their debt and gives rise to potential risks for local governments.
According to Shi, some local governments promised to buy back shares from private investors to facilitate PPP projects. In a bid to reduce the local governments' participation in the PPP projects, Shi reiterated that local governments should not contribute more than 10% of their budget to PPP projects.
According to Chinese media, to date 43 IPO applications from 26 securities companies have been rejected by the China Securities Regulatory Commission (CSRC). The total potential funds which could have been raised from the rejected IPOs stands at 14.4 billion yuan.
Chinese media estimate that securities companies lost around 864 million yuan in underwriting fees. Guangfa Securities had 21 IPOs approved and five rejected, making it the highest in both categories among all underwriters. China Securities has 42 IPOs pending with the CSRC – the most among its peers.
Sate Administration of Foreign Exchange (SAFE) recently issued 43 disciplinary notices to banks, companies and individuals. Nine banks, including Industrial Bank, Minsheng Bank and China Construction Bank, are on the list.
The major violations among the banks are the lack of proper due diligence and KYC (know your client) procedures when processing cross-border transactions for their clients. The main violations among companies concern fake trades with the intention of illegally moving money out of China.
The People's Bank of China has conducted an investigation into the interbank accounts of Chinese banks between September 2016 and January 2017. The report, which was published in July, shows that 40 banks, including Bank of China, China Construction Bank and Agricultural Bank of China, violated the rules on interbank account management. PBoC issued disciplinary fines to those banks and instructed them to address PBoC’s concerns within three to six months. The banks have been suspended from interbank account related business until PBoC’s concerns have been addressed.
After one year of research and development, WeBank, Wanxiang Blockchain Labs and ENTVIR have jointly launched the first Chinese open-source blockchain platform called BCOS. Currently, Postal Savings Bank of China, China Merchants Bank, Everbright Bank and WeBank have launched their own services in custody, cross-border clearing and syndicated loans, based on blockchain technology.
The Securities Association of China has recently released its report on Chinese securities companies. The report points out that in 2016 net profits of all Chinese securities companies was at 123.4 billion yuan, down 49.57% from 2015. The brokerage business declined significantly while the investment banking business saw positive growth. In the overseas market, Chinese securities companies are also seeking opportunities. Twenty-one percent and 14% of total revenue came from overseas operations for Citic Securities and Haitong Securities, respectively.
During the first half of 2017, China's outbound direct investment was 331.1 billion yuan, 42.9% down from the same period in 2016, Keming Qian, a spokesperson at the Ministry of Commerce, has said in a press conference. However, trade activity grew significantly with Belt-Road countries. Trade activities with Asean countries, India and Russia increased by 21.9%, 30.4% and 33.1%, respectively. According to Qian, ‘unreasonable’ outbound investment has slowed in the first half of 2017.
In a China Banking Regulatory Commission (CBRC) meeting over the last weekend, Shuqing Guo, chairman of CBRC, said that in the second half of 2017 cutting overcapacity and deleveraging the market are still key focuses for the CBRC. Specifically, CBRC will strictly enforce regulations which restrict bank loans to property developers and local governments. According to Guo, CBRC will increase private ownership in the Chinese banking system in a gradual manner.
July saw a record number of mutual funds going into liquidation. Fourteen mutual funds went into liquidation in July and since the start of this year, 32 funds have been liquidated. Among the 14 liquidated funds, most of them had seen large redemptions in the first half of 2017, and the assets under management (AUM) for those funds became relatively small thereafter. As of end of June, there were 260 mutual funds with AUM of less than 50 million yuan.
China Insurance Regulatory Commission (CIRC) has issued new regulations on liability management for insurance companies. According to a spokesperson from CIRC, under the regulations the CIRC will estimate each insurance company's liability management capability. The companies with stronger liability management capabilities will be authorized to sell more innovative products and receive financial support from CIRC. Those with weaker capabilities will be restricted from making investments and issuing short-term insurance products. According to CIRC, the regulations aim to direct capital to the real economy instead of the financial sector.
As China speeds up deleveraging its financial markets, China Banking Regulatory Commission is conducting an examination of interbank loans. According to Chinese media, more disciplinary fine letters will be issued by CBRC to banks violating the rules of interbank loans. Chinese analysts suggest that China's efforts to deleverage the market by cleaning up the shadow banking sector have worked. Banks are cutting their shadow banking businesses and focusing on their core deposit and loan businesses.
The State Council issued an official notice on July 27 encouraging Chinese businesses to innovate. The notice points out that large corporations should take the lead in bringing more innovative solutions to the market. The notice also highlights that financial institutions have to support the real economy sector. Internet plus and Artificial Intelligence were also highlighted as key focuses for China's future economic development.
In an interview with state media, Gang Li, deputy director of China Securities Regulatory Commission (CSRC), said that some members of the media misinterpreted CSRC's statement on direct financing.
Li emphasized that ‘speeding up’ direct financing does not equate to ‘speeding up’ IPOs. But at the same time, CSRC is restricting refinancing and restricting shareholders from selling their stocks, in a bid to move financing to the IPO market. According to Li, the number of IPOs has stabilized and 10 IPOs will be approved each week on average.
Hongling Capital, the P2P platform with largest trading volume in China, announced that it will exit the P2P market within three years. In 2016 the company incurred a loss of 180 million yuan. Shiping Zhou, chairman of Hongling Capital explained that they are not specialized enough in the P2P business, and P2P will no longer be a business line because it is not profitable for them. The company's NPL ratio was only 3% in 2015 while Zhou said that in 2016 the company suffered a large loss from a single loan default.
Chinese investors have been eyeing investment opportunities in Southeast Asia, especially in the TMT sector. In Indonesia, there are fewer than 100 VCs while there are thousands of VCs in China. To Chinese VCs, Baidu, Tencent, Alibaba, JD.com and Didi are their major competitors in Southeast Asia as these technology companies are also aggressively looking for overseas partners in order to be more international.
According to Chinese media, Southeast Asia has recently seen an increasing number of technology talents with overseas education coming back to local markets and starting their own businesses, which makes Southeast Asia a market with large potential growth in the technology space.
Data from China Securities Depository and Clearing Corporation show that 3,253 out of around 3,300 A-share listed companies have pledged outstanding shares as collateral for borrowing. Securities firms estimate that over 50% of share pledging services are provided by securities companies. In the face of the increasing risks arising from share pledging services, securities companies reduced the average funds provided to companies applying for share pledging. For example, ChiNext companies are only able to get around 30% of the value of the collateral, down from 40%.
According to Chinese media, as an important tool to deleverage the financial markets, the debt-to-equity swap programme is likely to speed up in the second half of the year. Data from Ministry of Finance show that as of the end of June, SOE debt stood at 94 trillion yuan, up 11.4% from last June. In addition, SOE ABS and mixed ownership reforms are also likely to gain momentum in the second half of 2017.
Guangdong province has released its economic data for the first half year of 2017. In the first half of 2017, Guangdong province still remained the most productive province in China, with a GDP of 4.19 trillion yuan. Noticeably, it is the first time when both Shenzhen and Guangzhou surpassed Beijing and Shanghai, in terms of incremental GDP. Chinese analysts believe that the high GDP growth of the two cities is driven by increasing exports and increasing project investments with respect to the Guangdong Free Trade Zone.
China Securities Regulatory Commission has said at the Financial Work Meeting that it will speed up improving the infrastructure of China's capital markets, especially for direct financing. Currently, compared to bank loans, the volume of direct financing is still small. The Chinese media estimate that in the first half of 2017 A-share listed companies raised 1.3 trillion yuan through direct financing.
657 companies listed in ChiNext of the Shenzhen Stock Exchange have released their semi-annual profit results. According to Chinese media, the profit growth in H1 2017 slowed significantly compared to 2016 because there have been fewer M&As. The total volume of M&A activities by ChiNext companies grew from 40.4 billion yuan to 214.5 billion yuan from 2013 to 2015. It is expected that M&A activities will continue to slow down in the H2 2017 due to tighter supervision.
Since 2017 there have been more than 10 changes in senior executives at Chinese trust companies, from restructuring of duties, dismissal due to violations, and appointment by other companies. As China is striving to deleverage the financial markets and clamp down the shadow banking sector, trust companies are suffering as they constitute a large part of the shadow banking sector. As of the end of 2016, assets under management of Chinese trust companies amounted to 20.22 trillion yuan.
SOEs have started to speed up the deleveraging process as well as their debt-to-equity swap programmes, according to Chinese media. Currently, 12 central SOEs have signed debt-to-equity agreements with their counterparties, which includes banks and corporates.
High debt has long been a problem for China's SOEs. Since last October China has issued several notices to address the high levels of debt in China's non-financial institutions.
Although China Telecom has denied the participation of Baidu, Alibaba, Tencent and JD.com (BATJ) in their mixed ownership reforms, many Chinese media pundits still believe they will be included in the future. The big four Chinese technology companies have already started cooperating with China Unicom in mobile phone sim cards.
Sources told the Chinese media that the big four technology companies will make equity investments in China Unicom of a total value of up to US$11.8 billion.
Data from Wind show that among 24 steel companies listed in the A-share market, 21 of them recorded higher-than-expected profits. It is believed that the financial performance of the steel companies is attributed to the increasing price of steel. Market analysts believe that with China's continuous efforts to cut overcapacity, high steel prices will still be sustainable.
China Insurance Regulatory Commission (CIRC) has issued temporary regulations for credit insurance products. The regulations forbid certain activities, including selling insurance products where the underlying assets are privately sold bonds or public sold bonds rated below AA+. The regulations also forbid insurance companies from providing guarantees for unqualified P2P companies. For further details (in Chinese), please see: www.circ.gov.cn/web/site0/tab5168/info4076391.htm
The State Council has issued a circular on AI development, which demonstrates China's determination to develop its AI (Artificial Intelligence) capability. The circular requires that by 2030, China's AI technology capability has to be one of the top in the world and that core AI products should exceed one trillion yuan in total value. Since 2016, Chinese technology companies such as Baidu and Alibaba, have begun implementing AI labs.
Since April, when the People's Bank of China (PBoC) required third-party payment companies to deposit reserves, it has accumulated 84.1 billion yuan in reserves from third-party payment companies. Chinese media estimate that third-party payment companies will lose 300 million yuan in profit due to the large reserve requirements. Alibaba and Tencent, the two largest payment platform owners, will lose 40 million yuan and 29 million yuan, respectively, according to estimations in the Chinese media.
In a press conference held by the State Administration of Foreign Exchange (SAFE), Yingchun Wang, spokesperson for SAFE, echoed a recent statement from the National Development and Reform Commission and the Ministry of Commerce. SAFE will collaborate with other authorities to monitor 'unreasonable' outbound activities while still encouraging 'reasonable' M&As. Wang also said that China will continue to open its financial markets and push friendlier policies for overseas businesses in the future.
According to Chinese media, central SOEs (SOEs owned by the Central State Owned Assets Supervision and Administration Commission) will be divided into three types – industrial groups, investment companies and operational companies.
The operational companies will adopt a Temasek model (a fund management model developed by Singapore’s sovereign wealth fund) to maintain the assets of the companies, while the investment companies will be responsible for exploring new industries. The industrial groups will consolidate within strategically critical industries such as power and gas. The number of central SOEs will be reduced from 101 to less than 90.
The Ministry of Housing and Urban-Rural Development and other eight authorities jointly issued a circular on the rental apartment market. The circular requires 12 cities with large population inflows, including Guangzhou, Shenzhen and Nanjing, to develop the rental apartment market on a pilot basis. The circular encourages those cities to construct new apartments for rental use. In addition, banking institutions are required to provide financial support for the construction of rental apartments.
In a press conference of the National Development and Reform Commission (NDRC), Pengcheng Yan, a spokesperson for NDRC stated that it will continue to keep an eye on unreasonable outbound investment in real estate, hotels, movie cinemas, entertainment and football clubs. According to Yan, NDRC supports corporates with real expansion needs to do outbound acquisitions. It particularly supports projects under the Belt Road initiative. NDRC said it will keep an eye on non-manufacturing outbound M&As.
The Guangzhou government has issued new regulations for the city's housing market. The regulations state that the renters of an apartment will enjoy the same ownership benefits as the apartment owner. The children of renters will have the same right to go to nearby schools. Guangzhou becomes the first city in China to implement this reform. Chinese analysts believe that once more cities start to follow Guangzhou, the housing price will significantly drop while the house renting market will benefit greatly.
China's technology leader, Tencent, further expanded its footprint in financial market. Taiwan's Fubon Financial Holding Group announced on July 19 that it will partner with Tencent in selling their insurance products. A joint venture of the two groups will be set up in Shenzhen while a business licence is pending at the Chinese regulators. In 2013, Alibaba, Tencent and Ping'An Group jointly set up an internet insurance company, the first insuretech company in China.
In the financial work meeting last week, a new regulatory committee was set up under the state council. The new regulatory committee is called the Financial Stability Committee. As the name suggests, the committee will be responsible for the stability of China's financial markets and for improving the regulatory environment.
Chinese analysts believe that senior officials from People's Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission, China Insurance Regulatory Commission and Ministry of Finance will sit on the new committee. It is also believed by analysts that the new committee may be equally as important as the five existing regulatory bodies.
China's A-share market has been criticized for attracting a lot of companies but lacking a good house-cleaning system. Data from Wind show that since 2001 only 60 companies have been delisted from the A-share market. Shenzhen Century Plaza Hotel was the first and only stock delisted from A-share market in 2017. So few companies are delisted because unprofitable companies are still attractive as backdoor listing targets.
Amid a difficult banking environment, a Chinese bank called WeBank stood out in 2016 with a ten-fold growth in revenue. WeBank is an internet bank registered at the China Banking Regulatory Commission and backed by Tencent. The bank has no physical branch. Eighty percent of the bank’s revenue comes from online micro and small loans. Its main internet banking competitor, MyBank, set up by Alibaba, has a larger asset base and more outstanding loans.
China's trade activities have picked up in the first half of 2017. According to Songping Huang, spokesperson of General Administration of Customs, in H1 2017 China exported 7.21 trillion yuan worth of goods, up 15% from H1 2016, while imports totalled 5.93 trillion yuan, up 25.7% from the same period last year. Huang said that trade activities will continue to grow in the second half, despite some uncertainty in international trade.
Over the past few years, Yuebao has been the only money fund sold on Ant Financial's platform. Now the big four banks in China are all allowed to sell their own money market funds in Ant Financial, with an average annual return of 4.5%-4.9%, slightly higher than Yuebao. It is expected that the big four banks will challenge the leading position of Yuebao in the money market.
On Wednesday, July 12, Jiang Yang, vice chairman of the China Securities Regulatory Commission (CSRC) said that China will strengthen its supervision on the securities market as it aims to keep it fair, open, and impartial. Reforms will improve the capital market, making it more open to foreign investors to better serve the economy. “Chinese regulators will continue cracking down on violations of securities laws and regulations, including insider trading and market manipulation,” said Jiang.
Since the Bond Connect was launched, offshore investors have shown great interest in onshore bonds. New bonds issued by Agricultural Development Bank of China received ten times oversubscription while a number of other larger issuers also received at least two times oversubscription. The growing interest, as Chinese media explained, is attributed to the rising yields of renminbi bonds, which is in line with the increase in global yields.
Chinese state media under the People's Bank of China published an article on China's renminbi reform. The article expected that the future direction of the renminbi reform will be to widen the floating range of the currency, while at the same time the currency will remain at a relatively stable level. The article also said that the government should try their best to reduce their intervention in the FX market.
Chinese property developers have difficulties in getting financing in the onshore market. According to Chinese media, Sunac China Holdings Limited's 10-billion-yuan enterprise bonds were rejected by the Shanghai Stock Exchange. As of July 6, 13 property developers have been rejected by the China Securities Regulatory Commission. Some Chinese property developers turn to trust companies for financing, although the cost of financing is higher than bank loans and bonds.
China's Bay Area Economic Plan, focusing on the development of Guangdong, Hong Kong and Macau, has been submitted to the National Development and Reform Commission. The new Bay Area is expected to compete with Bay Areas in New York, San Francisco and Tokyo. According to government officials, the construction of the Bay Area is expected to be completed by 2020. By 2030, officials estimate that China’s Bay Area will become the most productive Bay Area in the world.
Since the National Internet Finance Association was launched, 24 P2P companies have joined the association as of July 10. Due to tighter regulation of China's P2P companies, the quality of existing companies has improved. Seventy percent of the 24 member companies have reported profits in 2016, while Hongling Capital and Dianrong, two leading P2P member companies, have recorded losses of 183 million yuan and 179 million yuan, respectively.
According to Chinese media, the China Banking Regulatory Commission has issued 744 disciplinary fine letters to commercial banks and asset management companies. Sources told Chinese media that regulators do not accept any type appeal process in relation to fines: once the letter is issued, those companies will have to pay the bill. Among all violations, misconduct in credit businesses are the most common.
China Securities Regulatory Commission (CSRC) issued amended regulations for Chinese securities companies on July 7. The new regulations update and address some issues that could add or deduct marks to the securities companies in terms of ratings. CSRC releases the annual review in mid-July every year. In 2016, over 60% of securities companies were downgraded by CSRC.
After years of expansion, Chinese commercial banks are now in a stage of restructuring. In the first half of 2017, Beijing saw 38 local branches shut by banks such as Bohai Bank, Shanghai Pudong Development Bank and Everbright Bank. According to Chinese analysts, these local branches do not adopt a sophisticated business model and are not profitable.
As China continues to tighten regulations, CSRC has intensively cracked-down on violations such as insider trading over the past few years. Since 2014, CSRC has initiated 99 insider trading investigations and submitted 83 cases to police, in relation to sums amounting to 80 billion yuan. As of May 2017, 25 asset managers received criminal convictions and 15 employees of securities companies were disqualified from the market.
China's mutual fund industry reached a milestone in the first half of 2017 when market size exceeded 10 trillion yuan. Money market funds now total 5.12 trillion yuan and account for half of the mutual fund market. Currently, Tianhong Asset Management, ICBC Credit Suisse and Efunds are the top three asset management companies in China in terms of AUM. Noticeably, Bank of China Investment Management has fallen out of the top ten.
Sources confirmed to Chinese media that the financial work meeting, held every five years, will commence in mid-July. The financial work meeting discusses possible significant reforms in the financial market. The market believes that the meeting this year will mainly focus on financial risk and regulatory frameworks. The much-discussed consolidation of PBoC, CSRC, CBRC and CIRC, is not likely to happen soon. Chinese analysts believe that the main obstacle to the consolidation is from the objection from current government officials whose responsibilities and power will be affected.
On Thursday, July 6, Liu Qibao, a member of the Political Bureau of the CPC Central Committee, called for the integration of culture in economic development. Liu urged China to seek deeper international cultural exchanges, showcasing Chinese culture as part of the Belt and Road initiative. According to Liu, cultural development is crucial to economic development and poverty alleviation.
According to an official statement on Wednesday, July 5, the Chinese government aims to ensure that both domestic and foreign companies registered in China have equal legal footing. Regulations and policies will be improved to further stimulate market vitality, and high-quality assets will be used to attract investments through public-private partnerships in order to create a fair legal environment. These improvements will make China more desirable for foreign investors.
Along with the shift in the Chinese market from a producer model to household consumption, the country’s outbound investments are also experiencing a shift from energy and commodities to brands and technology.
In 2014, China’s outbound merger and acquisition (M&A) activity in technology-related sectors, including relating to the internet and software, amounted to the same as traditional energy investments. In 2016, China’s outbound M&A in internet and software reached US$26.7 billion, while outbound M&A in energy dropped to just US$2.8 billion from US$30 billion in 2012.
China Securities Regulatory Commission (CSRC) has sped-up processing time for M&A activities for A-share companies. According to Chinese media, 24 M&A applications were approved in June, the most in 2017. This compares to 9 in January, 5 in February, 13 in March, 11 in April, and 10 in May. In a bid to crack-down on violations in M&A activities, CSRC issued new regulation for M&A activities last September.
As China begins to deleverage the financial market, Chinese banks have started to redeem their investment in funds of asset management companies. Specifically, ICBC-Credit Suisse has seen over 10 billion units of redemption in their two mutual funds from banks in the second quarter. According to a banker working at a Chinese bank, the main reason for the large redemption is that banks have to fulfill the liquidity requirement of PBoC. The other reason is that the domestic bond market performed poorly in the first half of 2017 and banks need to find other investment opportunities with higher return.
As China’s population continues to age there is a growing need for accelerating the development of commercial pension insurance. The Chinese State Council recently released a guideline to speed up the development of commercial pension insurance. It will not only become the largest source of increment in the insurance market, but will also form a strong foundation for stabilizing the domestic capital market.
Chinese President Xi Jinping encourages the development of an open world economy. Xi said the world economy still faces daunting challenges despite “further consolidation of growth momentum… in both developed and emerging economies,” as such, he noted that “the G20 needs to stay committed to open development, support the multilateral trading regime with the WTO at its heart, and enable trade and investment to continue to drive global economic growth.”
People's Bank of China issued a regulation on rating agencies in China’s Interbank Bond Market. The regulation requires that foreign rating agencies have to register at the PBoC provincial branch. Moreover, foreign rating agencies have to comply with PBoC regulations and be monitored by the PBoC. The regulation also sets up qualification requirement and specifies a list of violations. For the whole regulation, please go to (in Chinese):
Textile is one of the most important industries in China, accounting for 5% of all 30 sectors in the manufacturing industry. In the face of large volatility of the cotton yarn price, China Securities Regulatory Commission (CSRC) recently approved cotton yarn future trading in Zhengzhou’s Commodity Exchange. According to the CSRC, the cotton yarn future can help manufacturers hedge their exposure and help with price discovery. The official launch time will be announced soon.
China's SOE reform has entered the final stretch. In a recent meeting of the Chinese State Council, a deadline was proposed that SOE reform has to be mostly completed by the end of this year. According to Chinese media, 92% of central SOEs have started their reform while the number of provincial SOEs is 90%. Apart from the ownership structure, other key areas of the reform will tackle corporate structure and board of directors appointees.
The Ministry of Commerce of the People's Republic of China recently released a report on the development of retail industry (2016/2017). According to the report, by the end of 2016, there are 1.81 million of retailing units in China, this represents an increase by 5.2% compared to 2016.
According to Tencent, its superstar mobile phone game, King of Glory, has achieved a revenue of 6 billion yuan during the first quarter of 2017, with a monthly turnover of 3 billion yuan. The revenue of this unprecedentedly successful game was even higher than 3079 A-share listed companies. The game has over 200 million registered users and 50 million daily active users. Around 120 million users are still in primary school.
As of the end of June, Yuebao, China's largest money market fund sold on Ant Financial’s platform, has reached a size of 1.43 trillion yuan. The fund exceeded the size of personal deposits of China Merchants Bank, only slightly behind Bank of China. Yuebao is also the world largest money market fund. As of the end of 2017Q1, the fund has reached a market share of 12%.
China Insurance Regulatory Commission issued a regulation on China's insurance companies. The regulation allows insurance companies to participate in the Shenzhen-Hong Kong Stock Connect. The regulation also specifies the requirement of eligible companies and investable stocks. Chinese insurance companies could invest in Hong Kong stocks only through the QDII program, third party agencies or their offshore investment subsidiaries.
Trial operation of Northbound Trading on the Bond Connect commenced today. Agricultural Development Bank of China and China Development Bank will issue policies on bonds to foreign and domestic investors for the first time on 3 July and 4 July respectively. According to a Chinese Economist, Bond Connect is a new milestone for the opening up of China’s capital market to foreign countries. Deutsche Bank predicts that US$700 to US$800 billion of foreign capital will flow into onshore renminbi bond market in the next five years.
According to Chinese media, Citi will include China into its World Government Bond Index – Extended / WGBI-Extended from July. At the same time, Citi also announced to launch two bond index, Citi Chinese (Onshore CNY) Broad Bond Index and The Citi Chinese (Onshore CNY) Broad Bond Index - Interbank). The new indexes will enrich the coverage of Citi's bond index portfolio.
Chinese media learned from the State-owned Asset Supervision and Administration Commission that another M&A between two central SOEs has been completed. China High-Tech Group Corporation was acquired by China National Machinery Industry Corporation, a state-owned manufacturing group. As a result, the number of central SOEs decreased to 101.
China’s Hushen 300 index futures opened lower on Friday, June 30, with the contract for settlement in July down 0.37% to finish at 3,632 points. Similarly in August, September, and December contracts opened lower at 0.03%, 0.35%, and 0.43% respectively. The China Financial Futures Exchange (CFFEX) has set the base value for all the four contracts at 3,399 points.
According to the National Bureau of Statistics on Friday, June 30, China’s manufacturing sector has expanded for eleven straight months stretching back to May 2016. China’s purchasing managers’ index (PMI) came in with a reading of 51.7% recorded for June. A reading over 50% indicates expansion, while a reading below indicates contraction.
Foreign investors have high hopes for bond connect, a trading link for bonds between mainland China and Hong Kong. This program has the chance to increase overseas ownership of bonds in China where it is currently less than 2%. On Thursday, June 29 , Li Xiaojia, chief executive of Hong Kong Exchanges & Clearing (HKEx) remarked that bond connect is “technically ready” at the moment. James O’Sullvian, the head of securities services at Standard Chartered Bank in Hong Kong noted that the trading mechanism, known for its simplified application process and automated trading will satisfy international investors.
Guoqiang Ma, the chairman of China Baowu Steel Group Corporation, said in a forum that people generally have a misunderstanding of SOEs. According to Ma, from historical statistics, most technological innovations were introduced by SOEs. But Ma also committed that in terms of business models, POEs are more innovative and flexible than SOEs.
According to Chinese media, during the first half of 2017, the China Securities Regulatory Commission approved 224 IPOs with a pass rate of 84.8%. Thirty-seven companies have been rejected by CSRC. The rejection rate of NEEQ (National Equities Exchange and Quotations) is much higher than the overall rate. The tightened supervision by CSRC is regarded as the main reason for the higher rejection rate.
At the World Economic Forum in Dalian on Wednesday, June 28th, Premier Li Keqiang promised foreign companies easier market access and a level playing field. The country plans to enact reforms to allow greater participation of foreign capital and companies. Li said, “China’s reform has always run parallel with opening up. We invite foreign firms to come to China and participate in corporate reorganization to foster new growth engines.”
The first round of regulations aimed at protecting investors in the securities and futures market will be put into force on 1 July. The new regulation has positive and far reaching impact on development on China’s capital market. It also protects the right and interests of medium and small investors. The selling of products and services to new clients and higher risk products to old clients by securities and futures intermediates are now regulated. Under new regulations, investors of low risk tolerance can also invest in high-risk products after a confirmation process.
Since MSCI included Chinese A-shares into its emerging market index, the trading volume of CSOP FTSE China A50 ETF, the largest A-share ETF, has increased significantly. On June 27, the fund gained 1.5 billion yuan in subscriptions from long-only investors and some speculative investors. It is the first time where a large volume of international funds have entered into the A-share market since the MSCI inclusion.
Chinese premier Li Keqiang said in a recent speech that China encourages foreign companies to keep their profits in China and invest in China. On the other hand, Li said that foreign companies, if their profits are generated in China, can also freely remit them out without any restriction. Some sources have confirmed to Chinese media that cross border flows have started to become easier on the back of the country’s rising FX reserve.
China’s major industrial firms registered double-digit profit growth in May 2017, reporting 2.9 trillion yuan in profits, a 22.7% increase from the previous year. This profit growth came despite moderated prices of industrial goods. This has led researchers from China Merchants Securities to believe that the “tightened financial regulation will have limited impact on the real economy”. In the 2017 Summer Davos Summit, Premier Li Keqiang said that with the steady economic transition, China is capable of delivering the year’s major growth targets.
People's Bank of China announced on June 26 that it did not extend third party payment licenses to 9 companies. Currently, licenses from 20 third party payment companies have been revoked 2017. Chinese analysts believe that as the payment market becomes larger in China, Mainland financial regulators are redoubling their efforts in monitoring the market. Extension of third party payment licenses are also increasingly becoming difficult for companies.
According to Chinese media, banks and exchanges are ready for the Bond Connect system with reports stating that the scheme can be launched as early as July 3rd. The market expects favorable policies towards Hong Kong as Chinese President Xi Jinping visits territory on June 29.
China Central Depository & Clearing Co (CCDC) released a custodian regulation in addition to PBoC's regulation last week. The additional regulation specifies the roles and responsibilities of CCDC and Central Moneymarkets Unit (CMU).
For the whole regulation (in Chinese), please visit:
The National Audit Office released an auditing report of 20 central SOEs focusing on their activities over the past several years. The report pointed out that 18 central SOEs have exaggerated their profits by 200 billion yuan through the adjustment of their balance sheet. One of the most common violations is undisciplined procurement and sales. Five central SOEs are involved in manipulating their procurement and sales figures.
Henry Fernandez, CEO of MSCI told Chinese media that the MSCI has pitched to over 150 investment entities including pension funds, asset managers and other investment agencies. According to Henry, overseas investors recognized that the two stock connect schemes were more helpful than the QFII/RQFII programmes. On the other hand, overseas investors share concerns around the suspension of stocks and the current investment quota. Fernandez also said that MSCI is considering including an additional 195 mid-cap A-shares to its index in the future.
Investment in local provinces will likely speed up in 2017. Since the second quarter of 2017, a couple of provinces including Inner Mongolia, Guizhou and Sichuan have announced their investment plans in Q2 2017. Unlike previous years, the investment is mainly in new economy projects instead of infrastructure projects. Data from the National Bureau of Statistics also shows that for the first five months of the year, the investment growth in high tech sector is faster than other sectors.
On June 23, Zhang Shaochun, vice minister of finance, announced on his State Council report to the Standing Committee of the National People’s Congress (NPC) that China’s government debt risk is “largely controllable”. According to official data, in 2016, the combined debt of China was 27.3 trillion yuan, with a debt-to-GDP ratio at 36.7%. The central government has continued to hold its officials accountable for illegal financing activities, and “Fresh steps have been taken to better manage China’s local government debt, with strengthened supervision efforts… and risk prevention schemes,” Zhang said.
The bike sharing industry in China is reaching an infection point. Following the first bankruptcy in the bike sharing industry a first M&A is likely to be completed soon. According to Chinese media, the industry leader Mobike will complete its acquisition of UniBike in a few days. After the completion, Mobike will continue to focus on higher tier cities while UniBike will stay in the lower tier cities.
Xinghai Fang, vice chairman of China Securities Regulatory Commission recently said that the CSRC will speed up the opening of government bond futures market to commercial banks. A source told the Chinese media that new regulations will come out as early as this year. According to Chinese analysts, the futures market will significantly affect the pricing in the spot market and can also offer a hedging option to the participants.
Data from the Ministry of Human Resource and Social Security shows that for the first five months, the pension fund has seen an inflow of 1.57 trillion yuan and an outflow of 1.35 trillion yuan. Despite a net inflow in the pension fund balance, there is an imbalance among different provinces. According to the Ministry of Human Resource and Social Security, the balance in eastern provinces is much larger than western provinces. In northeast China, there is even a deficit in the pension fund account.
On Wednesday, the Chinese State Council declared its support for the development of the sharing economy. China will aid by improving tax and welfare policies and providing support for those self-employed in the sharing economy. Premier Li Keqiang announced that China is adapting to the latest technology to facilitate supply-side structural reform, which will reduce overcapacity and lower costs to generate sustainable long-term growth. Li also said that there would be no WeChat if the government interrupted the development of the technological innovation in the past.
As technology grows in importance, Chinese commercial banks have started to partner with leading technology companies. Currently, Huaxia Bank has partnered with Tencent, while ICBC has partnered with JD.com. ABC signed a partnership agreement with Baidu, and CCB partnered with Ant Financial.
The competitive landscape of China's financial industry has become more complicated as technology companies obtain financial licenses while at the same time collaborating with traditional financial players.
Baidu, Alibaba and Tencent have started to shake old labels by putting forward their new strategic positions. Instead of position itself as an e-commerce company, Alibaba emphasized that it is an infrastructure provider that empowers e-commerce companies. Tencent says internally that it is a technology company rather than a social media or entertainment company. Tencent has been investing a lot in AI technology, and Baidu says that it will become an AI company instead of a technology company. It becomes clear that Chinese technology leaders are upgrading themselves by heading towards high-end technology services.
A study from Chinese Enterprise-employee Matching Research shows that the average net profit margin of Chinese enterprises is 3.3% on average. The average net profit margin of POEs is 3.9%, higher than the number of SOEs (2.2%) and foreign owned enterprises (2.1%). Enterprise mangers say that there has been increased adoption of machines or automatic devices to replace human employees to save on labor costs. The study also finds that the numbers of employees in Guangdong and Hubei provinces have dropped, mostly labor intensive positions.
A People’s Bank of China (PBoC) survey reveals that domestic entrepreneur confidence is on the rise. The PBoC’s entrepreneur index rose for the fifth straight quarter despite the tightening of financial supervision from regulators. The index rose from 61.5 to 65.4 compared to the previous quarter. Similarly, bankers’ confidence in the Chinese economy increased from 64.9 to 67.8 from the first quarter of 2017.
Driven by innovation and transition of the cities, China's "Bay Area" consisting of Guangdong, Hong Kong and Macau, is expected to compete with New York’s Bay Area, San Francisco’s Bay Area and Tokyo’s Bay Area. A source told Chinese media that China's Bay Area will focus on internet, cloud computation and AI and the potential market size will grow to trillions of yuan. Pony Ma, chairman and CEO of Tencent, believes that there is large potential in the Bay Area because there are already a number of innovative firms in the area.
During the sixth annual dialogue in Beijing hosted by the US Chamber of Commerce and China Centre for International Economic Exchanges, premier Li Keqiang encouraged US firms to invest in China to advance the development of bilateral ties. Both countries are anticipated to benefit from joint economic and trade cooperation.
The PBoC published an article on their website saying that digital currencies in China are not legal because they are not issued or authorized by the central bank. The government entity also says that only digital currencies issued by PBoC are regarded as legal currencies. In 2013, the central bank defined bitcoins as virtual goods, rather than currency.
The rapid increase of third-party electronic payments is responsible for improving China’s online consumer market. The growth is seen as favourable to the Chinese economy as it supports the country’s economic rebalancing and boosts consumption and employment. Though e-payments are projected to increase, the banking sector is predicted to not be greatly affected as retail business payments make up only a small portion of Chinese banks’ revenue.
China Eastern Airlines recently became the first central SOE to complete its mixed ownership reform. Eastern Air Logistics, originally owned by China Eastern Airlines, has been spun off with 45% shares owned by China Eastern Airlines, 25% owned by Lenovo, 10% owned by Global Logistic Properties, 5% owned by Deppon, 5% owned by Greenland and 10% owned by Eastern Airline's core employees. According to China Eastern Airlines, Lenovo, Global Logistic Properties and Deppon are strategic investors while Greenland is its financial investor. In addition, China Eastern Airlines intentionally chose to give up an absolute control over the Eastern Air Logistics, which has demonstrated the central SOE's determination to push ahead with reform policies.
Xiaochuan Zhou, Governor of People's Bank of China, stated in a speech in Shanghai that The Cross-Border Interbank Payment System (CIPS) will open an operation in Shanghai to better serve Renminbi internationalization and One Belt One Road. According to Zhou, the set up of CIPS in Shanghai will further support the city’s position as an international financial center. Zhou also said that Shanghai has the ambition to become a top international financial hub by 2020.
On June 18th, the world largest coal company Shenhua Group made an official asset restructuring announcement. According to the announcement, the company's stock will be suspended until early July. The market expects that a new conglomerate with around 2 trillion yuan worth of total assets will be formed in early July. The size of the new company will become larger than all previously merged SOEs including Baowu Group, China Minmetals Corporation, CRRC Corporation and China COSCO Shipping Corporation.
While People's Bank of China did not follow Federal Reserve System to raise the interest rate, SHIBOR, the benchmark interest rate in China, has continued to rise. Chinese commercial banks have been competing for capital by issuing interbank deposits. This has effected the three-month AAA rated interbank deposit rate which at one point exceeded 5%. According to Chinese traders, the rate hike from the Fed has worsened the market liquidity in the interbank market.
Yaqing Xiao, head of the State-owned Asset Supervision Administration Commission, stated in a speech that the main objective of the SOE reform was to strengthen the competitiveness of SOEs. Xiao believes that privatizing or getting rid of state ownership from the SOEs is completely incorrect. According to Xiao, central SOEs have achieved a profit of 312 billion yuan in 2017 Q1, 23.2% higher than 2016 Q1, which marked a record high compared to previous years.
According to Ministry of Commerce (MOC), the Foreign Direct Investment (FDI) in May was 54.67 billion yuan, 3.7% down from May 2016. It is the second consecutive month where FDI has shrunk. MOC spokesperson said organization will issue an official guideline on FDIs soon to provide a better business environment and to attract overseas investors.
A guideline on mutual funds investing into Hong Kong stocks through the Stock Connect has been issued to asset managers. The guideline requires mutual funds participating in the Stock Connect with a name tag of "Hong Kong stock" should invest at least 80% of non-cash assets in Hong Kong stocks. Those with less than 80% of non-cash investments in Hong Kong stocks should not include "Hong Kong Stock" in the mutual fund name. Asset managers have been keen on introducing funds investing in Hong Kong stocks as a result of the Stock Connect.
Salespeople of commercial banks have been struggling to make new sales over the past few months. As the liquidity becomes tighter, the interest rate of personal loans and corporate loans have also risen significantly. In addition, banks are also facing a shortage of reserves to lend out to corporates. A relationship manager of a commercial bank in China told Chinese media that a large proportion of relationship managers have seen lower compensation as a result of fewer new loans.
The share price of Meitu has dropped below its IPO price after its six month cornerstone investor lock-up period. According to Chinese media, Meitu's large shareholders planned to sell 66 million shares at its IPO price. Since its IPO, the Chinese technology company has experienced a bouts of stock price fluctuation.
Regulators of the Chinese exchange market are discussing the feasibility of adjusting the credit rating requirement for issuers. In April, China’s Central Depository & Clearing issued a guideline that forbids pledged assets from bonds rated below AAA or from issuers below AA.
The guideline puts pressure on credit rating agencies as issuers have been requesting higher rating. Issuers hope a higher rating will generate liquidity for their bonds. According to Chinese media, regulators of the exchange market are planning to establish a bi-credit rating mechanism where two credit rating agencies will issue two reports of the issuers independently. In addition, the exchange will also build up an internal rating system to review the credentials of issuers.
Industrial Securities announced that it would establish a special fund to compensate the loss for investors involve in Dandong Xintai Electric's fraud IPO. Industrial Securities will claim the loss from Dandong Xintai Electric. According to China’s Securities Regulatory Commission, the pre-reimbursement requirement has been in place for two years. Market experts believe that the pre-reimbursement requirement can reinforce the due diligence of future IPO underwriters and enhance the investor protection mechanism.
Shanghai Free Trade Zone announced that an onshore crude oil client has successfully opened an account in Haitong Futures Shanghai FTZ branch. It is the first client of China's crude oil futures, a move that signals crude oil futures will be officially launched in China soon. For offshore clients, they should still wait for official regulation to be issued by the China Futures Association. Currently, 138 futures companies have obtained qualifications for crude oil futures.
The annual report from the National Council for Social Security Fund shows that in 2016, the Social Security Fund achieved an investment return of 31.94 billion yuan or a rate of return of 1.73%. Since the fund was launched in 2000, it has grown at a CARG of 8.37% and the accumulated investment return as of 2016 was 822.7 billion yuan. Noticeably, overseas asset accounted for 6.66% of the whole portfolio.
In response to recent questions regarding the counter cyclical factor, state owned media reported that the additional factor is not manipulation of the FX market. Instead, the factor can help the FX rate better reflect the fundamentals of China's economy. According to Chinese media, the variables that make up the counter cyclical factor are not determined by the People's Bank of China but commercial banks. Therefore, the state media believes the factor will be a pure market decision.
National Development and Reform Commission (NDRC) and Ministry of Industry and Information Technology jointly issued a guideline that encourages the strategic partnership or consolidation in automobile sector in China. The guideline also encourage companies with strong technology capabilities to enter the new energy vehicle sector. According to NDRC, areas with serious pollution such as Beijing, Tianjin and Hebei, will be encouraged to invest in more new energy vehicles.
Securities Association of China recently issued a drafted guideline on enterprise bond underwriting towards securities companies. The new guideline adds two more requirements to the enterprise bond underwriters. According to Chinese media, eligible underwriters for enterprise bonds should be granted an A rate or above from Chinese regulators within past two years.
Moreover, non-A type securities companies(there are only 36 A-type securities companies) should be ranked top 20 in terms of enterprise bond underwrite volume. Chinese analysts believe the new guideline will benefit large securities companies due to the fact that small securities companies are kept outside of the enterprise bond market.
Ministry of Commerce is speeding up streamlining rules for overseas corporates applying for a business license in China. According to Ministry of Commerce, 6383 overseas invested corporates have been set up in 2017 Q1, 7.2% up from same period in 2016. A few provinces including Fujian, Jiangsu, Zhejiang and Hubei, have already allowed foreign participation in infrastructure PPP projects.
The Chinese State Council announced in last October a review program on fintech companies consisting of finding problematic fintech companies, providing them with advice and estimating the compliance of those companies. The review was supposed to be completed this June. However, according to Chinese media, the review is likely to be postponed to June 2018. Business licenses of companies that fail to comply with the required rules by then will be revoked. Experts believe that only a third of fintech companies can survive when the program is implemented.
As financial innovation continues to accelerate in China, new risks are brought about. In order to counter the new challenge of the financial industry, The People’s Bank of China and four other departments including the China Securities Regulatory Commission, China Banking Regulatory Commission, China Insurance Regulatory Commission and Standardization Administration issued a plan of constructing a standardization system for the industry from. From 2011 to 2015, over 96 regulation and guidelines have been issued. The plan requires that over 110 regulatory updates or new regulation or guidelines should be completed within the next five years. The standardization system will focus on financial product, infrastructure, statistics and risk monitoring/control.
For the first time over the past four years, a one year Chinese government bond has a higher yield to maturity (YTM) than a ten year government bond. On June 8, the one year YTM was 3.66% while the ten year YTM was 3.65%. It reflects a higher liquidity in a longer tenor bond market. In mid-May, the Chinese government bond market even saw a M-shaped yield curve.
Some A-share listed companies have been buying their own stocks to support their share price over the past few weeks, which has caught the attention of Chinese regulators. Shenzhen Stock Exchange has recently issued a regulation on all Shenzhen A-listed companies’ shareholders. The regulation requires that Shenzhen-listed companies should disclose detailed information of stock holding encouragement letter to employees. The regulation also lists some compulsory disclosures.
Charles Li, Chief Executive of HKEX, says that the southbound feature of the Bond Connect will not be launched in the next two years as Hong Kong’s bond market is not sophisticated enough. He also pointed out that at the beginning stages of the Bond Connect there would be some regulatory restrictions that serve as a buffer to Chinese regulators. According to Li, the southbound features of the Bond Connect will be launched depending on market conditions.
In a general meeting of the State Council, Premier Li Keqiang says that the one trillion yuan tax and expense should be cut in 2017. Apart from four tax cut plans amounting to 718 billion yuan put forward earlier this year, a few types of fees will also be waived. Banks and insurance companies will not be subjected to regulatory fees.
The National Finance Association of China is planning to build a monitoring system for online financing platforms due to the amount of platforms operating in the country. According to statistics from p2peye, 56% of P2P platforms in China have encountered problems such as fraud and financial closures. P2peye states that there are around 4950 p2p platforms operating in China. The system hopes to help lower risks and prevent investor losses.
Chinese customers are facing difficulties in getting housing mortgages. According to Chinese media, the mortgage interest rate has risen by 10%, as a result of the central government's efforts to control the housing price in China. Those who already applied mortgage loans will have to wait unless they accept an increase in their interest rates.
The Ministry of Finance issued a new circular on the tax benefits to small and micro enterprises. The circular defines that small and micro enterprises should have an annual revenue of no more than 500 thousand yuan. According to a previous circular, small and micro enterprises were defined to have no more than 300 thousand yuan in annual revenue.
Latest date from the State Administration of Foreign Exchange shows that as of May 26, 283 QFIIs have obtained US$92.7billion in investment quotas, US$1.96 billion more than April. Market participates anticipated that there will be investment opportunities in bluechip A-shares. According to Chinese media, seven A-listed companies such as Angang Steel Company, Midea Group, Zhang Jia Jie Tourism Group and Hefei Meyer Optoelectronic Technology have accommodated field research by overseas institutions in the first four trading days of June.
More Chinese property developers have become a common sight for land bids in Hong Kong indicating heated competition between Chinese and Hong Kong property developers. Over the past year, ten plots of land have been acquired by Chinese property developers worth around HK$60 billion. Chinese analysts believe that the main reason for the strong demand is the growing difficulty of purchasing land in mainland China.
Yang Jiang, vice chairman of China’s Securities Regulatory Commission (CSRC) states in a speech that CSRC is making efforts to streamline the M&A documentation procedure. Jiang says that 90% of the M&A applications of listed companies do not need the CSRC's approval. According to Jiang, in the future, the CSRC will continue to open up the capital markets to overseas financial institutions.
As MPA (Macro Prudential Assessment) is around the corner, banks are actively attracting deposits by offering high yield wealth management products to customers. The average wealth management yield has been increasing for the past few weeks and some wealth management products even offer over 7% yield. The high yield has even attracted institutional clients. For the first five days of June 2017, 67 listed companies have announced their purchase of wealth management products.
On June 4th, the world largest coal company Shenhua Group and GD Power Development, one of the top five power companies in China, jointly made an official restructuring announcement. The market expects that those two companies will merge into a conglomerate with around 1.8 trillion yuan worth of total assets. The size of the new company will become larger than all previously merged SOEs including Baowu Group, China Minmetals Corporation, CRRC Corporation and China COSCO Shipping Corporation.
A credit bond was issued with a yield of 9.3% last week, the third such bond that reported over 9% yield in 2017. Data from Wind shows that for the first five months of 2017, 471 credit bonds were issued with a yield over 6%. As a result of financial regulators' efforts to deleverage the financial market, the average interest rate of issuing a credit bond has become higher than the interbank interest. Chinese banks, therefore, increased the interest rate of deposit and wealth management products to retain deposits from customers.
The People's Bank of China announced the launch of a China-Brazil fund on May 30. The fund will serve to support China’s One-Belt-One-Road initiative and Go-global strategy. The China-Brazil fund is aimed at bolstering the strategic cooperation between China and Brazil.
Ministry of Finance and Ministry of Land and Resources have jointly issued a circular on land project bonds for local governments. The circular allows local governments to issue land bonds where proceeds would be used for land exploration. The land project bonds will be monitored and registered under Ministry of Land and Resources. Chinese analysts believe that the official land financing channel for local governments can release the financing burden of LGFVs.
Since May 25th, the CNH/USD has risen to 1500 bps within the past six trading days. Chinese media summarized seven possible theories for the sudden increase of CNH. Those reasons include US rate hike, Moody's downgrade, price divergence between mid-price and closing price, twisting the Renminbi depreciation trend, comforting the market emotion, releasing the pressure of US government and One Belt One Road initiative.
According to Chinese media, in the first five months of 2017, the China Securities Regulatory Commission (CSRC) have issued 55 penalty notices to listed companies, third-party agencies and retail investors. Reasons include insider trading, market manipulation and short term trading. Among all those being penalized, the largest disciplinary fine was 3.5 billion yuan.
Data from Hithink RoyalFlush information shows that the yield of AAA rated five year MTN has exceeded the interest rate of bank loan for the first time since 2008. Since 2017, 394 bond issuance with a total amount of 369.4 billion yuan have been cancelled. Currently, the yield of AAA rated five year MTN is 6.14% while the number a week ago was 4.72%. The yield for AA rated five year MTN is even higher at 7%. Chinese analysts believe that the tightened liquidity, increasing risk and stricter monitoring are the main reasons why large corporates or SOEs are considering bank loans again.
Following the partnership with Bailian, Alibaba acquired 18% of outstanding shares of Lianhua Supermarket on last Friday. According to Chinese media, Alibaba is developing its S2B model (supply chain to business) where small businesses rely on the company’s supply chain platform. It the recent move shows that Alibaba is attempting to integrate its internet, big data, logistics and payment capabilities
The A-share market has seen significant fluctuation over the past few weeks. Some large shareholders of A-share companies were alerted by stock exchanges to keep an eye on their pledging shares. These shareholders get finance by pledging their shares to financial institutions. Regulators have sent notices to those companies whose positions could be automatically offset due to poor performance of the secondary market.
China Securities Regulatory Commission issued a supplementary regulation on holdings reduction from large shareholders of A-share companies. The new regulation requires that block trade players need to comply with the securities law. The rule also sets a restriction for large shareholders instructs them to reduce their shares that are not from the IPO. The regulation also highlights that convertible bonds and equity swap should be subject to this regulation. For the full regulation, please go to:
China’s Banking Regulatory Commission issued a guideline on banks to encourage inclusive finance, which was introduced by United Nations in 2005. The guideline requires banks, especially state-owned banks, to set up inclusive finance departments to help SMEs companies from rural areas and agricultural companies. Specifically, large banks are required to set up an inclusive finance department by the end of 2017. As of the end of March, outstanding loans to SMEs totaled 27.8 trillion yuan, 14.4% up from the same period last year reveals CBRC data.
Since 2017, three Chinese securities companies including Huatai Securities, Orient Securities and Shenwan Hongyuan Securities have announced their private placements, with a maximum amount of 50 billion yuan. In 2016, total private placement was just 20.6 billion yuan. Chinese analysts explain that the issuers this year are much larger in terms of size than last year’s. However, Chinese analysts believe that it is possible that the private placements may be undersubscribed.
China's money multiplier reached 5.33 in April, the highest since 1997 while the M2 growth has slowed down. Analysts believe that the People’s Bank of China (PBoC) has tightened the money supply. However, the money creating capability of China's financial market especially in the shadow banking sector has gone up. The money multiplier has been considered as a leading economic indicator of an economy. Chinese analysts expect that the (PBoC) will continue to keep the M2 supply tight which will pose a liquidity challenge to banks.
In a bid to crack down on illegal activities such as money laundering and terrorism financing, the PBoC issued a guideline on account openings. The guideline states that financial institutions have the right to refuse account opening applications in certain circumstances. The guideline also specifies actions market participants should take when conducting KYC and AML investigations. The guideline will be applicable to all market participants including banks, asset management companies, insurance companies and other financial institutions.
State Administration of Foreign Exchange (SAFE) disclosed 10 cases of FX violations including both individuals and corporates on its website. Those violations include fake invoices, fraud accounting treatment and transferring the money through different personal accounts. SAFE has been liberating FX regulation on legal cross-border transactions while it has been closely overseeing the FX violations in the market.
China's Ministry of Finance issued a 74 page official report on the China-US relationship. Within the report there are four sections discussing the general principles and possible future opportunities in bilateral relations. The report points out that China will import more agricultural and energy products from US. In addition, China will not allow the renminbi to depreciate.
For the whole report, please go to:
Following Moody's downgrade of China, the market expects Chinese corporate to face challenges in issuing offshore debts. Among the US$1.42 trillion of offshore debt, only 15% of it went to the intercompany loan market. However, the Chinese Ministry of Finance believes that the debt problem in China will not be a systemic risk. This is due to the fact that 95% of the debt in China is onshore and that China still has a sizable FX reserve.
Since China’s Securities Regulatory Commission issued a guideline to restrict onshore refinancing in the A-share market in February, the size of private placements has shrank significantly in 2017. The average issuance size of private placements in 2016 was 150.7 billion yuan while in April 2017, the issuance size was just 48.6 billion yuan. In the secondary market, more companies have seen stock prices fall below its issue price of their private placements while those applying for private placements will have to offer a larger premium to make their market price.
National Development and Reform Commission announced the current achievement of SOE reform in its website. Twenty SOEs in two batches are now going through reforms. The reforms are mainly focused on the adjustment of corporate structure and inclusion of strategic partners. The third batch of SOEs will include more industries and will also include both central SOEs and provincial SOEs.
China's Ministry of Finance (MOF) held a press conference with regards to Moody's downgrade action. The spokesperson said that Moody's methodology was mistakenly based on the economic cycle and that it overestimates challenges China will face. In response to the debt level, the MOF points out that Moody's does not fully understand the regulatory environment in China as the existing budget law states clearly that governments have no obligations to pay back debt of SOEs and LGFVs. In addition, MOF believes that Moody's underestimates the impact of China's supply side reform.
Fund of Funds is likely to thrive in China as a result of tightened regulation on asset management business. The first FOF was born in 2006. The current AUM of FOF is less than 1.3 yuan trillion in China. As of May 15, 2,309 FOFs were issued in the market. China’s Securities Regulatory Commission first opened applications of mutual fund of funds last November.
CCFED The Third Construction & Engineering Co, a state-owned company, announced an adjustment of salaries for new fresh graduates entering the company. The amended salaries were 50% less than the employment offer initially presented to the graduates. Over 700 graduates have been affected by the salary adjustment but they are able to resign without disciplinary fine.
China Securities Regulatory Commission (CSRC) imposed a window guidance to securities companies currently under IPO review. According to Chinese media, the CSRC has requested a detailed explanation on their respective business models, the reliance on government subsidies/tax reduction, changes in account receivables and connected transactions.
Chinese internet companies listed on US market such as Weibo and JD.com have seen a strong performance in Q1 while the internet startups listed in A-share market have performed poorly. As a result, QDII funds investing in internet companies recorded positive return while the AUM of domestic funds investing in internet companies have fallen. Data from Choice shows that as of May 19, BOCOM CSI Overseas Chinese Internet fund grew 31.48% YTD in net asset value, the most among the same category. Among all stocks, Tencent, Alibaba, JD.com and Baidu are the most popular overseas listed stocks.
China’s Insurance Regulatory Commission (CIRC) has recently issued an official guidance on insurance companies. In the guidance, the CIRC allows insurance companies to invest in infrastructure projects through debt investments including loans and bonds. Credit enhancement arrangement can be waived for large projects registered under the Chinese State Council and with an AAA credit rating. Specifically, CIRC supports insurance companies to invest in the infrastructure projects under the One Belt One Road Initiative. A special fast pass will be provided to applicants investing in those projects to shorten the paperwork time.
According to Chinese media, Chinese property developers are now banned from issuing debt in offshore markets. But it is possible that the panda bond market could be reopened to investment grade developers in the future. Currently, Chinese property developers are moving to REIT products to raise funds. But the Chinese media believes that the regulation towards REITs will also be tightened.
As of May 19, nine mutual funds have been liquidated with a total amount of 3.673 billion yuan, which has exceeded the number of the whole year of 2016. Chinese analysts believe that the tightened regulation towards mutual funds affect the life cycle of conservative mutual fund products. According to Chinese media, market size is the main reason for liquidation and smaller funds are more likely to be liquidated. Since 2014, over 60 mutual funds have been liquidated.
Chinese state owned media Xinhuanet reported that during the One Belt One Road forum, over 270 agreements have been reached in five major categories and 76 sub-categories. Those five categories include regulation, infrastructure, trade, finance and livelihood.
The full list is available here in Chinese: http://news.xinhuanet.com/2017-05/16/c_1120976848.htm
During the One Belt One Road (OBOR) forum held in Beijing, 18 countries including China, UK and Russia have signed on a financing guideline of the OBOR projects issued by Ministry of Finance . It is the first official guideline on OBOR financing. The 27 countries have also complied with this guideline.
The official guideline is available here in Chinese:
According to Chinese media, for the past four months, China Securities Regulatory Commission (CSRC) have issued 45 disciplinary fine letters to Chinese companies. Main violations are regarding the information disclosure, insider trading and market manipulation several Chinese lawyers agree that the CSRC are is tightening its regulation in a bid to lift the cost of the violations.
The People's Bank of China (PBoC) recently set up a fintech committee to oversee the country’s fintech industry. In a press release, the PBoC highlighted the importance of fintech as a driving force of financial innovation. In the meantime, an exploration in regtech through big data, AI and cloud computation can also help identify and mitigate financial risks.
During the One Belt One Road (OBOR) forum held in Beijing, the PBoC signed a cooperation memo with IMF to better finance OBOR projects. PBoC also signed a cooperation memo with Czech National Bank with respect to information and knowledge sharing. In addition, the PBoC announced that it will provide 100 billion yuan of capital to the Silk Road Fund to support the OBOR initiative.
As a policy bank in China, the Export-Import Bank of China has been playing a key role in OBOR initiative. According to Hu Xiaolian, the chairman of the Export-Import Bank of China, the bank has financed 1207 OBOR projects over the past three years. Hu also said in the OBOR forum that the bank will continue to seek international cooperation in providing syndicated loans, trade finance and other financial services.
As China's key development strategy, the One Belt One Road (OBOR) initiative has been attracting a number of countries, which has created a large financing need. Yi Gang, vice governor of the People's Bank of China, says that China will explore possibly find ways to bolster the use of local currencies in the financing of OBOR projects. Currently, China has entered into currency swap contracts with 21 countries participating in OBOR. In addition, Yi also highlighted that a number of OBOR countries have shown strong interest in green financing.
China's State Council has recently issued a proposal on State-owned Asset Supervision and Administration Commission (SASAC) that cuts 43 regulatory issues. The proposal points out that SASAC should avoid much intervention in corporate restructuring and should not directly regulate the activities of SOEs that are shareholders of other companies. The proposal also specifies that SASAC should not intervene self-corporate governance of SOEs. In addition, SOEs at provincial level will be monitored by their group and provincial SASAC.
According to China Banking Association, One Belt One Road investments are not subjected to FX control. Recent FX controls are targeting to crack down FX speculation. The Export-Import Bank of China and Industrial and Commercial Bank of China also admitted that they are not restricted by the FX controls in funding of OBOR projects.
Charles Li, Chief Executive of Hong Kong Exchanges and Clearing Limited (HKEX), said in a seminar in Hong Kong that the Bond Connect Program will be officially announced in the next two weeks. Earlier, some media outlets had reported that the Bond Connect was planned to be launched in July.
Institutional investors are not interested in buying local government bonds due to fears of rising interest rates. Compared to government bonds and bond issued by China’s Development Bank, local government bonds are less attractive despite a higher yield along with higher risks. Currently, over 80% of local government bond investors are banks. To boost the liquidity of the local government bond market the Shanghai Stock Exchange encourages more securities companies to underwrite local government bonds.
Bitcoin price has been rising over the past few weeks. Chinese media have learnt from a source that regulators will issue an official regulation on bitcoin companies focusing on AML (anti money laundering) issues. Since January, Chinese regulators have been investigating Chinese bitcoin platforms. According to Chinese media, the biggest three bitcoin platforms are likely to receive disciplinary fines from Chinese regulators.
Since its announcement on the mixed ownership reform, China Unicom has been proactively pushing its reform program. Wang Xiaochu, chairman of China Unicom said in its shareholders meeting that the mixed ownership reform is difficult because a number of government departments are involved. According to Wang, China Unicom gained 20 million new clients from Tencent and 3 million from Alibaba.
As of April 30, A-share companies have all disclosed their annual report of 2016. In 2016, Bank of Communications (BOCOM) recorded a 17.62% growth in net asset, leading other state owned banks. However, BOCOM's return on equity was poorer than the other four Chinese state-owned banks and all eight Chinese joint stock commercial banks for four years straight. In addition, the cost to income ratio is the third largest among all 13 banks including state owned banks and joint stock commercial banks. Ironically, BOCOM's compensation package for management has been the most attractive among all state own banks for the past two years.
Data from Wind shows that 136 A-share listed property developers are holding 4.92 trillion yuan debt as of end of 2016, 25.93% up from 2015. Moreover, 32 of those 136 companies has a debt ratio of over 80%. The increasing use of debt is a result of declining financing cost of those property developers over the past few years.
Xiao Yaqing, head of State-owned Asset Supervision and Administration (SASAC) said in a press conference that it will support and encourage central SOEs to participate in One Belt One Road projects. Specifically, SASAC will provide regulatory support to SOEs. Currently there are 9112 offshore entities of central SOEs have been set up in 185 jurisdictions. Overseas investment from central SOEs accounted for over 70% of ODI from Chinese non-financial institutions.
Data from the People's Bank of China shows that the FX reserve increased by US$20.4 billion in April, compared to the figure in March. It is the third consecutive month where the FX reserve has increased. SAFE explains that the stabilized FX reserve is a result of steady cross border flow.
Data from the National Bureau of Statistics shows that both export and import growth has slowed down in April. The export increased by 8% while the import increased by 11.9% YOY. Chinese analysts say that the seasonal adjustment of US economy results in a lower export while the strict regulatory environment leads to a weaker import.
Chinese financial regulators, including the People's Bank of China (PBoC), China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC), have recently stated that they will pledge further support to the One Belt, One Road (OBOR) Initiative.
Specifically, the PBoC will boost renminbi as a dominant currency in the initiative while CBRC will lead and support Chinese banks to participate in the initiative. CSRC will encourage A-listed companies to gain refinancing through the A-share market to participate in OBOR projects, and the CIRC will provide support to the long-term investments of insurance companies.
The National Development and Reform Commission (NDRC) has issued guidance for PPP (Public-Private-Partnership) project bonds. The guidance allows qualified PPP project participants to issue project bonds.
The proceeds can be used for initiating infrastructure projects, managing projects, or paying back existing bank loans. The guidance also states that the cash flow from PPP projects should be used to pay back the project bond principal and interest first. This is the second time the NDRC has provided regulatory support for PPP projects: last December, the NDRC approved PPP securitization under official regulation.
China Insurance Regulatory Commission (CIRC) has issued official guidance that supports PPP projects. The guidance allows insurance companies to invest in PPP projects by providing financing for PPP project participants. The investment can be by way of equity investment, bond investment or a mixed investment.
In addition, CIRC is encouraging PPP projects under the One Belt, One Road Initiative, those in the Beijing-Tianjin-Hebei region, the Yangtze River Economic Belt, and the Xiong'an Economic Zone.
According to Chinese media, the bond connect between Hong Kong and Mainland China will proceed to be launched in several phases. The north-bound connect (Hong Kong investors buying Mainland bonds) will open earlier than south-bound (vice-versa) while institutional investors will enter earlier than retail investors. In addition, the OTC market will open earlier than the exchange market.
Wealth management products offered by banks experienced slower sales in April. Out of the top 10 banks that sell the most the wealth management products, only Minsheng Bank increased their sales from March to April. Others in the top ten saw as much as a 10% decrease in sales.
Behind the drop in sales is a tighter MPA (Macro Prudential Assessment) given by the People's Bank of China, which now considers off balance sheet assets in their assessment. Data from Wind show that back in April, 10,038 new wealth management products were issued, down from 11,823 in March.
As China starts to develop its financial markets, the performance of the LGFV (local government financing vehicles) bond market has become weaker in both the primary and secondary market.
According to Chinese media, the average yield of LGFV bonds increased by 100-200 bps since the end of 2016. Since mid-April, the average yield of a AA-rated LGFV bond reached an average yield of 7%. The higher cost has driven many issuers to postpone or cancel their bond issuances. Data from Wind show that in April, 154 bonds were cancelled or postponed, equivalent to a total of 140.6 billion yuan.
QDII funds increased their investment in US equities in 2017 Q1 from 10 billion yuan to 13.4 billion yuan. The US equities accounted for 21% of the position of all QDII funds, up from 18% in 2016 Q4. Technology sector is QDII's favourite among all industries in the US stock market. Alibaba, Apple and Alphabet are the top three stocks favored by QDII funds, with a total position of 993.9 million yuan, 573.6 million yuan and 184.4 million yuan respectively.
Since this April, China’s Securities Regulatory Commission (CSRC) has adjusted their working schedule, increasing the frequency of IPO application review from two times per week to three times per week. Although the CSRC goes through 13 to 15 applications on average per week, the approval rate has reached a historical low due to stricter requirements. Since the beginning of 2017, 18 IPO applications have been rejected by CSRC. The main reasons for rejections were the decline in profit, connected transactions, lack of independency, uncertainty in sustainable profitability and compliance.
A number of listed companies declared dividends in their 2016 annual report recently. ICBC declared most dividends of 83.5 billion yuan, followed by CCB, Shenhua Group, ABC and BOC. Since being listed in 2006, ICBC has paid a total of 646.5 billion yuan cash dividend. Sinopec Group is the most frequent dividend payer. Since it was listed in 2001, it has paid dividends for 30 times, with a total of 247 billion yuan.
In a meeting of the Political Bureau of the CPC Central Committee, President Xi Jinping highlighted the importance of stability in the financial markets. According to Chinese media, it is rare for financial risk to be a political concern in China. In addition, the committee pointed out the difficulty of mapping-out a sustainable long-term plan for the property market. It is expected that the capital and property markets will be under strict supervision by Chinese regulators.
As a leading electronic appliance maker, Gree has been generous in distributing cash dividends. The company announced its 10.8 billion-yuan cash dividend plan on April 26, on the back of a strong profit growth in 2016. From 2012 to 2015, Gree distributed a 25.6 billion-yuan cash dividend, the largest dividend among all A-share companies. In the air conditioner market Gree leads the market with a market share over 40% in China.
Data from the China Iron and Steel Association show that Chinese steel companies realized a profit of 23.3 billion yuan in Q1 2017, turning from a loss of 8.8 billion yuan in the same period last year. Noticeably, the net export of China's steel in Q1 2017 declined by 25% YOY. Chinese analysts say that the decrease is attributed to the growth of internal demand and protectionist measures in other countries. The reform also benefits international steel companies such as ArcelorMittal and Posco.
China’s Banking Regulatory Commission issued six guidance and regulations in the past month focusing on risk management. China’s Securities Regulatory Commission and China’s Insurance Regulatory Commission also issued relevant regulations on risk management. These actions are a clear indication that risk management has become the top priority for Chinese regulators in 2017.
China Securities Regulatory Commission (CSRC) recently accused Feng Xiaoshu, a former employee of the CSRC, for insider trading. Feng accumulated 248 million yuan in illegal benefits by secretly investing in listed companies. Chinese analysts believe that the flaws in the Chinese IPO scheme was the main reason for the corruption because the IPO review committee had the final say over the IPO application. Conflict of interest occurs if CSRC employees are rewarded by the IPO applicants.
China's largest bank Industrial and Commercial Bank of China (ICBC) clarified that it did not largely redeem their outsourced investment through third-party asset management companies (AMC). According to a spokesperson of ICBC, the bank has a strict internal risk management system. Chinese media reported earlier that Chinese commercial banks such as ICBC and CCB are increasingly redeeming their investment in asset management programmes in AMCs to meet their balance sheet regulatory requirements.
China Securities Regulatory Commission (CSRC) has issued new regulations for futures companies. The new regulations lift the minimum net asset requirement for futures companies to 30 million yuan and adjusts the allocation requirement of assets with different liquidity, recovery ratio and risks. In addition, the new regulations increase the minimum deposit of asset management divisions of futures companies. The new regulations will come into effect on October 1.
State Administration of Foreign Exchange (SAFE) announced on its website that it has entered into a cooperation memo with General Administration of Customs and State Administration of Taxation to exchange information. The three regulators will work together to crack down on violations such as smuggling, fake invoices and FX arbitrage. The three regulators are also able to share information with each other to better monitor the market.
As the largest asset management company in money market fund, Tianhong AMC has become the first asset management company to exceed 1 trillion yuan AUM in mutual funds as of the end of Q1, 40% up from year-end 2016. Their money market fund "Yuebao" under Alibaba's Alipay platform, achieved 1.14 trillion yuan AUM. According to Wind, the overall fund industry incurred a loss of 253 billion yuan in 2016 while Tianhong AMC's mutual funds still earned a 19 billion yuan for its clients.
China Insurance Regulatory Commission (CIRC) has issued new guidance on risk management for insurance companies. In a difficult business environment, some insurance companies pursued risky assets and expanded their balance sheets aggressively, which created a tension between the asset and liability sides of the business. CIRC will keep an eye on those companies expanding too aggressively and produce new rules to fill the regulatory gap.
China Banking Regulatory Commission (CBRC) recently issued guidance to provincial CBRC offices to list high-risk companies. The guidance highlighted the risks arising from corporates in Shandong and Liaoning province acting as guarantors for one another, which led to a number of defaults in related companies in Shandong province. The guidance also requires banks to investigate the relationship between the guarantor and the guarantee.
Value investors in China's A-share market have been benefiting from a tightened supervision of the equities market. Since Liu Shiyu, chairman of China Securities Regulatory Commission (CSRC) was appointed last year, blue-chip stocks with solid financial performance such as Kweichow Moutai have seen steady growth in their share price. However, it becomes difficult for short term traders to speculate. According to Chinese analysts, the gradual changing pattern of China's A-share market is attributed to chairman Liu's speeches that encourage investing in companies with real value.
As China’s Banking Regulatory Commission (CBRC) continues to tighten its regulation on the asset management industry, Chinese state owned banks have started to redeem their investment in asset management products including mutual funds, proprietary accounts and other asset management plans. ICBC, CCB, Industrial Bank and Citic Bank have redeemed most. According to Chinese media, CCB will redeem as much as 100 billion yuan worth of investments. Chinese analysts explained that the large redemption was due to the upcoming MPA (macro prudential assessment) by the PBOC.
Premier Li Keqiang stated in a meeting of the state council that China will further cut 380 billion yuan tax in 2017. According to Li, the VAT (value-added tax) reform will stay in place. Furthermore, SMEs will be able to waive their income tax. Startup companies as well as technology companies can further enjoy tax benefits.
CBRC is investigating the shareholders of Chinese joint stock commercial banks. According to Chinese media, shareholders with "leveraged" capital will be the main focus of the CBRC as it did not want short term investors in China's banking sector. For the past few years, China's insurance companies have been aggressively investing in Chinese banks, which makes the shareholder structure or even corporate structure of Chinese banks more complicated.
Chinese media reported that China Minsheng Bank Beijing branch's senior managers privately sold their wealth management products to their private banking clients. The contract value was around 3 billion yuan and the annual yield of those products was 8.4%. According to Chinese media, the proceeds were used for paying their existing liabilities. The incident has suggested problems in Minsheng Bank's internal risk management system. Currently, three senior managers of the bank have been under investigation.
Data from Wind shows that as of the end of April 18, 1510 A-share companies have announced their cash dividends plans. Market analysts stated that regulators' recent emphasize on cash dividends suggested that cash dividend could be included in one of the criteria for private placement or allotment. Analysts expect it possible inclusion will bring in more long term capital in China's A-share market.
State media under PBOC learned from a source that the work focus of PBOC, CSRC, CBRC and CIRC for the year 2017 will be controlling risk in the financial system. Employees working in the banking industry confirmed that some banks are under investigation by the regulators and those banks are adjusting their business coverage. One of the main issues that the regulators are trying to crack down is the arbitrage opportunities in the banking system especially in the interbank market.
Wang Yi, Minister of the Chinese Ministry of Foreign Affairs officially announced that the One Belt One Road summit will be held in Beijing on May 14-15. President Xi Jinping will attend the summit and host a roundtable session. Currently, leaders from 28 countries, including Russia and Spain, have confirmed their attendance.
Xiang Junbo, the former chairman of China’s Insurance Regulatory Commission (CIRC) was officially delisted from the list of CIRC management due to alleged violation of anti-corruption rules. The removal was confirmed by the state media Xinhuanet. The vice chairman Chen Wenhui will temporarily take charge of the CIRC.
China issued over 900 billion yuan of asset backed securities (ABS) products, 50% up from 2015, according to information disclosed by the People's Bank of China. ABS products under the Credit Asset Securitization Scheme (CASS) amounted to 390 billion yuan. As of the end of 2016, 14 Non-performing Asset Securitization (NPAS) products were issued with a total size of 15.6 billion yuan.
Liu Shiyu, chairman of China Securities Regulatory Commission (CSRC), has criticized A-share companies giving out large stock dividends in a meeting with representatives of listed companies. According to Liu, some companies gave out stock dividends as large as 300% to existing shareholders to drive down the share price and attract more investors.
The share price will then increase again and large shareholders can exit their positions and benefit from the rising share price. Liu said that CSRC will keep an eye on those companies and may impose disciplinary actions towards them.
Since the China Banking Regulatory Commission (CBRC) issued guidance to crack down on misconduct in the banking sector on April 7, it has frequently conducted market inspections – especially investigating employees working in banks or at regional banking regulators.
According to Chinese media, some banks' senior managers misused their power to hire their own relatives or lower the threshold of entry for them. Some officials working for banking regulators did not impose sufficient due diligence on banks with good relationships with those officials. Those involved in violating the law will be subject to disciplinary action.
The China Banking Regulatory Commission (CBRC) issued a circular on the transactions of banks' large shareholders. Under the circular, regulators will keep track of all equity transactions from large shareholders in both primary and secondary onshore and offshore markets.
In addition, equity transactions from related parties will also be closely monitored. The objective of the new circular is to regulate the shareholders' activities of stock trading so that the interests of retail investors can be well-protected.
A new securities law will add legal requirements suggested by the Standing Committee of National People's Congress to existing capital market legislation.
According to Chinese media, additional requirements on cash dividends of listed companies and restrictions on large shareholders' liquidation of their shares will be included in the new securities law. It will also empower the officials of CSRC to investigate companies where appropriate.
Although China Unicom has not yet disclosed its new share issuance programme, Chinese media have already reported that new shares, equalling 30 billion yuan, will account for 20% of the total outstanding shares.
Alibaba and China Telecom have committed to buying new shares from China Unicom, and State-owned Asset Supervision and Administration Commission (SASAC) has also committed to buying a comparatively larger portion. In addition, the employees of China Unicom are also allowed to subscribe to the new shares.
As Tianhong Asset Management Co disclosed its annual report, 39 asset management companies in China have released the results of their financial performance in 2016.
Tianhong Asset Management Co is still the largest AMC (Asset Management Company) in China with AUM (Assets Under Management) of 1.3 trillion yuan, while the most profitable AMC is ICBC Credit Suisse Asset Management Co, with a net profit of 1.64 billion yuan. Aegon-Industrial Fund Management Co had the largest net profit margin of 40.25%, followed by China AMC with a net profit margin of 35.52%.
The A-share market, including Shanghai and Shenzhen, priced 123 IPOs in Q1 raising 58.9 billion yuan as of the end of March, according to data from Wind. This is the most active first quarter by number of IPOs in the last six years.
According to Chinese media, GF Securities, Haitong Securities, China Securities, Citic Securities and CICC are the top five underwriters in Q1, accounting for a 39.4% market share. Guangfa securities earned the most underwriting fees totalling 465 million yuan. Citi Orient Securities earned 141 million yuan in underwriting fees, the most among all joint ventures.
China Banking Regulatory Commission (CBRC) has issued official guidance on risk management for commercial banks. The guidance highlights ten aspects of risk management, including credit risk, liquidity risk, bond investment, interbank business, wealth management and product distribution, real estate, local government debt, fintech, external risk, and other risk.
Since the appointment of CBRC chairman Guo Shuqing, China's banking watchdog has been active in monitoring the risk within the banking industry. It is expected that managing risk will be a key focus for the CBRC.
China's bluechip company Kweichow Moutai overtook Diageo to be the world largest liquor company on April 10. On that date the market cap of Kweichow Moutai was US$71.72 billion while the market cap of Diageo was US$71 billion, according to East Money Information.
Kweichow Moutai focus their business on the Chinese white wine, baijiu; Diageo is the British multinational responsible for a range of drinks and brands such as Smirnoff vodka, Guinness, Gordon’s gin, and others.
The market for baijiu has been booming on the back of the increasing price of baijiu. Baijiu companies have benefited from the growing profit margin.
Xiang Junbo, the current chairman of China Insurance Regulatory Commission (CIRC), is now under investigation due to alleged violation of anti-corruption rules, according to the Central Commission for Discipline Inspection (CCDI).
Xiang becomes the highest-ranking official in the financial industry to be caught up in the government’s crackdown on financial malfeasance and corruption. According to Chinese media, Zhou Mubing, the current president of Agricultural Bank of China (ABC), will be appointed chairman of CIRC.
Liu Shiyu, the chairman of China Securities Regulatory Commission (CSRC), has said in a conference that CSRC is keeping a close eye on the listed companies that have capabilities but never distribute cash dividends.
According to Liu, some large shareholders of listed companies boosted the stock price by allocating net profit to retained earnings, and then liquidated their holdings, which harms the interest of retail investors.
As of end of March, excluding recently listed companies since 2015, 31 A-share listed companies have not issued cash dividends. Shenyang Jinbei Automotive Company, the largest automobile manufacturing company in Liaoning province, has not issued dividends since 1993.
State-owned Assets Supervision and Administration Commission (SASAC) disclosed that 31 central SOEs have announced their long-term investment plan for the Xiong'an economic zone, including China Railway Group, China Unicom and the Metallurgical Corporation of China.
Most of the SOEs will participate in infrastructure projects in the new economic zone. Financial institutions such as China Construction Bank, China Merchants Group and State Development & Investment Corp also stated that they will provide financial support to the new economic zone in terms of direct investment and fund raising.
China Unicom, the state-owned Chinese telecommunications company announced that it will soon announce a significant change in their corporate structure. China Unicom is the only telecom company among the first batch of six SOEs to be restructured that include Eastern Airlines, China Southern Power Grid, Harbin Electric Corporation, China Nuclear Engineering Corporation, China State Shipbuilding Corporation and China Unicom. China Unicom is also the first A-share listed company that released a mixed-ownership reform program. According to Chinese media, China Unicom will engage private and state owned investors by issuing new A-shares.
Chinese A-share listed companies are selling properties to increase their profit. In 2016, over a hundred companies sold their properties with an amount over 2 billion yuan. In the meantime, 105 listed companies reported a net profit less than 10 million yuan. Shenzhen Hifuture Electric, a Shenzhen listed company, announced at the end of March that it sold 34 units of properties in 2016, amounting to 50 million yuan.
According to Chinese officials, the third economic zone "Xiong'an" will explore a new property development model. It is possible that a Singaporean model will be adopted in Xiong'an in a bid to attract more young talents to work for the new economic zone. In the zone, cheap flats will be rented to young people and startups. Currently, housing prices is one of the biggest hurdles for startup businesses.
Following the official launch of the third special economic zone in Xiong'an on April 1st, the Chinese State Development & Investment Corporation (SDIC) became the first company to invest in the new economic zone. SDIC is currently one of the largest private equity investment company among all state owned companies. According to Chinese media, SDIC has already set up a one billion yuan Beijing-Tianjin-Hebei investment fund to support the new economic zone.
A couple of Chinese stocks related to the Xiong'an new economic zone including A-share and H-share have benefited from the launch of the new economic zone. In the A-share market, over 64 stocks including the BBMG Corporation and China Fortune Land Development reached the 10% price increase limit. In the H-share market, on April 3rd, stock prices of BBMG Corporation increased 34.67% and China Suntien Green Energy Corporation increased by 12%. In the US market, China Auto Logistics's stock price rose by 90% during April 3rd the 4th trading period.
Chinese media have reported that ten bonds from seven issuers have defaulted in the first quarter of 2017. Except for Huasheng Jiangquan Group, the other six companies are regular defaulting issuers. Dongbei Special Steel was involved in 10 bond defaults so far. Data from Wind shows that in Q1 2016, 18 bonds with an amount of 12.7 billion yuan had defaulted. In addition, 100 bonds were announced to be postponed or cancelled as of March 17, 2017 much higher compared to previous years.
A NASDAQ-listed Chinese company called Wins Finance Holdings surprised the market in February, as its stock price peaked at 45-times that of the IPO stock price. According to Chinese media, the company was the best performing stock on the NASDAQ stock exchange. However, the stock price turned around quickly, dropping over 50% afterwards. The business specializes in financing services.
China's commodity and derivatives market has seen a breakthrough following the CSI 50 ETF option introduced by Shanghai Stock Exchange in 2015. The soybean meal (a soybean extract) option, introduced by Dalian Commodity Exchange, marks the first commodity option in China's financial market. According to Dalian Commodity Exchange, a corn option and a soybean option are in the pipeline. In April, a sugar option will be available on the Zhengzhou Commodity Exchange. Fang Xinghai, vice chairman of China Securities Regulatory Commission, said at the opening ceremony that China will consider to bring more new option products to the market.
Shanxi Free Trade Zone will be launched on April 1, according to Chinese media. As one of the third batches of seven free trade zones, it will rely on its geographical advantage to provide support and services to countries along the silk road. In addition, Shanxi Free Trade Zone will take the responsibility to lead the western provinces to develop their economies. Other free trade zones will have different strategies. For example, Liaoning Free Trade Zone will focus on the relationship with Japan and Korea.
The 2017 budget from the Chinese Ministry of Finance shows that the contribution rate of the mandatory pension fund for employees and employers rose by 5.5%. The size of the increase was the lowest in the past ten years. The contribution rate had risen around 10% consecutively over the past 11 years until 2016. The rate was only lifted by 6.5% in 2016. It is expected that the contribution rate will continue to slow down as the national pension fund starts to face future payment pressure.
As asset management companies and fund companies released their annual reports, Chinese media observed that structured funds have reported a significant loss in 2016. Structured funds have incurred a loss of 21.4 billion yuan, which accounted for 20% of the total loss in the Chinese funds industry. Wind data shows that over half of all funds that have released their reports have lost their net asset value. On the other hand, Money market funds, QDII funds and bond funds were the three best performing funds compared to all other fund categories.
According to Chinese media, the Chinese government’s supply side reform is aimed at managing the overcapacity of 50 million tons of steel and to eliminate “zombie companies”. In three to five years, the debt ratio of the whole steel industry should be lowered to less than 60%. One way to achieve this would be through M&A within steel industry. Hebei province, a steel intensive location, will cut down steel companies from 106 to 60 by 2020.
As Chinese financial regulators tighten their requirements on real estate purchases, some major property developers have expressed their pessimism towards housing prices. Local industry leader Vanke has already started to beef up its corporate reserves in event that the Chinese housing market faces a downturn. Local rival Evergrande announced that it would pay back its debts in advance. Since March of this year, 25 cities have implemented new rules to restrict speculators from buying real estate.
Data from MSCI shows that since 2017, MSCI China Index has risen by 14%, more than US and Japan, and the World index. According to Chinese media, it is the best performing quarter of Chinese stocks including A-share, H-share and US listed shares since 2006. Some global institutions such as Goldman Sachs and BlackRock are bullish towards Chinese stocks in statement issued earlier this year.
Chinese media observed that mutual funds following the “One Belt One Road” (OBOR) theme have seen a significant increase in net asset value. For example, the net asset value of Everbright OBOR fund increased by 31% since January 28. Wind OBOR index has increased by over 30% over the past 13 months. China West Construction Group, a leading construction company participating in OBOR, has seen 10% daily price increase limit in five out of past six trading days.
The State Administration of Foreign Exchange (SAFE) is closely monitoring forex transactions by Chinese commercial banks. An undisclosed large joint stock commercial bank faced disciplinary action by SAFE with a fine of 3.5 million yuan due to the bank's misconduct in FX transactions worth US$200 million. The branch has also been instructed to stop selling FX to its corporate clients for one year. According to Chinese media, SAFE included this case in a window guidance document that was distributed to major banks, warning Chinese banks against misconduct.
The People's Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission jointly issued official guidance regarding financial support to manufacturing companies. The guidelines support high-tech manufacturing companies in becoming listed on the stock market and other support for financing. In addition, Chinese regulators are also encouraging financial innovation in terms of bond issuance and securitization for manufacturing companies.
Chinese media observed that 9 listed banks, including China Merchants Bank, Shanghai Pudong Development Bank, Industrial Bank, Citic Bank and Everbright Bank, have announced their refinancing plans, totalling 240 billion yuan. The refinancing tools include share allotment, convertible bonds and preferred stocks. Chinese analysts attribute the urgent need for refinancing to the strict capital adequacy ratio required by PBoC's MPA (Macro Prudential Assessment).
In the face of the upcoming MPA (Macro Prudential Assessment) of People's Bank of China (PBOC), some Chinese small and medium banks are experiencing a shortage of liquidity to meet the requirements of the MPA. Chinese large banks are unwilling to lend in the interbank market as they also need to maintain a certain level of reserves. Moreover, the open market operation by the PBOC has been paused. Chinese analysts expect that market liquidity will remain tight for the rest of this month and that PBOC is trying to shrink the liability of Chinese commercial banks.
Chinese media learned from source that an official guidance on Shanghai Free Trade Zone by the Chinese state council is in the pipeline. The new guideline includes a further relaxation on onshore IPO and bond issuance by overseas issuers. According to Chinese media, overseas corporates are able to be listed on the A-share market in both the main board and NEEQ (National Equities Exchange And Quotations), China's OTC market.
Huishan Dairy Corporation, a Hong Kong listed Chinese dairy company, shocked the market last Friday, with its share price plummeting 85%. It was discovered that the chairman of the company pledged his stocks and invested into the property market. The failure of the investment is expected to turn the debt into non-performing loans. The margins of the debtors with the company's stocks as collateral have been cut substantially, which has led to a stock price drop .The chairman admitted that the company has run out of its cash and it will soon officially announce this to strategic investors.
The SOE restructuring fund, a fund set up in 2016 focused on SOE reform, will invest 30 billion yuan in 2017. In addition, a SOE M&A fund, a sub-fund under the SOE restructuring fund will be set up with an initial amount of 50 billion yuan. The SOE restructuring fund recently invested 1.8 billion yuan in Air China and made its first A-share investment in Metallurgical Corporation Of China. Late last year the fund also acted as the cornerstone investor in China Securities’ US$1.1 billion Hong Kong IPO.
Blocking Chinese insurance purchases on its system last October, China’s UnionPay is now turning its attention to the property transactions. According to several reports, all property agencies are currently not allowed to accept payments from UnionPay bank cards issued in mainland China. The latest restriction on UnionPay payments is targeted to curb capital outflows from China. Market data shows that in 2016, mainland buyers accounted for 13.8% of new first hand property sales in Hong Kong.
The profitability and even more importantly continuous profitability of a Chinese company has been traditionally been considered as the most significant factoring in getting A-share IPO approval from the CSRC (China Securities Regulatory Commission). However, Chinese media observed that the number of IPO applications that were rejected by the CSRC were increasing based on a lack of compliance, poor accounting treatment and unclear information disclosure. Chinese analysts believe that the transformation suggests that China is willing to move towards an IPO registration system that considers both company profitability and compliant procedures.
Citic Securities released their annual report in 2016. Despite a 47.65% decrease in net profits, Citic Securities still lead the league table of securities companies with a net profit of 10.37 billion yuan. Data from Securities Association of China shows that since 2006, Citic securities has held the top rank on the league table. However, the net profit gap between Citic and the second securities company, Guotai Junan Securities, has narrowed down to 4.1 billion yuan in 2015 to 500 million yuan in 2016. Chinese analysts expect Guotai Junan to be Citic's strongest competitor once the firm is listed on Hong Kong stock exchange later on this month.
Shanghai appears all set to speed up its collaboration with London following the official launch of the Shanghai Clearing Center London office yesterday. Chinese media learned from a source that the Shanghai London stock connect is likely to see a breakthrough in 2017. The system has reportedly already passed all technical hurdles. London is the second largest offshore renminbi clearing center. Chinese experts expect that as a result of Brexit, the UK will have more freedom to engage in more bilateral trade agreements, which will aim to enhance the China- UK relationship.
As Tencent released its 2016 annual report, the company overtook Alibaba again to be the largest company in terms of market cap in emerging markets. The net profit of Tencent has risen by 47% YOY in 2016 Q4. The two Chinese technology leaders have been taking turns leading the emerging market stocks. Since March, Tencent has been sitting on top with its market cap increasing 18.7% YTD. Moreover, the stock price of Alibaba has increased by 19.7% over that same time period.
A venture capital investment fund from CreditEase, the parent company of Yirendai, the first US listed Chinese fintech company, has recently announced their investment in US fintech companies Trumid, WeConvene and WorldCover. The fund was established in February 2016 with an initial amount 6 billion yuan, including dual currencies of 3 billion yuan and US$500 million. The US dollar investment will focus on fintech companies at mid or early age development stages while the RMB investment will focus on more mature companies.
Data from Hithink RoyalFlush Information shows that as of March 21, 479 A-share listed companies have declared their cash dividends. Among all companies that have already released their 2016 annual report, 11 companies even declared a larger dividend than their net income and 22 companies with net loss have also declared dividend payouts. According to Chinese analysts, due to a restricted share redemption towards large shareholders, a cash dividend program seems to become the only way for large shareholders to get some cash out of their holdings. The tightened onshore financing regulation also adds to the growing appetite for cash dividends.
Data from Wind shows that as of March 20, 450 out of 1,400 bond investment funds have seen shrinking net asset values. One fund suffered the largest loss decreasing 3.53% YTD in its net asset value. While the bond market has been gradually recovering from the bond crisis at the end of 2016, the average return of those 1,400 bond investment funds was only 0.19% YTD, even smaller than the return of money market funds, which is averaging 0.71% YTD.
According to Chinese media, the first official guidance by Ministry of Commerce and National Development and Reform Commission on ODI (overseas direct investment) will be issued in 2017. The guidance will give specified rules on the investment reviewing process, capital flows, profit allocation and tax policy. The guidance will also list out both encouraged activities and banned activities. Currently, there are only two applicable regulations from Ministry of Commerce and the State Administration of Foreign Exchange on ODI activities. However, those two regulations have been criticized for being unable to cover all concerned areas and not being enforced.
With the slowdown or even decrease in the number of new physical bank branches, the demand of bank tellers have also been declining for the past few years. Data from China’s Banking Association shows that in 2016, ICBC, ABC and CCB cut 14,090, 10,843 and 30,007 tellers respectively. With respect to joint stock commercial banks, the reduction in tellers is less substantial. Citic Bank, for example, cut 2,494 tellers in 2016, which is the most among all joint stock commercial banks.
As the end of Q1 come close, market liquidity is starting to get tight again in China’s interbank market. Both small banks and large banks are struggling to find funds. Experts explained that the tightened liquidity is due to the upcoming MPA (Macro Prudential Assessment), maturing interbank deposits, local government bond issuance and US rate hike. According to Chinese media, some banking institutions had to pay a 10% overnight interest rate.
In 2016, the total amount of Overseas Direct Investment (ODI) from Chinese corporates has grown by 40%. Pan Gongsheng, minister of State Administration of Foreign Exchange (SAFE) said in a recent forum that cross-border M&A by Chinese corporates is generally beneficial. However, some irrational investment activities such as M&A deals involving unrelated companies have been noted by SAFE. Pan said that some companies with existing high debt ratio still use acquisition financing to make overseas M&A and some companies even go through ODIs to transfer their onshore assets out of China.
The Chinese lithium battery market is likely to see a boom in three years, that’s according to Chinese media who report that by 2020, Chinese lithium battery manufacturers will overtake Tesla and be the largest group in the world. The significant growth in the Chinese lithium battery industry is in line with the growth of the new energy vehicle industry within China. Strong support from the Chinese government towards new energy is also seen as supporting the rise of the Chinese lithium battery market.
Chinese media reported that 69 asset management companies have had Kweichow Moutai in their portfolios by the end of 2016. Efunds Asset Management owned 5.47 million shares in Kweichow Moutai with a total market cap of 1.83 billion yuan. Since the end of 2005, Kweichow Moutai has seen a 2851.39% growth in its share price. Benefiting from the rocketing share price, Efunds has gained an 8.5 billion yuan return from the most popular stock in China.
According to Chinese media, China has started its deleveraging programme aimed at several key industries including steel, coal, metals and real estate. Since early March, regulators, financial institutions and scholars have been working together to devise detailed rules and guidance for earmarked industries in hopes of reducing their debt. In 2017, regulators will decide the list of companies which will participate in the pilot programme. Financial tools such as securitization or debt-to-equity swaps will be applied in this program.
Chinese property developers have swept the Hong Kong market. For the past seven months, Chinese property developers have spent HK$48.1 billion in Hong Kong land bids, accounting for over half of new land sales. Noticeably, the HNA group was the most aggressive among all bidders. It acquired four key plots of land worth HK$27.2 billion in the last five months. Analysts believe it shows that property developers are looking to diversify their assets in hopes of a better return.
The work report from the NPC says that the target urban employment in 2017 will be 11 million people, 1 million more than the target in 2016. It is the first time in the last four years that China has lifted the target. In the past four years, the number of new employment had exceeded 13 million people. According to Yin Weimin, minister of the Chinese Ministry of Human Resources and Social Security, university graduates will be encouraged to take low level jobs, work SMEs and work in western part of China to cope with the structural unemployment problems in China.
According to Chinese media, an amended securities law will be submitted to Standing Committee of the National People's Congress in April to include more specified rules to restrict large stakeholders of listed companies from selling shares. The law will clear up requirements on how much shares stakeholders can sell, how long stakeholders should hold on stocks before selling them. The general principle is that the stock selling should not undermine the market order and harm investors' legal interest.
NPC has approved that the cap of local government debt will be increased to 18.8 trillion yuan in 2017, 1.63 trillion more than 2016. Since the budget law has been enforced in 2015, the cap has increased every year. Market data shows that the outstanding balance of local government debt has declined 4.3% as of the end of 2016, compared to 2015. The NPC will strictly monitor the debt level of the local government to make sure no one will exceed the debt cap.
Dalian Commodity Exchange and Zhengzhou Commodity Exchange have recently released the contract specifications of soybean and sugar options respectively without disclosing the official trading days. Currently, there is only one exchange traded option in China, which is CSI 50 ETF option. Market analysts believe that the introduction of those two option products will enrich the Chinese exchange traded option market on top of the OTC market.
According to Chinese media, an amended securities law will be submitted to the Standing Committee of the National People's Congress in April 2017 to include more specified rules on investor protection. Under the law, investors will be divided into two groups, ordinary investors and professional investors. Ordinary investors will enjoy a proprietary protection in terms of risk alert and information disclosure. In addition, if there is dispute between ordinary investors and securities companies, securities companies should prove their regulatory compliance without making misleading or fraud statement to investors.
China Securities Regulatory Commission issued a window guidance on the refinancing of the National Equities Exchange And Quotations “NEEQ” (the Chinese OTC market). The window guidance requires a one year lock up period on private placements and has agreed on a premium share price. Prior to the window guidance, there was no such requirement on the NEEQ. An undisclosed source said that the window guidance is aimed to close the door on arbitragers.
Following the NPC, the Chinese Ministry of Finance and State Administration of Tax stated that they would soon release a detailed plan on corporate tax and expense cuts. According to Chinese media, the planned tax cut will be 350 billion yuan and expense cut will be 200 billion yuan. Specifically, the VAT reform will further expand and there will be only three different tax rates applicable to different companies. The new plan will also provide extra benefits to SMEs. The taxable income threshold of companies that can enjoy half tax will be heightened from 300,000 to 500,000.
New regulations are being drafted to oversee the asset management market in a bid to crackdown on the shadow banking sector, as confirmed by the ‘one bank and three commissions’ (PBoC, CSRC, CBRC, and CIRC) at the National People’s Congress.
The new regulations will define the asset management business as an off-balance sheet business. Financial institutions will not be allowed to have asset management businesses within their balance sheets. In addition, proceeds from asset management products will be banned from being invested into other asset management products except for the cases of MOM (manager of managers), FOF (fund of funds) and some other exempted cases.
Under the new regulations, bank deposits and wealth management products are strictly defined as on-balance sheet activities, and should not be invested into any asset management products.
China's insurance market has seen increasing participation by offshore reinsurers. In order to ensure the credit risk and solvency of offshore reinsurers, China Insurance Regulatory Commission issued a circular effective on March 13.
The circular states that onshore insurance companies that share risks and income with offshore reinsurers are able to ask the offshore reinsurers to deposit a margin inside the onshore company. The deposit can either be cash or letter of credit from authorized banks.
G-bits Network Technology, a mobile game company listed on the Shanghai Stock Exchange in January 2017, for the first time temporarily overtook consistent frontrunner Kweichow Moutai as the most expensive stock in the A-share market, including Shanghai stock exchange and Shenzhen stock exchange on March 14.
G-bits is the first mobile games company listed on the mainboard of the A-share market not through backdoor listing. In its 2016 annual report, the company achieved a 235% growth in net income attributed to equity holders, up from 195% in 2015.
By market-close Kweichow Moutai was once again the most expensive stock in the A-share market.
Chinese media reported that the People's Bank of China (PBOC) have imposed a window guidance directed at state owned banks that reduces the new mortgage quota for each bank. Some bankers working in Chinese state owned banks have confirmed to the media that new mortgage loans have been shrinking for the past few months due to less demand and tighter controls over new mortgage loan applications. In addition to the reduced quota, banks should also regularly report their mortgage data to regulators.
China Securities Regulatory Commission (CSRC) and Securities and Futures Commission of Hong Kong (HKSFC) recently announced their successful crackdown on a case relating to market manipulation. The violators manipulated the A-share stock price of Zhejiang China Commodities City Group and obtained an illegal profit of 41.8 million yuan. It is the first cross border market manipulation case since the Shanghai-Hong Kong stock connect was launched in 2014.
Chinese technology leaders such as Baidu, Alibaba and Tencent (BAT) are aggressively investing into US technology startups. Data from CBI Insights shows that BAT as well as JD.com have invested US$5.6 billion into US startups over the past two years. Startups involved come from wide range of technology sectors such as VR (virtual reality), fintech, mobile applications and social media. Over 75% of the deals took place in the US state of California.
Xiao Yaqing, head of China’s State-owned Asset Supervision Administration Commission (SASAC), said in a press conference that 2017 will see mixed ownership reform will expanding towards more SOEs, but it does not mean that every SOE will participate in the reform plan. According to Xiao, whether the SOEs will not participate in the reform or not depends on the conditions such as the business nature of the SOEs. An official document from SASAC shows that in 2016, the mixed ownership reform penetration rate was over 92% among all central SOE subsidiaries.
Zhou Xiaochuan, governor of People's Bank of China (PBOC), said in a press conference that the PBOC, CSRC, CBRC, CIRC and SAFE have already reached an initial agreement on some key issues facing the asset management industry. Zhou summarized some main problems and challenges faced by the industry including too many arbitrage opportunities in China, inefficient cooperation between different regulators and the shadow-banking sector. Zhou however, wasn’t able to reveal more details on upcoming asset management regulations.
According to Zhou Xiaochuan, the long-term trend to open the RMB bond market to overseas investors and issuers will not change. However, China will not intentionally pursue the inclusion of RMB bonds into overseas bond index. Instead, China will open the market in a steady pace. In addition to Zhou's answer, Pan Gongsheng, the minister of SAFE said that the openness would be in two aspects, the panda bond market and the China interbank bond market. Pan also said that China would build a friendlier environment for overseas investors and issuers in terms of accounting principles, law, tax and credit rating.
Government officials from the Shanghai government revealed that the Shanghai free trade zone would further relax restrictions on overseas auditing firms and rating agencies in 2017. Regulators are also drafting guidelines to relax rules on overseas banks, securities companies, asset management companies, futures companies and insurance companies. In 2016, overseas corporates and institutions based in Shanghai achieved a profit growth of 16%. Around a third a Shanghai’s government tax income came from overseas companies. A spokesperson of Shanghai government said that once the official regulation comes out, they would implement it as soon as possible.
Guo Shuqing, the new chairman of China’s Banking Regulatory Commission (CBRC) said in a press conference that Chinese banks are now actively participating in the debt to equity swap activities. Currently, the size of signed contract of debt to equity swap is around 430 billion yuan and over 40 billion yuan has been implemented. Latest data from CBRC shows that at the end of 2016 Q4, the NPL ratio of Chinese commercial banks was 1.74%, 0.02% down from 2016 Q3.
The Chinese government’s proposed IPO registration system was not mentioned in this year’s NPC work report indicating that the regulation of the IPO registration system will be postponed for the second straight year since the idea was floated around. According to Chinese media, China’s Securities Regulatory Commission will maintain the old IPO scheme and keep a close eye on the profitability of IPO applicants.
Wang Yi, Minister of Ministry of Foreign Affairs said in a press conference of NPC that the China-US relationship will be more positive going forward. In particular he highlighted, President Xi Jinping and President Donald Trump’s call last month where both parties reached a consensus on the "One China" principle. According to Wang, the common interest between China and US is larger than the disputes, so it will be beneficial for the two countries to work together. It is the 38th year since the People’s Republic of China established a formal relationship with US.
Wang Yi said in a press conference of NPC that although One Belt One Road is a concept raised by China, the benefit from the initiative will be shared by several other participants. Wang said that in the face of protectionism, the One Belt One Road offers a great opportunity for the world to work together and helps establish an economic rebalance. According to Wang, the One Belt One Road Summit which is scheduled for May 2017 has already attracted over 20 country heads and over 1200 guests over the world.
According to Wang Yi, the biggest issue of China and South Korea is the THAAD missile system. China urges South Korea and the US to stop this project as it threatens China's security. The project also undermines the relationship between China and Korea. On a lighter note, Wang encourages more Korean youth to come to China and learn about the country.
Xiao Jie, minister of the Chinese Ministry of Finance said in a press conference that personal tax reform was still being discussed by officials. According to Xiao, tax on some types of income, such as basic salary, will be calculated and reported once a year. In addition, tax benefits will also be granted to those who gave birth to a second child. The MOF is still considering adjusting tax allowance depending on average level of consumption.
SOEs in China are preparing to make debt to equity swaps in an effort to reduce onerous debt. According to Wang Zhaoxing, vice chairman of China’s Banking Regulatory Commission, applications for debt to equity swaps have been sent to the state council. It is expected that the debt to equity swap programme will start as early as the first half of 2017. Wang said that state owned banks have submitted their applications to set up a legal entity to handle debt to equity swap procedures.
The work report of the National People's Congress said that China will stick to its renminbi reform and keep the currency stable. Chinese analysts say this signals that China will prevent the renminbi from depreciating too much. It is expected that China will boost renminbi internationalization once the value of the currency becomes stable. In addition, China will also make efforts to control the fluctuation of the exchange rate to within a certain range.
Yi Gang, vice governor of the People's Bank of China, said in an interview with Chinese media, that the PBOC will defend the bottom line of financial risks and that it will not let institutions that create risks also benefit from the risks. According to Yi, the PBOC will keep a close eye on the possible systemic risks and would not let it happen. Yi said that the asset bubble issue has always been a key item for him.
He Lifeng, director of the National Development and Reform Commission, said at the NPC (National People's Congress) that the One Belt One Road initiative has got responses from over 100 countries since it was launched. Currently, over 50 contracts with foreign governments and over 70 contracts with international organizations have been signed. For the past three years, investment under One Belt One Road initiative has exceeded $50 billion, according to He.
The timing surrounding the implementation of China’s property tax will be one of the topics not addressed during China’s NPC. Fu Ying, the spokesperson of the NPC said that the draft regulation on property tax will not be included in the agenda this year. Many Chinese analysts see the property tax as an effective and feasible way to control property prices within China. Yet, not everyone is happy about the proposed property tax as some stakeholders' interest may be hurt from the new regulation.
Fang Shangpu, vice minister of SAFE (State Administration of Foreign Exchange) published an article on Chinese media, stating that the restriction on the FX purchase requirement will be gradually relaxed. In terms of the cross-border capital flow, SAFE will set up a negative list consisting of forbidden activities. According to Fang, the main principle will be to prevent speculation on the FX market.
The new CBRC (China Banking regulatory Commission) Guo Shuqing, made his first press conference yesterday. In his statement Guo said he would crack down on the shadow banking sector in China. Guo said firmly in the press conference that CBRC will better regulate the banking environment and monitor misconducts. Guo has been regarded by Chinese analysts as a "real reformer" due to his work as chairman of CSRC (China Securities Regulatory Commission). During that time he pushed forward with weekly reforms.
In a bid to deal with the government’s cap on private placements, which is 20% of outstanding shares, Chinese companies are considering to pay a stock dividend to increase outstanding shares. Since the new refinancing regulation came out, over 20 A-share listed companies announced their stock dividend plans, most of which are at least 60% stock dividends. As of Feb 27, around 40 listed companies announced that they would modify or pause their refinancing plans. Chinese analysts said that the stock dividends may benefit mostly small-sized companies.
Li Pumin, the spokesperson of the National Development and Reform Commission, said in a press conference that in 2017, the investment on fixed assets from 32 provinces will amount to 65 trillion yuan, up from 60.65 trillion yuan in 2016. According to Li, the investment will proceed in an orderly way to avoid repeat construction and oversupply. As of 2016, China has built 22,000 kilometers of high-speed railway and 130,000 kilometers of expressway the most amount compared to other countries in the world.
According to Chinese media, China’s Securities Regulatory Commission (CSRC) will start to include face-to-face interviews in their IPO review process for some applicants. Falsifying financial reports will be one of the key elements the CSRC will keep an eye on. CSRC will also closely monitor the due diligence carried out by the underwriters of those applicants such as securities companies. In addition, the CSRC for the first time will go to rural areas in China to review IPO applying companies. In 2016, CSRC issued a regulation stating that it will support companies from rural areas in their IPO journey.
In an interview with Chinese media after a press conference, Liu Shiyu, the chairman of the CSRC said firmly that the PBOC, together with the CSRC, CBRC (China Banking Regulatory Commission) and CIRC (China Insurance Regulatory Commission) was drafting a regulation on asset management business within China. The main objective of the upcoming new regulation is to control the risk in China's financial system. Data from Chinese media shows that the AUM (assets under management) of asset management units run by securities companies, banks, insurance companies, mutual fund houses, private fund houses, trust and futures companies was 116.98 trillion yuan as of the end of 2016. Among all, AUM of banks was the highest compared to other types of companies.
Senior officials working at Ministry of Human Resources and Social Security said in a press conference that the Ministry had already chosen the asset managers of the pension fund, but that did not mean that the fund would go to A-share market soon. According to Ministry of Human Resources and Social Security, the A-share market is only one of the feasible investment choices of the pension fund. In addition, when the pension fund will invest into A-share market it will depend on market conditions.
Since SF express was successfully backdoor listed on February 23, the stock price has been rising for the past five consecutive trading days. During the first four days, the stock price reached the 10% price ceiling. The chairman of SF, Wang Wei, became the third richest man in China, overtaking Pony Ma, the chairman of Tencent. Currently, SF express is also the largest company in terms of market cap listed on Shenzhen stock exchange.
Following Didi and Uber's subsidy competition, China's share bicycle platforms such as ofo and Mobike started a new round of fundraising competition. On March 1st, ofo completed a series D fund raising US$450 million from a group of investors including DST and Didi. Its competitor Mobike also finished its series D fund raising from Singaporean Temasek. Currently, share bicycle platforms in China have become one of the most popular transportation for Chinese citizens due to their low costs (1 yuan/hour). Analysts from China Securities expect that this market will have a large potential to grow as it successfully addresses people's transportation needs.
Offshore fundraising activities by Chinese corporates has exceeded onshore fundraising for the first time in 2017. According to Dealogic, Chinese corporates have issued US$26.1 billion offshore bonds compared to US$21 billion in onshore fundraising, since the start of 2017. Banks and property developers are the two most active issuers. For example, ICBC, BoC and CCB overseas branches have all issued US dollar and euro bonds in February 2017.
Local media reports in China have claimed that MNCs are facing difficulties remitting profits out of China, however, on interviewing General Motors and some overseas pharmaceutical firms, they denied facing any such difficulties. According to Pan Gongsheng, minister of State Administration of Foreign Exchange, any real trade activities under current accounts will be approved, but any transactions under capital accounts will need to go through stricter approval processes.
According to Chinese media, in 2016 Chinese courts received 5665 bankruptcy filings, up 53.8% from 2015. The increase in bankruptcy cases is attributed to the government's supply side reform policies. Provincial governments and city governments have already stopped subsidizing so-called "zombie companies" and banks have also halted lending to those companies, leading to an increase in bankruptcy filings.
On February 26, 2017, Mr. Liu Shiyu, the president of CSRC (China Securities and Regulatory Commission) announced that their primary objective was to regulate the market in accordance with laws and in order to protect small/medium sized investors. In regards to IPO regulations, Mr. Liu pointed out that market condition is stable enough to increase IPO issuances. Liu also mentioned that the quality of IPOs issued versus the quantity of IPOs is more important.
As a part of China's military reform, the CMC (Central Military Commission) confirmed specific measures of improving the private sectors' participation into the military equipment industry. According to Chinese professionals, by introducing competition to the military industry, the capability of weapon research and the productivity of military manufacturing can be improved significantly. Three segments are most likely to benefit from this reform this includes satellites, aircrafts, and shipbuilding.
Last week, the CIRC (China Insurance Regulatory Commission) announced regulatory action on Qian Hai Insurance for violating regulations and to Evergrande Insurance, for its speculating activities. The chairman of Qianhai Insurance will be expelled from his position. Evergrande Insurance will face one year of restrictions on stock investment, and also be forced to adjust down its proportion ceiling on equity investment to 20%.