Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), outlined the next steps for reforming the Chinese asset management industry when speaking at an Asset Management Association of China forum on October 22.
First, regulators will introduce measures to incentivise private equity and venture capital funds to participate in corporate mergers and acquisitions. The commission will also set up government investment funds to help ease the financing process of listed firms and protect against the risks from lending linked to stock pledges. Second, Liu vowed to mobilise existing private funds and establish new ones to invest in private enterprises, with priority given to high tech enterprises. Thirdly, the commission would develop new public funds for elderly care.
On the same day, CSRC published the final draft of the regulatory framework for privately offered asset management products, mutual funds and private equity funds.
The new rules are supplementary guidelines to the framework released in April. Financial institutions are now only required to have a minimum of three investment managers or equity researchers to manage privately offered plans, down from five in the previous draft. Institutions will also be allowed to manage the funds raised through money-market instruments before the plans are registered with the regulator, which was forbidden previously.
Asset management firms have until the end of 2020 to comply with the new rules.
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Premier Li Keqiang re-emphasised the importance of easing the financing conditions for private enterprises during a State Council meeting on October 22. Li promised to trim down the current set of limitations on access to capital markets. Administrative procedures will be simplified and moved online by the end of this year. By the end of March 2019, all foreign investment restrictions outside of the negative list would be abolished, Li said.
“An updated version of the market access negative list will be released and fully implemented by the end of the year,” Li said. “All market access restrictions on foreign investors that are not on the negative list will be eliminated by next March, creating a level playing field for investors from both home and abroad.”
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Meanwhile, as the ongoing market downturn continues to be driven by pledged shares, local administrators are setting up bailout funds in Beijing and Shenzhen to rescue pledged shares.
On Wednesday, the People’s Bank of China (PBoC) Governor Yi Gang met with both the China Interbank Market Dealers Association, the entity that oversees most bond issuance in China, and China Bond Insurance.
PBoC is planning to offer China Bond Insurance Rmb100bn ($14.4bn) that the company can use to underwrite credit risk mitigation warrants, a kind of bond default insurance similar to credit default swaps.
Among these Rmb100bn , private enterprises will donate Rmb21bn. The rest of the money will be raised from banks, insurance companies, SOEs, and local governments.
In another statement on October 22, PBOC announced that there would be an additional Rmb150bn in re-lending and re-discount credits to encourage the financing of micro-enterprises and SMEs to add to the previous Rmb150bn in June.
“These two announcements demonstrate the government is stepping up the magnitude of the loosening with tangible measures, following the comments made by a number of senior officials including President Xi Jinping,” Beijing Gao Hua Securities’ Yu Song wrote in a note. “In particular, the move on the entry limits of foreign companies is a helpful move for an eventual resolution of the trade dispute. While the government previously stated the goal of adopting a negative list policy this is the first time it gave a clear deadline.”
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China Banking Regulatory Commission (CBRC) updated the regulations on the administration of foreign-funded banks on Thursday. The draft is now receiving suggestions from the public.
First, wholly foreign-owned, China-foreign jointly owned, and the Chinese branches of foreign banks can now offer, redeem, and underwrite government bonds as agents. These three activities were not permitted under the previous framework.
Second, if Chinese citizens wish to deposit fixed-term savings into the Chinese branches of foreign banks, each deposit amount cannot be lower than Rmb500,000.
Third, if foreign banks have a record of satisfying the capital adequacy ratio in their own countries, their Chinese branches no longer need to follow the Chinese capital adequacy ratio.
Lastly, senior management personnel in wholly foreign-owned banks and China-foreign jointly owned banks cannot simultaneously take up senior management positions in the Chinese branches of the same foreign banks.
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Paul Chan, Hong Kong’s Acting Chief Executive, said in a speech at the Financial Times-AIIB Summit that infrastructure spending has largely come from the public sector, namely governments and multilateral development agencies. However, as the need for funding increases, the private sector would potentially be of great help.
“We are seeing strong infrastructure investment interest among private investors,” Chan told the summit on October 23. “However, there is a lack of bankable projects out there for investors and financiers due to a number of issues from political and legal risks at the country level, to construction, operation and financial risks at the project level.”
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The average annual growth in the trading of Chinese commodity futures was 23.7% for the past ten years, Li Zhengqiang, chairman of the Dalian Commodity Exchange, said in a statement on October 23.
In the first half of this year, 1.4 billion commodity futures contracts worth Rmb96tn were traded, 48% and 27% of the total in the entire world, respectively. The steady growth of the market, Li said, has made the Chinese futures market a major risk management market in the world.
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Ministry of Finance’s Liu Kun gave a rundown on the condition of state-owned assets ( SOAs ) on Wednesday.
This was the first time the State Council reported on the condition of SOAs in full length to the Standing Committee of the National People’s Congress, the top legislator, local media ChinaDaily pointed out.
According to the report, by the end of 2017, total SOAs reached Rmb183.5tr in non-financial assets and Rmb241tr in financial assets. Among the financial assets, state-owned enterprises account for close to Rmb150tr.