Regulators:
Zhou Xiaochuan, governor of the People’s Bank of China, has warned that a growing debt pile is damaging China’s ability to prevent financial risk.
“High level of leverage is the root of macro financial vulnerability,” he wrote in a November 4 article. “This is reflected in the excessive debt in sectors of the real economy, and in credit expansion at too fast a pace in the financial sector.”
To bring down leverage levels across the economy, Zhou said China should develop a wider base of investors, promote debt to equity swaps, and allow the bond market to play a bigger role in the financing of businesses.
The governor also stressed that China should continue to promote renminbi internationalisation, open up its capital account, and allow for greater foreign participation in the domestic market.
“With the premise of financial safety, we should ease the restrictions on foreign financial institutions entering the market… to promote the harmonisation of financial regulations [between Chinese and] international standards,” he said.
Zhou is expected to step down after a decade and a half in the job. He told reporters he would retire soon on the sidelines of the 19th Communist Party Congress on October 19.
Commodities:
The Hong Kong-Shenzhen Gold Connect launched on November 3, according to the Chinese Gold & Silver Exchange Society ( CGSES ).
Some Rmb244.44m ($36.9m) of gold traded through the scheme on the day of the launch, said a media report.
The new Connect allows mainland investors, through Hong Kong dealers with a presence in the Qianhai special economic zone, to buy and sell gold contracts, settled in cash or with physical delivery.
A gold vault will begin operating in Qianhai in April 2018, allowing for the physical delivery of gold in Shenzhen.
“This Shenzhen-Hong Kong Gold Connect has opened a new chapter in the development of our two gold markets,” Carrie Lam, chief executive of Hong Kong, said at the launch ceremony on Friday.
The Shenzhen gold link follows a similar scheme which allows Hong Kong and Shanghai dealers to exchange RMB-denominated gold contracts in each other’s market, launched in July 2015.
Hubs:
Singapore’s MAS and the CSRC have agreed to support the listing of Chinese companies in Singapore, according to an October 31 statement by the MAS. The two regulators are planning to strengthen information sharing on the derivatives markets by upgrading their memorandum of understanding.
The meeting was led by Fang Xinghai, chairman of the CSRC, and Ong Chong Tee, deputy managing director at the MAS.
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