Politics:
Xi Jinping can carry on as president indefinitely following an amendment to the country’s constitution suggested by the ruling Communist Party on February 25. Xi took office in 2013 and was due to step down in 2023.
The Central Committee of the Communist Party of China (CPC) recommended scrapping the limit for China’s president to serve no more than two terms. This could prolong Xi’s opportunity to reform the Chinese economy and implement his flagship policies, such as the Belt and Road Initiative, Raymond Yeung, chief economist for Greater China at ANZ, wrote in a February 26 report.
“We believe the authorities have a chance to extend the current policy direction and other initiatives for a longer time,” he said. “The authorities believe [this policy direction] needs many more reforms which are still in the pipeline, for instance, the state-owned enterprise reform, and this reform agenda [will] last for a few more decades.”
The CPC also announced the official establishment of the supervisory commission . The new state organ, which Yeung said will be responsible for the anti-corruption campaign, will be accountable only to the National People’s Congress (NPC), putting it on par with the State Council, Central Military Commission of the CPC and the People’s Supreme Court.
The changes will be passed on to the NPC for approval on March 5.
Regulators:
Foreign banks no longer need to file for approval before providing services in offshore wealth management to Chinese clients. Foreign banks now only need to notify the regulator after they have acted as custodians for offshore wealth management firms and mutual funds, a spokesperson at the China Banking Regulatory Commission (CBRC) said on Saturday in a statement.
The CRBC also laid out some requirements for foreign banks looking to acquire equity stakes in local banks. The watchdog said foreign banks must record profits for three consecutive financial years, have no record of illegal behaviour for the past two years, and be able to demonstrate a compliant and well-functioning information technology system.
The new rules came into effect on February 13, according to a document published on the CBRC’s website on Saturday. The rules followed the Ministry of Finance’s announcement last November that China will scrap the upper limit on foreign ownership stakes in Chinese financial institutions.
The NPC has granted an extension for regulators to implement the registration-based system reform for IPOs on the Shanghai and Shenzhen stock exchanges, the legislature said at a February 23 meeting.
The reform programme, which was initiated in 2015, seeks to remove the approval-based arrangement for IPO applications which has often led to lengthy delays for deals. To kick start the reform, the NPC approved an adjustment in the Chinese securities law for a two-year period in 2015. That amendment will now be effective until February 29, 2020.
Liu Shiyu, chairman of the China Securities Regulatory Commission, said the extension is necessary to show that China is serious about the reform, and cast away any doubt or misreading of the country’s intentions. It has also become more urgent due to recent turmoil in the international markets.
“Given that the developed financial markets in Europe and America have accumulated a certain level of bubble and risk, there are already signs of adjustment,” he said. “That brings about uncertainty for the window and timing of reform on implementing a registration-based system.”
Belt and Road:
Enterprises in Shenzhen invested $410m in Belt and Road countries in 2017, local authorities were reported by local media as saying last week. Trade between Shenzhen and these countries stood at $575.6bn, up 19.3% from the previous year, according to the media report.
FX:
The CME Group, the derivatives trading platform provider, is planning to launch RMB interest rate swaps by the second quarter of this year, the company said on its website. The product will have a maximum maturity of 10 years, and will be settled in dollar on a T+1 basis.
Total trade volume in China’s FX market stood at $2.26tr in January, $1.9tr of which took place in the interbank market, according to figures released by the State Administration of Foreign Exchange on February 23. Spot trades totalled $843.9bn, while derivatives transactions stood at $1.42tr, said the FX watchdog.
FTZ:
The government of Shanghai will accelerate the construction of the free trade port and improve the cross-border trade environment in the city, Ying Yong, mayor of Shanghai, was reported by the Shanghai free trade zone (FTZ)’s authority as saying on February 24. The Shanghai FTZ announced its intention to set up a free trade port last June.
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