Special round-up: China’s ‘Two sessions’ kick off

Policy direction:

• The Chinese government will make it easier for foreign financial institutions to enter and expand in the Chinese market, premier Li said in his annual work report on March 5.
  “We will open up markets, such as the bank card settlement market, in an orderly manner, and lift restrictions on the business scope of foreign insurance companies,” he said. “We will relax or remove the share ratio of foreign investment in banks, securities companies, futures companies, financial asset management companies, and unify the market access standards for Chinese and foreign banks.”
• In order to attract more foreign investment, the government will allow foreign companies to defer tax payments on profits which they are using to re-invest onshore.
• Li also said the government will continue to promote the development of the bond and futures markets. It will also deepen market reforms in interest rates and the RMB exchange rates, keeping the latter on a stable level.
• Finally, the premier touched on the need to prevent financial risk — a key policy objective outlined by president Xi Jinping last year.
  “We will strengthen financial regulatory co-ordination and organisation [and] improve oversight over shadow banking, internet finance and financial holding companies,” said Li.

Investment law:

• The NPC will consolidate the three laws governing foreign investment and create a single new law to promote and protect foreign investment in China, Zhang Yesui, executive vice foreign minister and the spokesperson for this year’s NPC meeting, told a March 4 press conference.
• Zhang added that China will continue to liberalise and facilitate trade and investment, relax market access, create a transparent, stable and predictable investment environment, and ensure that the legal rights of foreign investors are protected.

Regulatory setup:

• Meanwhile, the Central Committee of the Chinese Communist Party has named reforming government institutions, including those overseeing the financial markets, as one of the country’s eight major policy goals this year, according to a March 4 announcement by the State Council.
  “We must strengthen and optimise the function and ability of financial management, strengthen monetary policy, macro-prudential policy, and the ability to co-ordinate in financial regulations,” said the Central Committee. “We must strengthen the financial regulatory system, to prevent systemic financial risk, and defend the financial security of the nation.”
  On March 1, the PBoC, China Banking Regulatory Commission, China Insurance Regulatory Commission, China Securities Regulatory Commission and the State Administration of Foreign Exchange all held meetings to discuss the Central Committee’s order, and announced that they will thoroughly implement the reform.

Belt and Road:

• Critics who claim the BRI is a geopolitical threat have fundamentally misunderstood the purpose of the China-led initiative, Zhang told the March 4 press conference. He said the BRI advocates economic co-operation, and aims to achieve interconnectivity to benefit of all countries involved.
  “All participants are equal partners,” he said. “The BRI is an open and tolerant platform, and does not exclude or go against any country. It is open to all interested countries.