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The week in renminbi: Regulator fleshes out foreign ownership reform, Xi’s indefinite rule confirmed, China downplays trade war with the US

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By Noah Sin
12 Mar 2018

The China Securities Regulatory Commission (CSRC) lifts restrictions on foreign investors seeking a majority stake in local securities firms, lawmakers consent to move to scrap the two-term presidential limit, and the Chinese commerce minister says the country will not fight a trade war with the US.

Investment:

  • The CSRC has published its plans to roll back the red tape on foreign ownership in onshore securities companies.
    In line with the Ministry of Finance’s announcement last November, the CSRC said foreign companies will be able to own as much as 51% of a securities firm, up from 49% at present. The ceiling will be abolished altogether after three years, according to a set of draft rules published by the CSRC on March 9.
    The regulator is also planning to scrap a clause which requires foreign companies to only set up securities joint ventures with local securities companies.
    However, the CSRC is also putting new restrictions in place, including a 30% ownership ceiling for any single shareholder in a publically traded securities company.
    While the current regime only requires at least one of the foreign investors in local securities firms to be a financial institution, the new rules will only allow financial institutions to invest in these firms. Furthermore, only the top ranking global financial institutions — in terms of profit, revenue, the size and reputation of their business — will be able to benefit from the rule change, said the CSRC.
    Public consultations on these draft rules will run until April 8.
  • The China Banking Regulatory Commission has asked investors which hold a 1%-5% stake in a Chinese commercial bank to register with the regulator within 10 days of obtaining the stake, according to a March 6 document released by the banking watchdog.

Policy:

  • Amendments to China’s constitution, including the abolition of a two-term limit for the president, were approved by the National People’s Congress on Sunday, according to state media.
    China and the US will not engage in a trade war, Zhong Shan, the Chinese minister of commerce, told a March 11 press conference in Beijing. Citing the recent visit by Liu He, politburo member, to the US, Zhong said China and the US will try and resolve their differences through dialogue.
    “There will be no winner in a trade war,” he said. “It will only bring about disaster for China, the US and the global economy.”

Green:

  • Luxembourg Stock Exchange (LuxSE) has displayed the first domestic Chinese green bond in the interbank market on its green platform, the Luxembourg Green Exchange, according to a March 9 joint press release by Agricultural Development Bank of China (ADBC) and LuxSE.
    The move came after ADBC and LuxSE signed a memorandum of understanding in January to promote the Chinese green bond market.

FX:

  • The Zurich branch of China Construction Bank has been approved by China Foreign Exchange Trade System as a foreign currency lending member in the onshore FX market effective March 15.

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By Noah Sin
12 Mar 2018