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China policy round-up: PBoC and MoF in public spat, banks told to back weaker borrowers, CSRC gets a new director for international affairs

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By Noah Sin
20 Jul 2018

The research chief at the People’s Bank of China got into a rare war of words with the finance ministry, regulators push banks to lend to small businesses and buy lower-rated corporate bonds, and the securities watchdog appoints a new head for the international department.

  • Xu Zhong, head of the research bureau at China’s central bank, criticised the country’s finance ministry for not spending enough. He argued in a July 13 article that state-owned financial institutions lack capital as China deleverages and that the finance ministry should inject cash into these companies. Only then will these institutions have enough capability to weather a financial crisis, he said.
    His discontent with the Ministry of Finance was thinly veiled.
    “Finance is the foundation and pillar of a country’s governance,” he said. “We must look at issues concerning finance from the angle of the country, and not that of government ministries.”
    His comments were rebutted by an anonymous official at the Ministry of Finance, who penned an article in local media on July 15, saying MoF has already increased government spending. This official also took aim at the central bank’s crown jewel — RMB internationalisation.
    “RMB’s status globally still lags behind that of the Chinese economy,” said the official. “In terms of policymaking, [the PBoC] carries the characteristics of a small country’s central bank.”

  • The PBoC will lend through the medium-term lending facility (MLF) to onshore banks that buy non-financial corporate bonds with low ratings, a July 19 Chinese media report has claimed.
    The size of loans these banks are set to receive will match the scale of their investment in bonds rated AA+ or above, but if they tap those rated below this threshold, they will receive twice as much in MLF loans, the media report claimed.
  • Guo Shuqing, the chairman of the China Banking and Insurance Regulatory Commission, asked banks to help small and private businesses to get the funding they need in a July 17 meeting, which took place in the headquarters of Bank of China.
    Participants of the meeting, which included representatives from Agricultural Bank of China, BOC, China Construction Bank and Industrial and Commercial Bank of China, agreed that the big banks should lead the way in lending to small businesses and keep the lending costs down. They also said they would use technologies such as artificial intelligence to speed up the approval process for borrowers.
  • The China Securities Regulatory Commission (CSRC) has named a new director to head up its international department, which plays a key role in constructing the cross-border schemes, such as Stock Connect, according to a July 19 media report.
    Shen Bing was the deputy director-general at the department before his promotion. He replaces Jiang Feng, who left his post two months ago to join the Shanghai Stock Exchange as general manager, said the media report.
  • Members of the US Congress have agreed to bolster the Committee on Foreign Investment in the US (CFIUS), in a bid to stop investments or acquisitions that could help foreign companies, including Chinese ones, harm its national security, according to a July 19 media report.
    The agreement boosted CFIUS’ export-control process to put transactions outside the US under review, including joint-venture agreements that involving US technology. It will also strengthen CFIUS’s ability to scrutinise foreign companies’ minority stakes through venture capital funds and other channels.

By Noah Sin
20 Jul 2018