China policy round-up: China offers verbal support to private enterprises, Australia strikes official BRI agreement, Xi and Trump talk trade

In this round-up, Chinese president Xi Jinping promises more support for the private sector, Australia’s state of Victoria becomes the first in the country to support the Belt and Road Initiative (BRI), and Xi and US president Donald Trump discuss trade on a phone call ahead of their meeting at the G20 later this month.

  • By Rebecca Feng
  • 02 Nov 2018
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Following the unusual publication of data on the condition of state-owned assets (SOAs) on October 24, a spokesperson from the Ministry of Finance (MoF) answered journalists’ questions regarding the SOA data on October 30. The MoF has promised to publish such a rundown every year from now on. This act is aimed at reinforcing the responsibility of the National People’s Congress in supervising SOAs, according to a statement from MoF. Effective supervision will push SOAs to do better service to the real economy, prevent financial risks, and deepen financial reform.

This year’s report stated that, by the end of 2017, total SOAs reached Rmb183.5tr in non-financial assets and Rmb241tr in financial assets. Among the financial assets, state-owned enterprises account for close to Rmb150tr.

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Private enterprises in China got another verbal encouragement from Xi this week, as he vowed for more support during a November 1 meeting with entrepreneurs. Xi highlighted six policy areas to focus on in the coming months.

First, the government will try to reduce taxes, fees, and social security contributions for small companies and tech startups. Second, the government will take further measures to prevent potential bullying behaviours of government agencies and state-owned enterprises towards private companies. The regulators will also continue to address the issue of high financing costs and private companies’ difficulties in obtaining funds. Third, the government will encourage private companies to participate in SOE reforms and aim to create an equal ground for private companies to obtain market entry approvals and compete in project biddings.

The government will also listen to the feedbacks of private companies, protect their personal and property safety, and forbid discrimination against private companies when implementing deleveraging policies.

This is the third time within a month that officials have addressed the government’s stance towards private companies, Yu Song at Beijing Gao Hua Securities pointed out in a November 2 note.

“This clearly shows that stabilising expectations of entrepreneurs has become a priority for the president and the government,” Song wrote. “More importantly, his [Xi’s] public comments have gradually become more specific in terms of measures to be taken, which we see as is encouraging.”

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The Australian state of Victoria has reached an agreement with China on the BRI, becoming the first Australian state to support the initiative officially, according to an October 25 statement released by the premier’s office of Victoria, titled “More Jobs and Investment with New Victoria and China Deal”.

Premier Daniel Andrews and China’s ambassador Cheng Jingye finalised a Memorandum of Understanding (MoU) between Victoria and China on the BRI, according to local media reports.

“In four years, we have more than tripled Victoria’s share of Chinese investment in Australia and nearly doubled our exports to China,” Andrews said. “We said we’d reboot our relationship with China and we’re getting it done.”

“China commends the choice made by the government of the Australian state of Victoria to take an active part in building the Belt and Road Initiative,” Lu Kang, foreign ministry spokesperson, said during a regular press conference on October 30. “The government of the Victoria state has seized the opportunity to deepen practical cooperation with the Chinese side, which will surely bring more opportunities and benefits to the local communities.”

On July 31, Australia announced a trilateral partnership with the U.S. and Japan to invest in projects in the Indo-Pacific region. The partnership had been seen as direct competition to China’s BRI.

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Hong Kong’s chief executive Carrie Lam emphasised the role of Hong Kong in China’s financial reform process during a speech at a seminar on October 29.

Lam recounted the reform achievements so far, including China’s 178-fold increase in export and import and 40-times rise of gross domestic product per capita from $200 to $8,000.

Lam set out four detailed plans for Hong Kong to facilitate future market reforms on the mainland.

First, Hong Kong will remain the testing ground for economic reforms and serving as the platform through which overseas companies access the mainland market.

Second, Hong Kong will accelerate innovations in all sectors, including finance and shipping. The region is also working to adopt new listing rules to help companies in raising capital.

Third, Lam promised to further help infrastructure projects arising from BRI by offering its expertise in professional services. Specifically, she stressed Hong Kong’s unique position as an ideal fundraising centre because of its liquid capital flow and global financial talent.

Lam also revealed in her speech the debut of a green bond issuance programme. The program will have a borrow ceiling of HK$100bn. Combined with the existing Green Bond Grant Scheme, which subsidises the costs issuers may incur in obtaining certification under Green Finance Certification Scheme, Hong Kong hopes to establish itself as the fundraising hub for green projects.

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The day following Lam’s speech, the Hong Kong Exchanges and Clearing (HKEX) announced its partnership with Digital Asset, a New York-based global blockchain solutions provider, to work on a blockchain-powered post-trade allocation and processing platform for Northbound trading under Stock Connect.

The collaboration was announced by Charles Li, the chief executive of HKEX.

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According to a statement by Digital Asset on the same day, distributed ledger technology can help alleviate the difficulty of realising T+0 settlement cycle for overseas accounts investing in China, due to the different holiday schedules and the subsequent trading time gap between China and Hong Kong.

Ultimately, HKEX hopes to complete allocation and settlement transactions within a four-hour window when trading securities in mainland China via Stock Connect, according to an HKEX statement on the same day.

“[HKEX] will now be working together with Digital Asset to introduce the first blockchain platform for financial services in Hong Kong,” Li said during his speech. “This could be the beginning of a long journey of innovation and revolution and we’re very excited to share this important milestone.”

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This should come as a piece of good news for MSCI. Last week during a market consultation presentation on the possible further inclusion of Chinese A shares in its products, the index provider mentioned the settlement challenge as one of the two major infrastructure constraints needed to be addressed for further inclusion, the other being the lack of hedging instruments and futures contract.

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Li Keqiang met with a delegation from the United States Congress on November 1 afternoon in Beijing, according to an official statement released the same day. The delegation was led by Lamar Alexander, senior US senator from Tennessee.

Li reiterated that the two countries should respect each other and take notice of each other’s core interests and concerns. Communications and negotiations on equal grounds will benefit both countries as well as the rest of the world, Li said.

Alexander said that although there has been competitions between China and America, the two countries are not opponents and their shared interests far exceed disagreements. He added that trade war was not the solution to the conflicts that have arisen in the areas of trade and investments.

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On the same night, Xi and Trump talked over a phone call. Local media first reported the call, which was later confirmed by Trump on Twitter. The phone call was initiated by Trump, according to one of the reports.

“Just had a long and very good conversation with President Xi Jinping of China,” Trump tweeted on November 1. “We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!”

Trump also supported American companies to participate in the first China International Import Expo from November 5 to November 10 in Shanghai.

Xi said that the trade war between the two countries has influenced global trade and China is not willing to see that. Trump emphasised that direct contact between the two leaders is important in the relationship between two countries. Xi further said that he hoped the two leaders’ wish for a healthier bilateral relationship could translate into reality.

Following the phone call, Trump asked key US officials to draft a potential trade deal, foreign media reported on November 2. The deal is to signal a ceasefire in the escalating trade war and will be discussed by the two heads of state during their G20 summit meeting.

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Small and medium-sized enterprises in China are to receive more attention from state-owned and policy banks, according to an October 30 announcement by the China Banking and Insurance Regulatory Commission (CBIRC)’s vice chairman Wang Zhaoxing.

Wang announced that as of October, total loans issued to privately owned enterprises reached Rmb30.4tr. The 18 major commercial banks are controlling the interest rate around 6.23% in Q3 this year when lending to SMEs, a 0.7% decrease from the Q1.

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China Foreign Exchange Trade System (CFETS) plans to develop foreign currency swaps and foreign exchange interest rate swaps to further promote foreign currency trading in the Chinese onshore market, foreign media reported on October 30.

In the medium to long term, CFETS is also planning on facilitating companies to conduct US dollars funding in China by gradually building an onshore lending reference rate for US dollars.

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The Chinese economy has been hit by external forces, according to a statement from the Wednesday Politburo meeting chaired by President Xi. Downward pressure is increasing, and the government needs to take actions to counter it, Xi said.

On the same day, the National Council announced a stimulus package to support growth and facilitate infrastructure investment. The stimulus package will focus on key sectors such as hardware investments, environmental protection, and rural livelihood.

The focus on developing infrastructure projects means the government is preparing for a longer-term fight in the trade war with the US, Iris Pang, economist for Greater China at ING, wrote in a November 1 note.

Regarding the financing to the stimulus package, the National Council has requested local governments to issue bonds and banks to lend to these projects.

“We expect some local governments will again rely on local government financial vehicles to fund some of the projects,” Pang added. “And we expect banks will mainly lend to projects that are undertaken by state-owned enterprises. We believe that private enterprises may be involved in some of the smaller projects.”

Pang estimated that the stimulus package would amount to Rmb9-Rmb10tr.

Markets rebounded slightly following the Politburo’s statement and the phone call between Trump and Xi. The Shanghai Composite Index climbed from 2634.4 on Thursday morning to 2639.1 on Friday at 11am, according to Bloomberg data. The Shenzhen Composite Index also increased from 7642.8 to 7754.3. Both CNH and CNY strengthened against the dollar from the previous day’s close, trading at 6.8847 and 6.8903 respectively, also according to Bloomberg data. 


  • By Rebecca Feng
  • 02 Nov 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 16.70
2 Industrial and Commercial Bank of China (ICBC) 14.38
3 CITIC Securities 10.44
4 Agricultural Bank of China (ABC) 9.08
5 China CITIC Bank Corp 8.17

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 24-Oct-18 China Gas Holdings China 2,000
2 15-Oct-18 China Power International Development China 2,000
3 11-Oct-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,200
4 28-Sep-18 Trafigura Singapore 700
5 17-Sep-18 The Wharf (Holdings) Hong Kong 2,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 33.00
2 HSBC 20.05
3 Societe Generale 4.11
4 Bank of Taiwan 3.52
4 Cathay United Bank 3.52

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 13-Nov-18 Bank of China (Hong Kong) (BOCHK) China 1,000
2 19-Sep-18 Agricultural Development Bank of China (ADBC) China 1,200
3 17-Sep-18 Hitachi Capital (UK) United Kingdom 600
4 13-Sep-18 CIFI Holdings China 1,000
5 05-Sep-18 Daimler Germany 1,000