The week in renminbi: Allianz gets green light for Wfoe, foreign bond investors receive more tax exemptions, PBoC Shanghai supports private enterprises

Welcome back to our Monday newsletter. In this round-up, Allianz gets approval for first wholly foreign-owned enterprise (Wfoe) in the insurance sector, foreign bond investors will receive tax exemptions, and PBoC Shanghai branch is lifting lending quotas to help small and private enterprises.

  • By Rebecca Feng
  • 26 Nov 2018
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German insurer Allianz received the first-ever approval from China Banking and Insurance Regulatory Commission (CBIRC) to set up China’s first insurance Wfoe, according to a November 25 statement from CBIRC. The Wfoe will be based in Shanghai, according to Allianz’ press release on the same day.

CBIRC gave a one year deadline for the Wfoe to become operational, according to the regulator's statement. Allianz expects the holding company to be established in 2019.

“We look forward to contributing to the continued development and innovation of China's fast-growing insurance sector,” George Sartorel, chief executive officer for Asia Pacific at Allianz, said in the press release.

The regulatory approval follows a series of measures recently announced by the Chinese government to further open up the Chinese financial market and encourage investment by foreign financial institutions.

“The establishment of a 100% foreign owned financial holding company is a milestone showing that China is ready for further financial reforms,” Tommy Xie, head of Greater China research at OCBC, wrote in a November 26 note. “This could bring more energy to China’s financial market and also attract more long-term funding.”

In the same statement by CBIRC, Hong Kong Chiyu Bank was also permitted to establish a Shenzhen branch.

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Foreign bond investors will receive a tax exemption for their interest income for the next three years, until November 6, 2021, CBIRC announced on November 7. This preferential treatment does not cover business conducted onshore by foreign institutions.

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PBoC’s Shanghai branch plans to offer more than Rmb10bn in lending support to small and private companies through bill financing, according to an official statement on November 22.

The branch is also planning to eliminate certain restrictive borrowing quota policies. The Shanghai government will also establish a more speedy application channel for small tech companies to rediscount bills lower than Rmb5m.

The new measures will also include waiving the guarantee requirement for start-up businesses when they take out loans of below Rmb500,000. The bank will also double the maximum borrowing quotas from Rmb1m to Rmb2m.

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The Shanghai Stock Exchange (SSE) and Pudong New Area Government signed a memorandum of strategic cooperation to build a Yangtze River Delta Capital Market Service Base, according to a November 14 announcement.

Chinese president Xi Jinping promised the establishment of the entity at Shanghai’s China International Import Expo at the start of November. The other promise was building a registration system-based technology innovation board for start-ups and unicorns to raise capital on the Shanghai Stock Exchange (SSE).

As of the end of October 2018, Pudong housed 105 listed domestic companies, or 36% of the total number of listed companies hailing from Shanghai. 92 of these companies were listed on the SSE. The total value of the SSE-listed companies Pudong firms was Rmb1.43tn, accounting for 53% of the total of A-shares market in Shanghai.

In the same period, there were 1,446 listed companies on the SSE, the market cap was Rmb28tn and trading volume for the month of October reached Rmb34.6tn.

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Total FX trading activity onshore went from Rmb15.9tn ($2.29tn) in September to Rmb17.4tn in October, a 9.49% increase, according to data from a State Administration of Foreign Exchange (Safe) November 23 report.

Among the four different foreign-exchange instruments Safe singled out – FX and currency swaps, spot, forwards, and currency options, the latter two underwent the most significant shifts in trading volume in October.

The monthly turnover of currency options reached Rmb629.6bn, a 23.44% increase from September.

In the retail FX options market, turnover of currency options expiring in less than three months decreased by 33.9% while currency options expiring in more than one year saw a 107.9% increase. In the interbank FX market, the trend was the reverse. Options expiring in less than three months had a 33.7% increase while those expiring in more than a year dropped 75.6%.

Total trading volume for forwards reached Rmb140.7bn, a 21.37% decrease from September. Retail investors took up 77.9% of the total forwards market turnover. Forex call options decreased 38.9% while put options decreased by 15.1%. The volume decrease was mostly in options expiring in more than three months.

Swaps remain the main type of FX transactions. Turnover in the category increased by 10.9% to Rmb9.62tn in October, accounting for around 55.2% of total FX market trading volume.

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The Dalian Commodity Exchange (DCE) is working on building an international oils and oilseeds futures market settled in renminbi, according to a speech by Wang Fenghai, chief executive officer at DCE, on November 17.

The statement did not specify the timeline for setting up the oils and oilseeds futures market.

DCE also signed a memorandum of understanding with Malaysia FGV Holdings on November 14 agreeing to cooperate on the internationalisation of palm olein futures.

  • By Rebecca Feng
  • 26 Nov 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 14.44
2 Industrial and Commercial Bank of China (ICBC) 11.65
3 Bank of China (BOC) 10.33
4 CITIC Securities 8.41
5 Agricultural Bank of China (ABC) 7.17

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 18-Dec-18 Bank of China Group Investment China 2,000
2 17-Dec-18 Hungary Hungary 2,000
3 06-Dec-18 China Gas Holdings China 1,300
4 27-Nov-18 Daimler Germany 4,000
5 26-Nov-18 Beijing Enterprises Clean Energy China 2,800

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 30.97
2 HSBC 18.82
3 Societe Generale 3.85
4 Bank of China (BOC) 3.68
5 Bank of Taiwan 3.30

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 03-Dec-18 Huzhou Communications Investment Group China 500
2 22-Nov-18 Bank of China Tokyo Branch (BOC Tokyo) China 800
3 15-Nov-18 RusHydro Russian Federation 1,500
4 13-Nov-18 Bank of China (Hong Kong) (BOCHK) China 1,000
5 19-Sep-18 Agricultural Development Bank of China (ADBC) China 1,200