China policy round-up: China plans merger of investment programmes, US charges Huawei, JPM to offer Hong Kong funds onshore

In this round-up, the China Securities Regulatory Commission (CSRC) issued plans to merge two long-standing access schemes for foreign investors, the United States Justice Department unveiled charges against Huawei just as trade talks were set to begin, and JP Morgan (JPM) received approval to offer Hong Kong funds in China.

  • By Paolo Danese, Rebecca Feng
  • 01 Feb 2019
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The CSRC has issued a document and asked for market feedback on a long-awaited proposal to merge the qualified foreign institutional investor (QFII) and RMB QFII (RQFII) scheme on January 31. The QFII scheme was launched 17 years ago to allow global investors to invest in onshore securities. The RQFII scheme has been running for eight years.

Investors seeking to enter the schemes have so far needed to obtain a specific license from CSRC and a separate investment allowance from the State Administration of Foreign Exchange. China approved $101bn and Rmb648bn ($96.4bn) in quotas for the schemes, respectively.

Aside from proposing to merge the QFII and RQFII schemes, the CSRC has also suggested relaxing access requirements, expanding the scope of investments, improving custodian arrangements and strengthening overall supervision of the schemes.

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The US announced critical indictments against Huawei on Tuesday. The Justice Department has charged Huawei with bank and wire fraud it alleges the company used to circumvent US sanctions against Iran. The department has also confirmed its plan to file for the extradition of Meng Wanzhou, the chief financial officer of the company, who was detained in Canada in December 2018.

Chinese authorities were none too pleased with the development.

“Once again we urge the US to withdraw its arrest warrant for Ms Meng Wanzhou immediately, refrain from making a formal extradition request and stop going further down the wrong path,”  Geng Shuang, a spokesperson at China’s foreign ministry, said on January 29. “We also urge Canada to take China's solemn position seriously, immediately release Ms Meng Wanzhou and ensure her lawful and legitimate rights and interests, and stop risking its own interests for the benefits of the US.”

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China sold more US Treasuries in November 2018. The country’s stockpile fell by $17bn to $1.121tr, the sixth consecutive monthly drop. But China remains the largest holder of US government bonds, ahead of Japan with $1.036tr.

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JPM’s asset management arm won approval from the China Securities Regulatory Commission (CSRC) to sell Hong Kong funds to Chinese investors. The Asia Equity Dividend Fund and Global Bond Fund will be distributed through its local JV, China International Fund Management, under the mutual recognition of funds scheme, foreign media reported.

So far, 50 China-based funds have been approved by the Securities and Futures Commission of Hong Kong for distribution offshore while only 17 Hong Kong funds have gained CSRC approval for distribution onshore.

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HSBC has become the first foreign bank to offer futures margin depository services to foreign investors trading iron ore futures in China, according to a press release on January 29.

The bank received approval from the Dalian Commodities Exchange, the only exchange that offers iron ore futures trading in China.

With the license, HSBC will be able to help foreign traders and brokers set up settlement accounts dedicated to futures trading and facilitate margin deposits through transfers within the bank. Previously, overseas investors with foreign bank accounts needed to set up additional futures settlement accounts with onshore banks and make margin deposits through interbank transfers.

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Fox News published an opinion piece during the weekend attributing China’s slow-growing economy to President Trump.

“President Trump is exposing China’s economic vulnerability, showing that the communist nation cannot maintain its rapid growth without it patently unfair mercantilist trade policies,” the piece argued.

The White House picked up on the article and shared it through in its official newsletter on January 29.

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The China Banking and Insurance Regulatory Commission (CBIRC) issued a statement on Monday to encourage insurance companies to invest in public companies’ stocks, bonds, and other equity investment products.

The next day, the CBIRC issued another statement promising to simplify the registration process for insurance companies to set up private equity funds as well as for them to establish equity investment plans.

  • By Paolo Danese, Rebecca Feng
  • 01 Feb 2019

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 17-Jan-19 Everbright Water China 700
2 10-Jan-19 Beijing Enterprises Water Group China 2,000
3 18-Dec-18 Bank of China Group Investment China 2,000
4 17-Dec-18 Hungary Hungary 2,000
5 06-Dec-18 China Gas Holdings China 1,300

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 22-Jan-19 QNB Finance Qatar 500
2 03-Dec-18 Huzhou Communications Investment Group China 500
3 22-Nov-18 Bank of China Tokyo Branch (BOC Tokyo) China 800
4 15-Nov-18 RusHydro Russian Federation 1,500
5 13-Nov-18 Bank of China (Hong Kong) (BOCHK) China 1,000