China policy round-up: CBIRC pushes banks to lend more, US trade rep asks for ‘significant structural change’, HKEX plans to add more products

In this round-up, the China Banking and Insurance Regulatory Commission (CBIRC) put pressure on banks to provide more private sector financing, the US trade representative said he was not yet satisfied with China’s trade promises and the Hong Kong Stock Exchange (HKEX) planned to increase cross-border capital market deals.

  • By Rebecca Feng
  • 01 Mar 2019
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The CBIRC published a notice on Monday requiring commercial banks to set annual plans supporting the private sector. This year’s plan should be completed by the end of March. The regulator also asked large state-owned commercial banks to take leadership roles in lending to the private sector. Those banks should achieve at least 30% year-on-year growth in the amount of loans they extend to micro and small enterprises.

In the same statement, the CBIRC also urged commercial banks to set up an evaluation system that reduces the level of liability of those front-line employees who need to make the decision whether or not to provide loans to private companies.

The notice followed Chinese president Xi Jinping’s speech last Friday during a central committee study session, where he said the government should deepen the supply-side structural reform in the financial sector. Xi urged financial intermediaries to strengthen their role in supporting the real economy.

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US trade representative, Robert Lighthizer, told a committee in the House of Representatives that China’s promise of purchasing additional US goods alone would not be enough for a trade deal.  

“This administration is pressing for significant structural changes that would allow for a more level playing field – especially when it comes to issues of intellectual property rights and technology transfers,” Lighthizer said in testimony on Wednesday.

“There’s no agreement on anything until there’s agreement on everything,” he added when answer questions on currency. “But the reality is we have spent a lot of time on currency and it will be enforceable.”

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The Hong Kong Stock Exchange (HKEX) released a three-year development plan on Thursday.

The plan aims to increase cross-border capital market deals. The exchange also vowed to enrich the diversity of its product offerings by adding more tradeable financial instruments such as foreign stocks and ETFs.

In addition, the HKEX said it would work on allowing short-selling of A-shares as well as establishing a new mainland-Hong Kong Stock Connect, although it is not clear why this would be needed since it already has links with the Shanghai and Shenzhen stock exchanges.

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Local media reported on Thursday that Qinghai provincial department of finance met to discuss the local government’s debt issues. The conclusion was to eliminate all implicit debt in the next five to 10 years. The report was pulled the day after it was published.

The meeting came after Qinghai Provincial Investment Group, the local government financing vehicle (LGFV) made a last-minute payment on Rmb21.4m bonds and caused investors significant anxiety on whether LGFVs still have government backing.

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The Ministry of Finance has enlisted an international accounting firm to conduct research on capital gains tax exemption for international funds registered in China, Bloomberg reported.

As of now, global funds registered in China are subjected to up to 25% of capital gains tax for income earned worldwide.

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The Central Committee of the Communist Party of China held a meeting on Wednesday regarding “strengthening the CPC’s political construction.” After the meeting, the committee released a 10,000-character document.

Trivium China, a consulting company, noted that in the document, Xi elevated himself to the level of Marx. The firm concluded this by interpreted the following, rather garbled, sentence from the document: “Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era is contemporary Chinese Marxism and 21st century Marxism.”

“[This] is further evidence of how Xi Jinpnig has elevated politics above all else,” Trivium China wrote in a Thursday note. “Jiang Zemin and Hu Jintao tended to emphasize economic development over political orthodoxy. But with Xi, it’s all politics, all the time.”

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Watch this space. The lianghui, annual plenary sessions where national-level political decisions are made, will be held in Beijing on March 5.

  • By Rebecca Feng
  • 01 Mar 2019

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 21.85
2 China Merchants Securities Co 14.67
3 Industrial and Commercial Bank of China (ICBC) 14.44
4 Agricultural Bank of China (ABC) 8.89
5 China Securities 7.41

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 10-Jul-19 BMW Finance N.V. Germany 3,500
2 20-Jun-19 Maybank Malaysia 2,000
3 30-May-19 Portugal Portugal 2,000
4 17-May-19 Trafigura The Netherlands 540
5 16-May-19 CITIC Pacific China 1,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 32.50
2 Credit Agricole 6.34
2 HSBC 6.34
4 Bank of China (Hong Kong) (BOCHK) 6.22
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.22

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 16-Jul-19 CIFI Holdings China 1,600
2 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
3 16-Apr-19 ICBC Singapore Branch China 1,000
4 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
5 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500