The week in renminbi: Xi-Trump meeting coming up, Chinese premier meets top CEOs, Huawei sues US commerce dept, FTSE Russell includes China A-shares
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The week in renminbi: Xi-Trump meeting coming up, Chinese premier meets top CEOs, Huawei sues US commerce dept, FTSE Russell includes China A-shares

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In this round-up, the CBIRC head condemns US trade policy, China's premier Li Keqiang says country is open for business, the HKMA announces enhanced currency conversion arrangement under stock connect, and FTSE Russell officially includes China A-shares.

China has confirmed president Xi Jinping’s trip to the 14th G20 meeting to be held in Osaka. Xi will be in Japan between June 27 and 29 at the invitation of prime minister Shinzo Abe, the spokesperson of the Ministry of Foreign Affairs, Lu Kang, said on Sunday.

Xi is expected to meet US president Donald Trump at the G20.

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Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said in a commentary piece for the People’s Daily that an escalation of trade disputes by the US is a harm to others without any benefits to itself, while posing a danger to the world.

The US has benefitted greatly from the trade deficit with China in the past, but will “pay a huge price” by increasing tariffs, which will have limited impact on the Chinese economy, Guo wrote. He added that the US’s accusations against China “cannot be established at all”.

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Chinese technology giant Huawei filed a civil lawsuit against the US government, claiming that the commerce department mishandled the telecommunications equipment it seized from the company in 2017. The equipment was taken while being shipped from a testing laboratory in California to China. Huawei said it believes the gear is still being held by the government in Alaska after almost two years.

Separately, the company’s CEO and founder Ren Zhengfei met German economy minister Peter Altmaier in Shanghai during the latter’s three-day trip to China. The pair discussed technical and legal issues around 5G developments, with Altmaier asking Huawei to show that as a telecoms operator, it would be able to fulfill Germany’s security requirements.

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Li Keqiang, China’s premier, met the chief executives of around 20 companies last Thursday, including Schneider Electric, Swire Group, ArcelorMittal, Pfizer, Daimler-Benz, UPS, Nokia, Hyatt, ABB Group and BHP Billiton.

Li called for maintaining the steady growth of the global economy and trade, as well as a peaceful international environment, and said China welcomes companies from all countries to continue expanding their investments in the Mainland.

Companies registered in China, regardless of whether they are domestic or foreign, will be treated equally and fairly, Li said, adding that their legitimate rights, including intellectual property rights, will be protected.

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UK-based index provider FTSE Russell said on Friday that the official inclusion of China A-shares to its FTSE Global Equity Index Series (FTSE GEIS) as a secondary emerging market will take place on June 24, according to an announcement on the Shanghai Stock Exchange.

A timetable by FTSE Russell on its website suggested that the implementation of phase one will run from June 24 until March 23 next year, when 25% of the investable market cap of eligible large, mid and small cap China-A shares will be added to FTSE GEIS and derived indexes.

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The Hong Kong Monetary Authority (HKMA) has introduced the enhanced currency conversion arrangement, allowing northbound stock connect investors — for the first time — to obtain renminbi and conduct the related foreign exchange hedging based on the onshore exchange rate through the relevant Hong Kong banks.

Until now, those investing in the Mainland stock markets through the northbound trading of both the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect were only allowed to settle their transactions in offshore renminbi.

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The China Securities Regulatory Commission (CSRC) has approved Zhejiang Hangke Technology Incorporated Company’s initial public offering on the new Shanghai technology board.

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Last Friday, the CSRC published guidelines on mutual funds’ participation in securities lending business, requiring fund managers to strengthen credit risk management, while outlining the requirements of valuation, information disclosure and legal documentation.

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China’s consumer price index (CPI) is expected to grow between 2% and 4% year-on-year in 2019, said Lu Yanchun, head of the Pricing Monitoring Center of the National Development and Reform Commission, last Thursday. It is unlikely for the CPI, a measure for inflation, to increase beyond 3% in 2019, according to Lu, who was speaking at a conference for the coal industry in Shanghai. 

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Chinese state-owned enterprises (SOEs) saw steady growth in their profits from January to May this year, according to data published by the Ministry of Finance last Friday.

The combined revenues of the SOEs were up 7.7% on a yearly basis during the first five months of 2019 to Rmb23.77tr ($3.46tr), and the combined profits rose by 8.7% to Rmb1.39tr. As their total assets climbed to Rmb192.9tr and liabilities at a slower pace to Rmb124.4tr, the debt-to-asset ratio of the SOEs dropped by 0.2 percentage points to 64.5%, the MoF said.

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The overall foreign exchange turnover for May reached Rmb17.68tr, according to data released by the State Administration of Foreign Exchange (Safe) on Friday. The turnover of forex transactions between banks and their costumers reached Rmb2.39tr, and the turnover of interbank forex transactions hit Rmb15.29tr.

During the January-May period, the total turnover of the forex market was Rmb88.46tr, data from Safe showed.

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A survey by the People’s Bank of China (PBoC) with Chinese bankers showed that the Banker's Macroeconomic Heat Index (BMHI) for the second quarter of 2019 rose by 2.8 percentage points compared to the first quarter. The Banking Industry Climate Index, on the other hand, dropped by 0.6 percentage points compared to the last quarter, but increased by 4.2 percentage points year-on-year. The Banking Profitability Index, unmoved from the first quarter, was down by 0.3 percentage points from a year ago.

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