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The week in review: PMI rebound beats expectations, regulators announce new credit rating guidelines, ICBC gets new supervision head

China skyscrapers Chongqing_Fotolia_230px
By Rebecca Feng
02 Dec 2019

In this round-up, the Purchasing Managers’ Index (PMI) showed a surprise increase in November, the People’s Bank of China (PBoC) and other state regulators jointly released comprehensive guidelines for rating firms and Industrial and Commercial Bank of China (ICBC) named a new chairman for its supervisory board.

China’s November PMI rose to 50.2%, the highest reading in seven months, according to data released by the National Bureau of Statistics (NBS) on Saturday. The October reading was 49.3%.

Production and new orders rebounded to 52.6% and 51.3% from 50.8% and 49.6% in October, respectively. The imports sub-index climbed by 2.9 percentage points to 49.8%. The new export order sub-index was also 1.8 percentage points higher than October’s reading.

The NBS non-manufacturing and service PMIs also improved to 54.4% and 53.5% in November, respectively.

“We think the fading of payback effects after earlier export front-loading, as well as early signs of better global growth, likely contributed to the rebound in new export orders,” Maggie Wei, a China economist at Goldman Sachs, wrote in a Saturday note. “The dissipation of potential drag on some activities around the October 1 celebration of the 70th anniversary of the PRC might have also added to the recovery in PMI indexes in November.”

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The PBoC, the National Development and Reform Commission, the Ministry Of Finance and the China Securities Regulatory Commission jointly released a comprehensive set of guidelines for the onshore credit rating industry on Friday afternoon.

The guidelines clarified for the first time that the central bank is the main regulator for the industry. It also provided a detailed list of forbidden conduct, emphasised the independence requirement for credit rating agencies and proposed more severe punishments for rules violations.

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The Industrial and Commercial Bank of China (ICBC) will name a new chairman for its supervisory board, local media Caixin reported on Saturday.  The position has been vacant for two years now.

Yang Guozhong, former chairman of the supervisory board of the China Investment Corp, the country’s sovereign fund, will fill the position, Caixin reported.

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Yi Gang, governor of the People’s Bank of China, published an article on the WeChat account of Qiushi, the Communist Party’s magazine on Sunday.

Yi said that the country’s monetary policy should remain prudent and the central bank should prepare for a “mid- to long-distance race” as the world’s economy is entering a long-term downward spiral.

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The China Banking and Insurance Regulatory Commission (CBIRC) issued updated guidelines on Friday on commercial banks’ capital replenishment tools.

The CBIRC clarified the capital loss absorption payment sequence for different classes of capital instruments. Specifically, the regulator said that perpetual bonds and perpetual stocks will be paid at the same time since both are tier-one capital.

The guideline also made the threshold of triggering events higher when banks issue perpetual bonds. Previously, to issue perpetual bonds, banks need to stipulate the scenario when they encounter a going-concern, which is when their core tier-one capital ratio falls to 5.125% or below. Under the new guidelines, banks need only to stipulate nonsurvivable trigger events when issuing perpetual bonds.

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The Financial Stability and Development Committee, chaired by Chinese vice premier Liu He, held its 10th meeting on Thursday, according to reports by state-owned media Xinhua news on Friday.

The meeting covered two main topics; the next steps to reduce risk in the financial industry and the next round of financial reform and opening-up measures.
By Rebecca Feng
02 Dec 2019