Copying and distributing are prohibited without permission of the publisher.

Watermark

The week in review: CSRC chairman vows ‘zero tolerance’ on fraud, central bank governor reviews Covid-19 monetary policies

PBoC_PA_575px_18May2020
By Addison Gong, Rebecca Feng
18 May 2020

In this round-up, the chairman of China’s top securities regulator says the country will step up on its crackdown of fraudulent behaviour in the financial market, and the governor of the People’s Bank of China (PBoC) talks about policies to overcome the impact of the pandemic.

Yi Gang, the PBoC governor, has called for continued efforts to stabilise employment and support the real economy in an article published in Qiushi, the main theoretical journal of the Chinese communist party. Yi also emphasised the importance of having more countercyclical flexibility in monetary policies.

He added that the monetary policies implemented so far have seen preliminary results in combating the economic impact of Covid-19.

Specifically, nine national banks and 10 provincial local financial institutions have extended Rmb272.7bn ($38.4bn) of discounted loans to 7,151 corporations by May 9. The weighted average interest rate for these loans is only 2.5%.

Additionally, by the end of April, Chinese issuers sold 388 bonds with the virus prevention and control label, totalling Rmb399.3bn

The central bank governor also said that China’s treasury department had provided Rmb114.8bn of funding relating to the Covid-19 pandemic by May 10.

*

Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC) said there is “zero tolerance” for financial fraud, insider trading and market manipulation.

Speaking at an event for National Investor Protection Day last Friday, Yi said the Chinese regulators will “get to the bottom” of cases that undermined investor confidence, such as Kangmei Pharmaceutical and Kangde Xin Composite Material Group. Kangmei admitted to falsifying its financial records in April 2019, before the regulator announced the punishment in August 2019. Kangde Xin admitted to the wrongdoing and was penalised mid last year.

China will improve regulatory co-operation across its stock exchanges to crack down on violations of laws and regulations, Yi said. He also warned listed companies against using Covid-19 as an excuse to “tell lies, make up stories, or fake accounts”.

At the event, Yi also said China will step up its reform for a registration-based system for IPOs, stressing the importance of proper information disclosure.

*

The CSRC said it will work with the stock exchanges to accelerate the approval process for mergers and acquisitions. The regulator asked companies that have already made M&A applications to provide updates with estimates on Covid-19’s impact on the underlying assets.

*

The price of new commercial residential properties increased by 0.2% in April across the four ‘first-tier’ Chinese cities – Beijing, Shanghai, Guangzhou and Shenzhen – compared to a month ago, according to the National Bureau of Statistics of China (NBS).

The margin of the increase was the same in March. Fifty out of 70 major Chinese cities saw a rise in new property price last month, NBS data showed.

*

The number of domestic commercial flights in China reached 10,262 last Friday, surpassing the 10,000 mark for the first time since February 1, according to the Civil Aviation Administration of China. The latest figures suggest that the number of flights in China returned to about 60% of the pre-pandemic level, the regulator added.

*

The Bureau of Industry and Security (BIS) under the US Department of Commerce said that despite being added to the entity list in May 2019, Huawei Technologies has continued to use US software and technology to design its semiconductors. Those part of the entity list are subject to specific licence requirements around the export or in-country transfer of some items.

The previous restrictions only required US companies to secure a license before selling US-made equipment to Huawei, but it did not stop them from selling to Huawei if the equipment was made abroad.

As a result, some US companies have been commissioning their overseas foundries to sell equipment to Huawei, BIS said in a Friday announcement. 

“Despite the entity list actions the department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort,” Wilbur Ross, US secretary of commerce, said in the announcement. “However, that effort is still dependent on US technologies. This is not how a responsible global corporate citizen behaves.”

The announcement is aimed to “narrowly and strategically” target Huawei’s acquisition of semiconductors that are the direct products of using some US software and technology even if they are assembled overseas.

The Chinese Ministry of Commerce responded on Sunday. A spokesperson said that the US abused the export restrictions, using national safety as an excuse. China also urged the US to stop the wrongdoing, warning that China will take every necessary measure to protect the legal rights of its corporations.

By Addison Gong, Rebecca Feng
18 May 2020