The week in review: China extends AM rule deadline, MoF to penalise Luckin, Ant faces possible antitrust probe ahead of listing
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Asia

The week in review: China extends AM rule deadline, MoF to penalise Luckin, Ant faces possible antitrust probe ahead of listing

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In this round-up, Chinese financial institutions are given another year to comply with new asset management rules due to the Covid-19 pandemic, Luckin Coffee will be punished by the Ministry of Finance for inflating its sales figures, and Ant Group faces a potential antitrust probe that could derail its upcoming jumbo IPO.

China’s financial institutions now have until the end of 2021 to comply with new asset management rules.

The rules, aimed at reining in financial risks and lowering the leverage in the financial system by primarily targeting shadow bank lending, were released in April 2018. The original implementation period was by the end of this year.

The extension does not mean a change in direction for the reform of the asset management industry, said an announcement by the People’s Bank of China (PBoC). Instead, it was in response to a combination of factors including the impact of Covid-19 on the economy, the central bank added.

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Chinese financial institutions extended Rmb165.2tr ($23.7tr) of loans to borrowers by the end of the second quarter, a 13.2% year-on-year growth, according to data published by the central bank last Friday.

Notably, outstanding inclusive finance loans reached Rmb19.72tr by June-end, marking a 20.7% year-on-year spike. Outstanding green loans hit Rmb11.01tr, a 10.8% increase.

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The State Administration of Foreign Exchange held a meeting last Friday to discuss working plans for the second half of 2020. The regulator said it will explore potential reforms in cross-border investments by domestic private equity funds and continue to connect China’s financial markets with the world.

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The China Securities Regulatory Commission (CSRC) held its half-year meeting at the end of last week. The regulator reiterated a “zero tolerance” stance on capital market crimes such as lying in a prospectus, faking financial records, insider trading and market manipulation.

It also said it would simplify foreign access to the onshore market, boost co-operation with overseas regulatory bodies and amend overseas listing rules, in a bid to crack down on cross-border securities crimes.

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The Chinese Supreme Court has released guidelines on class action involving a securities dispute, simplifying the procedures and lowering the cost for investors. The guidelines became effective last Friday.

The move was in response to Chinese regulators’ zero tolerance stance on financial crimes and will protect investors’ legal rights, said the court announcement.

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The Shenzhen Stock Exchange has appointed Sha Yan, a veteran regulator, as its new president, the bourse said last Friday.

Sha was previously director general of the Department of Fund and Intermediary Supervision at the CSRC. Before that, she served as deputy head of the Department of Listed Company Supervision at the securities regulator. 

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The High Court of Tianjin city ordered embattled state-owned commodities trader Tewoo Group to enter a restructuring last Friday.

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The antitrust committee under the State Council of China is considering launching a probe into Alipay, owned by Alibaba’s Ant Group, and Tencent’s WeChat Pay under recommendations from the PBoC, Reuters reported, citing anonymous sources.

The committee has reportedly been gathering information on whether the Chinese digital payment duo have used their dominant positions to quash competition, according to the wire. A decision is yet to be made on whether to proceed with an official investigation, Reuters added.

Ant is planning a dual listing in Hong Kong and Shanghai that will give it a valuation of as much as $200bn.

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The Chinese Ministry of Finance (MoF) said last Friday that it has completed a three-month investigation into Luckin Coffee, its affiliates and 23 financial institutions related to the coffee chain.

The ministry found that Luckin had inflated sales by Rmb2.12bn, costs by Rmb1.21bn and profits by Rmb908m between April 2019 and the end of last year. MoF promised to impose penalties on Luckin.

The State Administration for Market Regulation has also launched an investigation into Luckin, according to a separate statement.

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China’s ByteDance is in talks to sell short video app TikTok to Microsoft Corp, the New York Times reported on Friday US time. TikTok has been under US scrutiny over national security concerns.

Reuters said in a Sunday story that US president Donald Trump has agreed to give ByteDance 45 days to negotiate a deal with Microsoft.

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The US sanctioned a government entity in Xinjiang and two senior officials related to it, according to a statement from the Treasury Department last Friday. The sanctions are imposed based on the Global Magnitsky Human Rights Accountability Act, which targets alleged human rights violators.

Xinjiang Production and Construction Corps (XPCC), a state-owned quasi-military government organisation, Peng Jiarui, deputy party secretary and commander of the XPCC, and Sun Jinlong, a former political commissar of the organisation, are prohibited from accessing the US property and financial system. The sanction also banned them from conducting transactions with US companies and citizens.

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Hong Kong postponed the Legislative Council elections for a year due to a resurgence in Covid-19 cases, chief executive Carrie Lam said last week.

“There are absolutely no political considerations in these measures,” Lam said. “I’ve been so busy tracking the virus situation in recent days, I hardly have time to see how the election competition is going.”

The Chinese State Council said it supported Lam’s decision.

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