The week in review: CBIRC explains bank profit plunge, ByteDance sues Trump administration, JPM China JV head exits
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Asia

The week in review: CBIRC explains bank profit plunge, ByteDance sues Trump administration, JPM China JV head exits

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In this round-up, China’s banking and insurance regulator explains why banks’ profits slumped nearly 10% in the first half, TikTok’s parent ByteDance says it is suing the US government, and chairman of JP Morgan’s onshore joint venture has left to join a pharmaceutical company.

The China Securities Regulatory Commission (CSRC) could order companies, or their controlling shareholders, that have been found lying in their IPO prospectus to buy back the issued shares. It is taking public feedback for the planned new regulation until September 20.

The repurchase should be at the market price, but investors are entitled to the price at which they bought the stocks, if it is higher than the current level, the CSRC said.

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Chinese banks earlier this month reported a 9.4% plunge in profits to Rmb1tr for the first half of the year.

One of the reason for the dip is because the banking industry has given up Rmb870bn in profits over the first seven months to support the real economy, the China Banking and Insurance Regulatory Commission (CBIRC) said in a Q&A last Friday. They did so by offering lower lending rates, loan payments deferrals and cheaper fees for corporate borrowers.

Earlier this year, China asked its finance industry to give up Rmb1.5tr in profits.

The CBIRC also cited the acceleration in banks’ disposal of non-performing loans (NPLs) for the profit slump. The lenders disposed of Rmb1.1tr of NPLs for the first half of 2020. They have also set aside Rmb1.3tr of provisions against NPLs, the regulator added.

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Foreign banks and insurance companies have set up over 100 institutions in China since 2018, including wholly-owned insurance and wealth management companies, the banking and insurance regulator said. It expects more foreign institutions to participate in China’s financial markets. It also promised to continue improving the opening up of the banking and insurance industries.

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ByteDance, owner of the short-video app TikTok, will sue the US administration on Monday US time to protect its rights, the company announced on its official WeChat account on Sunday evening.

ByteDance said it has sought to communicate and provide solutions to the US government for nearly a year. But the Donald Trump administration has “disregarded facts and due process” and tried to intervene in business negotiations.

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Senior White House officials have been reaching out to companies including Apple with reassurance that they can still do business with Tencent’s messaging app WeChat in China, according to Bloomberg. This was after US president Trump signed an executive order banning business transactions with WeChat.

Separately, a group of WeChat users in the US, led by the US WeChat Users Alliance, filed a complaint in a federal court in San Francisco at the end of last week to block the executive order.

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Chinese banks recorded a foreign exchange settlement deficit of Rmb17.7bn in July, or $2.5bn in dollar terms, according to the State Administration of Foreign Exchange.

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The People’s Bank of China (PBoC) resumed 14-day reverse repo operations for the first time in two months, injecting Rmb50bn into the market at a rate of 2.35% on Friday. At the same time, the central bank conducted Rmb150bn of seven-day repo at 2.2%.

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The first 18 stocks that listed on Shenzhen Stock Exchange’s ChiNext board under the new registration-based system started trading on Monday. As part of the ChiNext reform, a 20% daily price movement limit — up or down — will be applied from Monday on all existing listed shares on the board, replacing the current 10% cap.

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The CSRC has received the materials for Ant Group’s overseas IPO, according to an update on its website last Friday. The regulator usually decides whether to accept the application within seven business days, before starting to review the documents and giving feedback, onshore analyses suggest.

The Alibaba group company revealed a dual listing plan in Hong Kong and Shanghai last month, picking China International Capital Corp (CICC), Citi, JP Morgan and Morgan Stanley as the sponsors for the H-share transaction. CICC and China Securities Co are the advisers for the ‘pre-listing tutoring’ phase of the Star board portion of the deal.

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UK-based index provider FTSE Russell has decided to add 150 China A-shares to its flagship FTSE Global Equity Index Series, after completing its semi-annual review last week. The changes will be effective after the market close on September 18.

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China is encouraging its asset management companies (AMCs) to help mitigate the risks facing small and medium-sized banks, onshore media 21st Century Business Herald reported.

The CBIRC has reportedly issued a notice telling the AMCs to actively engage in the disposal of non-performing assets at smaller lenders, and to invest in or help restructure firms in trouble. AMCs are also encouraged to apply to the regulator if they want to sell perpetual bonds to replenish their capital.

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Hong Kong-listed Sino Biopharmaceutical has appointed former JP Morgan banker Li Yi as its chief executive, replacing Tse Ping, the company said in a Friday filing.

Li joined JP Morgan China as chairman and chief executive in October 2014, before being appointed chairman of JP Morgan Chase Bank (China) Co in April 2015.

He left the US firm as chairman of its foreign-controlled China joint venture, JP Morgan Securities (China), a job he held since September last year. JPM is yet to respond to a request for comment. 

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China’s deputy central bank governor Chen Yulu called for the “high-quality and sustainable development” of green financing in China in an article. China should perfect its green financing policy framework and strengthen international cooperation in the field, he wrote.

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The PBoC and the Ministry of Housing and Urban-Rural Development held a seminar with some Chinese developers in Beijing last week, the central bank said on Sunday. The meeting stressed China’s “housing is for living, not for speculation” policy, as well as “market-oriented, regulated and transparent” financing policies.

The Chinese regulators have reportedly tightened onshore debt raising in the property sector recently.

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Australia, India and Japan are working on a trilateral Supply Chain Resilience Initiative to counter China’s supply chain dominance, according to various media reports. The initiative is said to have been proposed by Japan. The three countries are in discussion to hold the first meeting between their commerce and trade ministers.

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