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China markets round-up: August CPI inflation eases, Beijing opens to more financial firms, GS seeks full control of securities JV

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By Addison Gong
11 Sep 2020

In this round-up, the Consumer Price Index (CPI) inflation moderates in August, the Chinese capital of Beijing opens up its financial services industry further, and Goldman Sachs is reportedly readying a deal to take full control in its China securities joint venture.

China’s CPI rose 2.4% in August compared to a year ago, slowing down from the 2.7% yearly increase in July, according to the National Bureau of Statistics. The August Producer Price Index (PPI) dropped by 2%, versus July’s 2.4%.

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The country’s foreign exchange reserves increased by $10.2bn — or 0.3% — last month to exceed $3.16tr, data from the State Administration of Foreign Exchange showed.

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China’s export data continued to be strong in August, jumping 9.5% year-on-year, while imports fell 2.1%. Total trade volume reached $411.6bn, with a surplus of $58.9bn, according to the General Administration of Customs.

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Local governments in China issued close to Rmb1.2tr of bonds in August, taking the total issuance for the first eight months of 2020 to Rmb4.96tr. These included Rmb2.9tr of special purpose bonds, and Rmb853bn of general purpose bonds.

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The State Council has approved a plan for the city of Beijing to further open up its services sector.

In financial services, the municipal government will support wholly-foreign-owned private fund managers to be set up, and for qualified private fund managers to apply for a mutual fund licence.

Multinational companies are also encouraged to set up wholly-foreign-owned financial companies in the city. Beijing will also support more foreign banks to obtain domestic fund custody licences, and for domestic securities houses to participate in the sale of Chinese depositary receipts under the Shanghai-London Stock Connect.

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The State Council has encouraged the use of big data and other technologies to identify credit risks at Chinese companies, according to a notice on Thursday.

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Goldman Sachs is seeking 100% control in its China securities joint venture (JV), Goldman Sachs Gao Hua Securities, according to Caixin. Goldman is said to have agreed on a price with its JV partner Beijing Gao Hua Securities. The US firm currently holds 51% of the JV.

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The China Securities Regulatory Commission is considering a crackdown on local financial assets exchanges, according to Bloomberg. The bourses will be banned from acting as fundraising platforms for companies outside of their jurisdiction, as well as from selling financial products to individual investors, the wire said. The move is expected to cut a funding source for the country’s real estate developers.

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The China Banking and Insurance Regulatory Commission has allowed insurance companies to invest in debt-to-equity plans by financial asset investment companies.

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The Guangdong-Hong Kong-Macau Greater Bay Area Green Finance Alliance (GBA-GFA) was launched in Guangzhou on September 4.

The alliance aims to promote research and incubation of green investments. It is backed by the Hong Kong Green Finance Association, the Green Finance Committee of Guangdong Society for Finance and Banking, the Green Finance Committee of Financial Society of Shenzhen Special Economic Zone and the Macau Association of Banks.

GBA-GFA is already supporting five green finance related projects, including Carbon Connect which is led by Hong Kong.

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The Ministry of Housing and Urban-Rural Development released draft rules regarding the residential property leasing industry. One of the measures proposed was to support residential leasing companies to issue bonds and asset-backed securities. The deadline for public feedback is October 8.

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China car sales picked up in August. Data from the China Passenger Car Association showed that the retail sales of passenger vehicles rose by the fastest pace in two years — 8.9% — to hit 1.7m last month. The figure was 6.5% better than in July. 

By Addison Gong
11 Sep 2020